Month: January 2020

I love to hear from friends and former colleagues around the holiday season! But over the past decade, I have learned to hold my breath as I open emails and messages. I always want to hear news of career progress and growing families, but 2019 once again brought painful stories of holiday season layoffs in the New York area. 

The Annual (holiday) Layoff:  We know layoffs are bad. So why do some (usually large) firms, seem to do them annually?  

Many firms have calendar year fiscal cycles and feel pressure to hit performance targets.  For some, the method used to do this is to shed staff at the end of the year – often around Thanksgiving, Hanukah and the Christmas holidays.  The traditional time of counting blessings and celebrating with family and friends, is turned into a time of stress, dread and sadness for the beleaguered employees of these “Annual RIF” firms.

So, what happens when Layoffs become Annual Events?  (You probably already know):

A low-grade, persistent fear slowly sets into the culture.

• Every day is a mini battle for job survival.
• Self-preservation begins to eclipse individual or team performance
• CYA wins the day

Innovation slows down.

• Real innovation requires experimentation and a willingness to fail during the discovery process.  People are increasingly afraid to fail and abandon experimentation in favor of the relative safety of the “tried and true”.

All Projects in Green Status.

• At certain times of the year, it is personally risky to report bad news…so people find ways to hide or defer it.
• Small ‘fires’ go unreported…. until they are too big to hide.
• People back away from complex problems instead of attacking them.

Performance management goes out the window.

• Annual ‘rank and yank’ at layoff time means that keeping bad performers until the year-end “reaping” becomes the norm.  Day to day performance management skills atrophy as managers are no longer trusted / required to improve or manage out bad performers during the year.
• It becomes a discouraging environment for conscientious managers and strong performers, but a fertile ground for mediocre performers who can “work” the annual system.

A growing cynical malaise.

• Looking good for the annual evaluation trumps actual performance.
• It becomes about playing the annual ‘game’.

Human Resources loses traction.

• They gradually become the annual grim reaper
• People may even avoid confiding in them

Breaking the Cycle is Not Easy:

How do executives of large firms avoid the temptation of Annual Layoffs and still get the ‘Benefits’ of meeting financial and transformational expectations in challenging years?

Answer: It is good old-fashioned, Druckerian, hands-on management.

There is no hack for this – we must create an environment where overall performance and operational discipline combine to reduce the likelihood of layoffs.

Leaders just do the job:

Constantly talk about Firm and Departmental performance at ALL levels:

• Relentlessly align people to strategy
• Make everyone responsible for knowing the market you are in
• Be seen – be relentlessly visible in the organization

Train, evaluate and demand performance from your managers – at all levels:

• Understanding the market and aligning teams to the firm’s strategy
• Communication at all levels (especially listening) and striving to create clarity
• Constant feedback and performance management
• Delegation and asking for more – always building depth and successors
• Evaluating and attracting talent
• Understanding financials and fiscal responsibility
• Recognizing people for good performance, mutual support, teamwork and innovation

Create Systemic Transparency:

• Adopt a system to ensure the accurate reporting of progress at all levels
• Balance the value of honesty vs. delivering positive news
• Discourage unnecessary protocol – encourage open doors
• Relentlessly focus, measure progress and demand top performance on your strategic imperatives.  Every day.  Every damned day.

Let’s resolve now to do this! 

• Demonstrate and expect real performance management all year
• Demonstrate and expect real financial control all year
• Evaluate every month (or at least quarterly) and course correct all year
  • At the end of the year, no surprises or need for reductions
• Here’s to a new ethical and prosperous decade – the 2020s.

Some last thoughts:

First off, let’s face it – there are likely no firms that do Annual Layoffs as a practice.  There are a number of firms that have had layoffs in various divisions in the last few years in a row.  My point here is this:  It does not matter what the whole firm actually does:  If people THINK layoffs have become Annual at your company, then you have this problem…and the clock is running on you.

And I think it gets better!  I am optimistic that the number of firms that have Annual (or near-Annual) Layoffs will dwindle to near zero by the end of the ’20s.  Transformational technology and the need to innovate will require these firms to re-think their practices in order to attract and retain talent, or they will be eaten.

Reflection Questions:

1. As a leader at a firm doing frequent annual layoffs, how can you effectively start a dialog to change?
2. What actions are within your power as a leader to mitigate damage to your organization’s performance?

Why do layoffs happen in the first place?

They are a corporate reality that can be caused by many things. 

It could be an under-performing product line, a department that does not hit sales targets, the impact from a merger, a company that falls behind the technology curve or did not anticipate market events or it could even result from large-scale economic downturn.

So many reasons.

These things happen… a lot. They just do. 

A staff reduction is something that a firm does with extreme reluctance – a sacrifice made to head off a major problem at the firm – a last resort… a failure of the firm’s leadership to anticipate something important.   

Damage from Layoffs:

Layoffs may address a potential problem, but they also damage the Fabric of an Organization:

• The flow of information is interrupted, impacting productivity
• Projects are impacted and so is quality
• Customer service may suffer
• It breaks the unspoken trust that employees have with their employer (I will trade you my best work and my time for employment and support for me and my family)
• People lose friends and colleagues

Just the rumor of a layoff creates fear, which can drive survivalist behavior and impact teamwork.

“Benefits” of Layoffs: 

What!?  Benefits?

Layoffs can quickly help address pressing financial problems by closing expense gaps. They are a tactic to drop the bottom line to meet or exceed the margin expectations of shareholders, investors or analysts. They can also help expedite an organizational transition like a large relocation or outsourcing plan which can improve financial targets. In times of stress, a layoff can take some pressure off senior executives by tactically addressing the financial picture. In extreme and rare situations, they may save a troubled company.   

Here’s where it can get ugly:

In some larger firms, there is immense pressure on executives and boards of directors to meet company performance expectations. Due to large company complexity, these execs may not directly ‘feel’ the employee culture in global or even regional locations. In the executive suite of a large company, they may be closer to the tactical benefits of layoffs than are with the cultural damage that is caused by them.  In some of these firms, they can be tempted by the annual boost they can get to their financials – and layoffs can become annual events.

Reflection Questions:

1.  When a layoff is the only option, what are some ways for firms to mitigate the cultural damage?
2. Once a layoff is over, what are some steps for firms to take to ensure that an event like this is not repeated?