About 25 years ago departments that formerly went by the title “Personnel Department,” changed their names to “Human Resources.”  The implication was that these staff functions saw the people in their organizations as resources – human assets.

 A fundamental question is were these human resources viewed as long term assets to be nurtured and developed over a career or were they short term costs to be cut when times grew rough or their skills needed honing? 

 The unfortunate answer seems to be that many of today’s “Human Resource” functions are actually in the business of administering layoffs, managing benefit costs, and finding ways to do more work with less people.  The paradox is compounded by the fact that human resource people are often the first to be cut in an economic downturn. 

 Perhaps a better – not pretty but perhaps more appropriate – name would be something like “Human Cost Reduction Department.”

I was recently contacted by a researcher from the BBC.  I like their thoughtful and global treatment of the news and was excited over the prospect of being interviewed about the effects of layoffs on survivors.  They however wanted to know, if I went into organizations and “fired people.” 

 I think they were influenced by the move “In the Air.”  I saw the movie and thought it was OK but presented a distorted picture of the layoff process.  Some outplacement firms do pass on the message, but never in the way depicted in the film. 

 When I told the researcher that, not only didn’t I go in and fire people; I advised clients to always have the responsible manager do that, they were no longer interested in putting me on the air.  Even responsible journalists like those at the BBC seem more caught up on the sensationalism of layoffs than understanding their toxic effects on survivors.

 If anyone does have examples of really bad layoff processes such as depicted in “In the Air,” I’d like to hear them.  I’ll try to incorporate them into my new book on “worst management practices.”

Wayne Turmel has a well known podcast show with the interesting title, “The Cranky Middle Manager.”  In my experience, middle managers today are very stressed and “cranky” is a mild adjective for their current state of mental health.  Wayne is a great interviewer and mixes humor with insight and useful content.

 My interview with Wayne just came out.  It covers a lot of what I’ve talked about in this blog in about 20 minutes.  Check it out Cranky Middle Manager Podcast  and pass it on to some of your own middle management friends.

Here is a summary of some of the recent research and studies that support the seriousness of the need to heal the wounds and re-recruit layoff survivors.   A future blog will summarize some of the research about actions individuals and organizations can take.

Organizations are experiencing a global pandemic of downsizing.  In order to successful lead organizations through the trauma of layoffs; leaders need new and innovative approaches to organizational revitalization.  Downsizing has become an increasingly popular strategic intervention to reduce costs and increase productivity.  Rugaber (2009) reports that, in the US alone, mass layoffs of 50 or more people totaled 21,137 in 2008, a year that also included the most job losses since World War II.  Layoffs in the technology sector increased 72 percent over 2007 and the trend is continuing, according to a report by Challenger, Gray & Christmas (Bartash, 2009).   

Downsizing has a negative effect on productivity. A study of 4,172 employees representing 318 companies who had kept their jobs after layoffs (Business Wire, 2008) yielded some attention-grabbing results. Key findings were that 74 percent of these survivors reported a decrease in their productivity; 81 percent stated that customer service had declined; and 77 percent saw more mistakes and errors being made.  The three most common words used to describe survivors’ feelings (62 percent of respondents) were guilt, anxiety, and anger. This study by Leadership IQ, is consistent with an ever-increasing stream of downsizing research that provides compelling evidence that leaders of downsized organizations need to pay very careful attention to those who remain.  Here are some highlights of that research.

There is a Tenuous Connection to Financial Performance. A longitudinal study (Dorfman, 1991) followed sixteen large restructurings for five years and found that stock performance in these firms trailed competitors by an average of 26 percent. Another (Casico, 2002) used ROI as an index and found no evidence that downsizing actually worked and that, in many cases, productivity actually decreased. In a pioneering study, DeMuse, Bergman & Vanderheiden (2004) tracked five financial indices of fortune 100 companies that went through downsizing– profit margin, return on assets, return on equity, asset efficiency, and market to book ratios – and compared the results, over a 12 year period, to companies that did not downsize.  The downsized companies generally reported lowered results during the first few years with improvement eventually returning to the level of the non-downsized firms. 

There is No Significant Increase in Productivity and Risk Taking Declines. A survey of 1,468 downsized firms by the Society for Human Resource Management (Ferris, Rosen & Barnum, 1996) reported that employee productivity did not increase and often worsened.  In a recent study (Prime, 2009)  indicated that a survey by CareerBuilders reported that 47 percent of layoff survivors had taken on additional work and 30 percent felt burned out. Cascio (2009) indicated that 58 percent of human resource professionals reported a deterioration of morale and a decrease in loyalty after layoffs.  My own research (Noer, 2009) found that, at the very time organizations needed employees to take risks and increase innovation, survivors tended to do the opposite: keep their heads down and hunker down in the trenches.   Another danger of downsizing is that turnover of those employees organizations want to retain will increase. Stjern (2009) reports that a two year study by of firms wishing to be included in Fortune Magazine’s list of the 100 best companies to work for, found that those with layoffs experienced 2.6 percent more voluntary turnover than those with no layoffs

The ideas in this posting were the basis for Training Magazine’s Inside Training   Business Intelligence July 15th column  In today’s pandemic of layoffs, training is sometimes seen as a nonessential activity, a target for cost reduction.  Here is how to change that misperception and position training as central to organizational recovery and enhanced productivity.

• The overwhelming consensus of research is that layoff survivors don’t work harder because they feel lucky to have a job; they are angry, risk averse, with much lowered productivity. They don’t automatically snap back and that’s where training can add significant value.
• Training line managers in basic helping skills – empathetic listening, non-judgmental reflection of feelings, and coaching is enormously beneficial in facilitating a return to productivity. It has a dual benefit: it equips managers with the tools necessary to authentically communicate and re-recruit their employees, and it helps managers deal with their own layoff survivor symptoms. 
• This is almost always a high leverage intervention. A one to two day workshop format with role plays, feedback, and facilitated practice has amazing “bang for the buck” both in providing managers with the requisite skills and in demonstrating the relevance of the training function.
• Trainers should focus on basic helping skills. Some organizations have experienced great success with semi-scripted managerial communication outlines for one-on-one employee sessions.  This is not demeaning to managers and they almost always find it helpful.  Helping skills are the currency of the realm in layoff recovery and most managers are undercapitalized.  They got where they are by excelling and planning, organizing, and controlling. Today they desperately need skills in listening, coaching, and empathy. This need represents a tremendous opportunity for the training profession to add significant value.  

The Worker Adjustment and Retraining Notification (WARN) act  is a government program that mandates that companies planning “massive” layoffs must give communities and employees 60 days notice. This is a great example of the old adage “no good deed” – or in this case act – “goes unpunished.”

 It attempts to do the right thing through the wrong means.  Giving employees and communities prior notice is a good thing.  Attempting to simplify a complex problem and administer the solution through government bureaucracy is a bad thing.  Because of exclusions and complicated guidelines, the act is extremely difficult to enforce. Giving more enforcement power to the Labor Department will only help the bureaucrats and the lawyers; not employees or organizations. 

Today’s recessionary climate is much more severe and unpredictable than when the act took effect in 1989.  Layoff decisions are often made in headquarters locations far removed from the actual sites of the reductions.  In the chaotic, ambiguity ridden, heat of battle for survival that characterizes most organizational cultures today, it is often not possible to plan 60 days out or predict the size or scope of layoffs. 

 Rather than give prior notice because of legislative mandate, it is far better to do it because it makes sound business sense.  Here is why:

•  If employees have prior notice, they have a sense of control and will actually be more productive because they will not suffer from fear, anxiety, and uncertainly.
•  Enlightened employers have found that being honest and clear with employees as a matter of policy is much better for productivity than relying on either extreme of layoff administration (walking employees out the door with no prior notice – or adhering to an artificial time frame such as the sixty days mandated by WARN).
• Research is clear that the best policy is for employers to tell employees what they know and, even more importantly, what they don’t know.  If they know or strongly suspect that there will be layoffs in the future they should be straight with employees.  This is based on good employee relations, not on a government mandate.
• It basically comes down to a three dimensions of trust: (1), If employees trust that employers will tell them the truth, even if that truth is they will be laid off in the future, they will be more productive and may even avert layoffs.  (2), If employers don’t trust their employees to handle the truth and need to walk them out the door with no prior notice, they have the wrong employees or are pursuing the wrong employee relations strategy. (3), Trusting the government to regulate truth telling and authenticity, is a bad bargain for both employee and organization.