The April 2002 edition of Harvard Business Review has an article by Darrell K Rigby called “look before you lay off”. It has been helpfully reprinted in April 2020. It focuses on the August 2000 downturn, and looks at the data from those S & P 500 companies that laid off a total of 500,000 workers, and compares their performance with those companies that didn’t.
Conclusions: “large and repeated downsizing is symptomatic of flawed strategies that inevitably produce below-par results”, and “Executives should carefully consider all options for coping with a downturn before letting workers go, especially if they are going to binge on rehiring as soon the economy rebounds. The smartest companies make sure they are addressing the right issues in the right ways before they jettison jobs.” (my emphasis).
Let us roll on 18 short, eventful and productive years and see what we have learned. Precisely nothing, in many instances. This is deeply depressing. I heard, yesterday, that the HR Director of a very large company, was spending her time actively searching for loopholes in the redundancy agreements to avoid paying the full amount of redundancy due, to the people they are busy laying off because sales are down. This is staggering for so many reasons! Here is an HR Director, in the weeds, trying to solve completely trivial problems in the face of the significant and possibly life threatening issues that the company is up against, with no focus on the future, and no strategy to speak of. It is appalling!
Sadly she is not alone. It is not very reassuring to see that nasty HR is alive and well, and thinking they are doing a great job saving the organization small change, whilst putting its entire future on the line. Here are a few statements that I genuinely thought I would not have to make in 2020.
1: If staff did not already despise the executive team in that company I mentioned above, they will certainly despise it now. How can you trust an HR operation that is doing its best to make people’s lives miserable whilst doing nothing to preserve the company or prepare it for the future? This is a time to reassure people and invest in their future.
2: We are going through very difficult times, but these times have a clear end point that is only a few months away. This focus is all short term; next week next month, when it should be on the economic rebound. They will worry about the future when it is too late to prepare for it when it arrives. Are these people fit to run large companies?
3: There will be many people that have skills that are transferable, and assuming they remain employed in this company because the organization decided not to make them redundant, I can guarantee that they will be looking for a job as soon as they possibly can. Talent, experience, knowledge and commitment will stream out of the door at the first opportunity. Those who stay now, have been completely demoralised and demotivated. Activity will inevitably plunge, customer satisfaction will plummet, and then there will be more cuts and more redundancies until there is nothing left. At these times key people are much more valuable than than cash book columns.
4: Those companies that are borrowing money to get through the short term hiatus, whilst planning for the future, as well as assuring their staff that they have their current needs uppermost in their minds, will thrive. These executives recognise the difficulty that their staff, whether contractors or permanent, face whilst, often, working from home, juggling children, partners, pets and everything else, as they do their best deliver back to the organization.
It is very hard to believe that high paid executives cannot keep their noses out of the cash position, whilst ignoring the overall, long-term health of the organization. They need to focus on dealing with the strategic issues they face. Companies with large resources and the ability to borrow for the short term short-falls, should be encouraging their staff to be as creative as possible, and empower them to solve the day-to-day problems. This will build their commitment and create space to think hard about what needs doing in the medium and long term. These companies will rebound strongly when the situation changes in a few months.
There is one simple truth that that these negative and dysfunctional companies should understand, and it should be the HR Directors leading this charge: money is extremely cheap at the moment, and talent is expensive and is likely to get more expensive. Let’s get a grip, and stop panicking. We should be using a bit of imagination, preserve our best and brightest, and start thinking long-term.