Mad About Layoffs

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There's something seriously out of whack about that whole way of thinking. Forget the theory behind it. Forget the credentials of the people who spout it. Look at it as a CEO. Anyone who runs a business today knows that finding and keeping the right people is more important than ever. We know how critical it is to break down the barriers in a company, eliminate the internal marketing and the corporate politics, and get everybody working together, moving in the same direction. We've tried one thing after another -- total quality management, self-directed work teams, participatory management, you name it -- in an attempt to achieve a sense of common purpose and focus. Even the accounting profession has had to recognize the market value of a company's internal spirit and to quantify its "intellectual capital." So how can we square all that with the idea that in today's economy every company has to lay people off from time to time, and there's nothing much we can do about it, so we might as well just sit back and accept the inevitable? It's nuts. It's corporate insanity. And it's wrong.

Preventing layoffs is management's responsibility. It's management's primary responsibility. In a sense, it's management's only responsibility. Because to prevent layoffs, you have to do a lot of other things right. And you're much more likely to do them when you're constantly reminding yourself that jobs are at stake and that you're responsible for the livelihood of real people who have put their trust in you.

So you try to figure out how to protect those jobs, and pretty soon you realize that you need a process to achieve sustainable growth. I'm talking about a rate of growth you can maintain year after year, through good times and bad, despite down markets, wrong projections, fickle customers, devious competitors, nasty surprises, whatever. In my company, that rate is 10% to 15% a year. This is not just a goal; it's a mind-set. Everyone knows the number, thinks about it, looks for ways to achieve it. When we sit down to do our annual plan, our whole focus is on determining where the growth will come from in the following year -- and what contingencies and trapdoors we have in case we're wrong. We call this process "high-involvement planning," and its key ingredient is paranoia. We look for every potential booby trap and figure out what we'll do if we step in one. Once we have the final plan, we build our compensation program around achieving it. Anything we earn above our targets bounces up to a bonus program. We set our base pay at a level we know we can handle, even in a bad year. So the bonus not only drives the profits of the company but ensures that people take home more money when things go well.

And what happens if we run into trouble despite all our planning? The first thing that goes is the bonus program. The second is the increase in profits. Only then are we forced to look at our people costs -- and the answer still may not be layoffs, because we have places to put people. We have subsidiaries that are growing. We started them partly to create opportunities for our middle managers and partly to give us another layer of protection against layoffs. We could launch them because we had people already trained to run companies, thanks to the Great Game of Business, the open-book-management system we developed in the 1980s. We didn't want to lose those people, and yet we felt -- and still feel -- the same pressures to reduce overhead as everyone else. The subsidiaries give us a way to keep our overhead in check without laying anyone off. Of course, they also represent the future of our business, and the means for driving shareholder value.

Why do we do all this? Because we believe we're here to create jobs, not eliminate them. We know what it's like to go through layoffs. We know how it feels to manage a workforce filled with fear and uncertainty, anger and mistrust. We never want to be in that position again. This doesn't guarantee that we won't fail, but if we're ever forced into a layoff, at least people will know that we did everything possible to prevent it.

And our way is certainly not the only way. Far from it. I believe the vast majority of businesspeople have the same goals and values as we do. Business, after all, has always been the engine of opportunity in this country. It's the means by which we create better lives for ourselves, better communities for our families, a better future for our children. We do have solutions to the problems the politicians are trying to exploit for their own purposes. It's time to stand up and say so.

Jack Stack is the president and CEO of Springfield Remanufacturing Corp., in Springfield, Mo., and the author, with Bo Burlingham, of The Great Game of Business. His column, Critical Numbers, appears every other month.

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Jack Stack

Contributing editor Jack Stack is president and CEO of SRC Holdings Corp., based in Springfield, Missouri. The company's innovative style of open-book management -- financial information is shared among managers and employees -- is summarized in Stack's book The Great Game of Business, coauthored with Inc. editor at large Bo Burlingham.

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