Alternatives to Layoffs
Layoffs don’t work. Most of us know this intuitively, but sound research provides a broader view of the costs. Bain and Co., an international consulting firm known for measuring financial outcomes, notes that many companies engage in “binge and purge” tactics during recessionary periods.These companies pay the direct and indirect cost of layoffs (severance, outplacement, unemployment, reduced productivity, loss of retained employees who quit when the economy picks up) along with the cost of replacing laid off employees with new hires 6-9 months later.
Many believe that downsizing increases stock values, but again, research leads to the overwhelming conclusion that this is not true in the short or the long term.
Layoffs also breach the implied psychological contract where “the employee watches out for the good of the company and the employer watches out for the good of the employee.” When layoffs begin many people resort to taking care of themselves and are less concerned with the overall good of the company.
Many companies favor cost-cutting over revenue increases during times of recession. This thinking leads to one very obvious solution; albeit one that does not achieve good results. Reducing the workforce, the largest single expense in most companies, creates the illusion of significant cost savings. Increasing revenues, on the other hand, especially when customers are also cutting costs, requires imagination.
Getting Involved
How you involve employees matters. Begin by setting ground rules and clarifying roles. Employees should participate in generating ideas, but the executive staff should decide which ideas to pursue.
With good design and facilitation and a large enough space, it is possible to engage hundreds of people simultaneously in generating imaginative solutions. Such designs tap into the collective intelligence of the group to produce results far better than any one person or small group might imagine. As an added benefit, employees are more committed to implementing ideas they were involved in creating.
Making It Work
One tool for getting a dialogue started is a process called “Meetings on a Napkin,” in which a well-defined, open-ended question is presented to a large group of people. From there, the group breaks off into smaller ones and a number of conversations are generated, all aimed at answering the question or solving the problem. As people rotate to meet with other individuals, their notes from previous sessions — written on paper napkins — are shared. The end result is a strong mix of ideas and conversations that will effectively address the issues at hand.
Another medium, a web site called The World Café (www.theworldcafe.com), provides an online community through which people can discuss and solve the issues most important to them. Through this virtual coffee shop, ideas are connected into patterns that result in bigger and more refined solutions.
Seeing The Potential
The solutions may not always be easy to spot, but they are there. In troubled economic times, you may be tempted to cut positions to alleviate costs, but remember that your workforce is your single greatest asset. Learning to create new revenues, instead of cutting positions, will assure that it stays that way.
Anne Perschel is a leadership and organizational psychologist and president of Germane Consulting in Worcester. She can be reached at aperschel@ germaneconsulting.com.
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