Kenneth Labich
John Koepke, now 56, didn't want to leave his wife, Pat, home alone that
horrible day in 1991. Just hours earlier she had been diagnosed with malignant
breast cancer. But she insisted he go to the offices of his Illinois graphics
company for a board meeting. Koepke had sewed as the company's president
for the previous eight years, and his absence would be noticed. When he
got to the office, the chairman pulled hem aside. "How's Pat?"
the boss asked.
"Not too well," replied Koepke. "We don't have the details
yet, except that the cancer's malignant."
"Too bad—this isn't a good day for you," said the chairman.
"We're making some changes around here, and you're no longer needed."
Koepke dissociated from reality for a moment; he prayed he was having a
bad dream. Later he found out the company was reneging on his contractual
severance agreement.
While few corporate executions are timed that badly, tales of thoughtlessness
and even outright cruelty are everywhere these days. A man finds out he
has been let go when a restaurant won't accept his company credit card.
A woman manager gets the news via a note placed on her chair during lunch.
Employees at a high-tech firm learn of their fate when their security codes
no longer open the front door of their office building.
Sheer numbness may account for at least some of this nasty behavior. The
great corporate restructuring fever has held pitch for over a decade now—
some 400,000 hapless folks got the boot during 1995 alone, and some executioners
may be too desensitized by now to stand on ceremony. But any company that
ignores the human wreckage involved, that halts people's careers and threatens
their financial security carelessly, is taking foolish risks. Lawsuits are
the most obvious threat; high six-flgure awards for wrongful dismissal
or discrimination are ever more common. Harder to measure, but at least
as corrosive to any organization, is the effect on survivors of a mindless
corporate purge. Any mass layoff somehow tarnishes a company, and the damage
can be permanent if the deed is done without care. Says Jim MacLachlan,
director of change management operations at the Deloitte & Touche Consulting
Group: "One thing is certain: If you treat people like pieces of meat,
it will come back to haunt you.'
Of all the jobs a manager faces, the least favorite, without a doubt, is having to give someone the ax. Most people in that position try to act sensitively and humanely, doing their best to limit the pain, humiliation, and fear most downsizing victims feel. But many a corporate executioner truly blunders the job. Here's a guide for what not to do. In other words, don't do what these sneaky, egregious, and just plain dumb bosses did—it may cost you in court.
Don't forget you're a member of me family of man.
The head office of a steel fabrication company instructed an employee to
fire his father. The son, having no choice, followed orders but tempered
the bad news by giving Dad six months' severance pay. For his generosity,
the son, a few weeks later, was unexpectedly fired. Mom, who worked as a
part-time bookkeeper, also got the boot. The son sued. A jury agreed he
had been fired wrongfully.
Don't use your employees as paws in a corporate chess game. A supervisor
called a meeting with his waitresses to say that someone was stealing from
the restaurant. In order to establish the identity of the thief, he told
the assembled women, he would begin firing them, one by one, in alphabetical
order, until someone fessed up. The company was found guilty of intentional
infliction of emotional distress.
Don't fire en masse.As part of a sales agreement, the original owners
of a medical collection agency were instructed to winnow its staff by half.
The 1,000 employees were assembled in the company parking lot and the names
of the 500 to be laid off were read aloud. The original owners then told
the remaining employees they were lucky they still had jobs, but their medical
insurance had been terminated.
Don't rely on electronic messengers to do your dirty work.
A reporter discovered he had been laid off when he tried to pay for dinner
with a source by using his corporate credit card and found it had been canceled.
Don't use the mailman as your messenger.
A woman returned from a business trip. Surrounded by her welcoming family,
she began to open her accumulated mall . . . and there found her termination
notice.
Don't use the airwaves.Grace Mirabella learned that her 17 years
as editor of Vogue had come to an end when gossip columnist Liz Smith announced
the firing on a local TV news show. Mirabella’s response: "For
a magazine devoted to able, this was not a very stylish way of telling me."
Check the calendar before firing. A systems engineering manager was
laid off on Take Our Daughters to Work Day. designed to combat "significant
losses in self-confldence and in expectations for the future" experienced
by adolescent girls. A word with public relations could have avoided the
embarrassment of the man and his 8-year-old daughter being escorted out
of the building by a security guard shortly after the workday began.
Never get personal. One R&D manager finally received permission,
to fire an employee with a reputation for being difficult and emotionally
unstable. He really lit into him, saying he had been a pain in the butt
since he Joined the company. The employee went home, retrieved a high-powered
revolver, returned to the of flee, and blew his brains out in front of the
boss and his colleagues.
Don't be a total Idiot.Don't fire someone while passing him in the
hall (as witnessed by James Challenger, 30-year veteran of corporate outplacement).
Don't be a hypocrite.A division within a FORTUNE 500 company issued
a memo that encouraged employees to increase their global competitiveness
by taking foreign-language instruction during the workday. Six months later
an those who had availed themselves of the offer were fired. Management
had apparently concluded that anyone who had the time to take a course during
business hours was obviously under-employed.
—Therese Eiben
The experts—human resources executives, out-placement specialists,
corporate hitpersons themselves—all agree that managers ought to question
their own motives hard before they institute layoffs. The stakes, human
and otherwise, are Just too high. Don't pull the trigger, they say, if you
are simply trying to cover up for your own management lapses. Says Frederick
Reichheld, a director at the Bain management consulting firm and author
of The Loyalty Effect: "Too often a layoff is viewed as some sort of
virile gesture, a way of saying that senior management is hard-minded and
serious."
Nor should top corporate brass view restructuring as a quick fix for a slumping
stock price. True, Wall Street has often responded nicely to layoff announcements.
But companies have gone to that well too often; security analysts and investors
now grouse that repeated restructurings, resulting in supposedly non-recurring
charges, have thoroughly muddied earnings at giants like AT&T, IBM,
General Signal, and many others.
It's also becoming clear that investors' ardor for stripped-down payrolls
fades quickly. A recent Mercer Management Consulting study of 1,000 of the
largest U.S. companies found that the compound annual growth rate of market
capitalization for downsizers was about 11% from 1988 to 1994. For the companies
that concentrated instead on revenue growth, the figure was 15%.
Top managers would also do well to consider the multiple costs involved
in firing people, say the experts. That's true even if just a single individual
is involved. Boston out-placement specialist Laurence Stybel estimates that
the average U.S. company spends at least $25,000 to replace an executive
getting a g70,000 salary. Far better, he argues, to find ways to improve
a faltering employee's performance. "Rehabilitation is better than
replacement," says Stybel.
He cites one client, a large hospital, that contemplated axing a director
of radiology who had become increasingly rude to co-workers. Instead of
firing him, the hospital's managers put him on probation and assigned him
a consultant who counseled him on interpersonal relations. To everyone's
surprise, the doctor appeared delighted to tone down his act. Result: The
hospital saved the slew of money and effort it would have taken to replace
him. Then there are the human costs to consider. The toll on people losing
their jobs is obvious enough. "These are wounded people, often battered
by exactly what they had been loyal to," says Richard Levin, a Massachusetts
psychologist who works with corporate executives who fire people. For purely
practical reasons, top managers might consider even more the potential pain
and guilt survivors of a big layoff suffer; they are, after an, the people
who would have to carry the ball forward. Almost everyone is likely to be
affected in some way, but the managers who do the actual firing are often
hurt the most. Alan Downs, a confessed corporate assassin for years before
turning to human resources consulting, recalls the hideous feeling of walking
into a headquarters building the day after a round of layoffs had begun.
This was his greeting from a survivor: "Are we clubbing baby seals
again today?"
The hard truth is that, despite whatever soul-searching senior managers
can muster, some firings are inevitable. There will always be individuals
who don't hack it, and, increasingly, there will be companies that are forced
to restructure to stay competitive. When an AT&T Reconstructs into three
smaller companies, there are bound to be casualties. When banks or utilities
are deregulated, employee rosters are all but certain to shrink.
But whenever heads roll, particularly during a large layoff, top management
has to be an active and visible presence. Among the worst sins corporate
leaders can commit during a restructuring is a Pontius Pilate maneuver—placing
the Job with outside consultants or their own personnel department and then
washing their hands of it. Ralph Johnson, who trains managers in proper
firing techniques for the American Management Association, recalls an East
Coast manufacturer who sent a low-level human resources executive around
to announce a series of plant closings. Workers started hurling spools of
thread at her, and she completed her tour accompanied by security guards.
Top management's proper role before a restructuring is, first and most important,
to develop and disseminate a rational explanation for what's taking place
and where the company is headed. Those who are leaving are far less likely
to be angry (and litigious) if they understand why their company is changing.
Those who stay are more likely to pitch in with a full heart if they believe
they are working for a more competitive organization. Says Jim MacLachlan
of Deloitte & Touche: "If you can get into the hearts and minds
of employees, they will buy the truth. Dialogue is the oxygen of change."
Management, working with the legal department, should also draft a profile
of the new work force, one that matches its vision of the company's future.
The idea is to take a close look at your total labor group—age, sex,
competencies, length of service. There will eventually be legal issues to
consider; your lawyers won't let you even think of wiping out most minority
workers or employees over age 40. But most important at this stage is to
hold your labor force up against the precise future needs of the company.
Says Eileen Canty, an organizational psychologist who labored through -layoff
battles at ITT during the 1980s and now works as a consultant with William
M. Mercer Inc.: "It sounds simple, but you'd be amazed how often people
screw it up. You have to ask yourself two questions: What are the skills
you need to run the business at the end of this tunnel and what are the
skills you won't need?"
This is definitely not the moment to settle old scores or weed out employees
with attitude problems. Ralph Johnson of the American Management Association
recalls the chaos that ensued at the now defunct Eastern Airlines in the
late 1980s when supervisors singled out workers they didn't like during
layoffs, regardless of whether their skills
would be needed. "It was sort of a textbook on how not to draw up a
new work force," says Johnson. "It was all about emotion."
· It used to be that if you replaced an older worker with someone
40 or above, you'd be safe from age discrimination suits. The Supreme Court
has decided that no longer holds.
· You generally cants fire an alcoholic unless you've first offered
him counseling or a leave of absence. But be careful: Accusing an employee
of alcoholism could result in a defamation suit.
· Just because the person you fire is straight, white, male, and
under 40 does not preclude a lawsuit. The law doesn't say you can't discriminate
against minorities; it says you can't discriminate based on race.
- Don't even think about Jettisoning anyone who refuses to perform some
part of his lob due to religious beliefs.
· You typically can't fire someone for frequent absences due to a
medical condition—even allergies or backache.
· A Jury could decide you have publicly defamed someone if you boot
him (or her) for sexual harassment. Instead, encourage the employee to draw
up a resignation letter detailing his own reasons for leaving.
Once management has a clear grasp of its future labor needs, the next
step in the layoff process is preparing the troops for the coming storms.
Top management should issue clear, repeated warnings that a downsizing is
possible; informal advice from line managers can help too. The employee
who has been tipped not to take on a big financial burden— a new house,
say—will be grateful to have been warned when the ax falls.
Actions, however, rattle way more cages than words. Workers all over the
U.S. have been living with the threat of downsizing, and they are unlikely
to take verbal warnings seriously unless they are backed up by concrete
changes in the status quo. The best methods serve two purposes. First, they
proclaim, loud and clear, that change is inevitable. Second, they demonstrate
that involuntary layoffs, when they occur, are a last resort. Depending
on the nature of the business involved, salary and hiring freezes often
get people's attention. Reduced overtime, shortened workweeks, pay cuts,
unpaid vacations—they all make it obvious that this particular ship
is changing course. One of the trickiest moments in the cruise comes when
management contemplates asking for volunteers to walk the plank. Since you've
promised to offer a package to anyone who steps forward during a voluntary
layoff, there's always a danger that too many people will leap at the chance.
This could make it appear that the ship is sinking, or cause a lot of those
employees you'd rather keep on board to go ashore. Still, say the experts,
if management has communicated its vision of the future properly, voluntary
layoffs are the proper initial step. "You take your chances,"
says Jim MacLachlan. "If you are selling a good business plan, most
of the good people won't leave."
There's nothing wrong, of course, with trying out special inducements to
get more people to walk out voluntarily. Smart managers, those with close
links to their work force, sweeten severance packages to match the tastes
of each particular employee. "You never know what buttons you have
to push unless you are in touch with your people," says Eileen Canty
of William M. Mercer. She worked with one company that helped persuade a
number of older workers to retire voluntarily by promising them membership
in a 25-Year Club, even though they were a couple of months short of the
requirement. Another company got the body count it wanted by allowing departing
employees to remain in the corporate gun club for an extended period. When
deciding who's going to stay, it's crucial to receive feedback from employees.
At AT&T, the decision this winter to eliminate some 40,000 jobs took
place only after months of furious planning and internal communication.
Management first defined the core competency of each of the company's three
new businesses, then polled supervisors to gather information on each worker's
skills. Employees were asked to fill structured resume, including lob preferences
and geographical limitations. No one was left in the dark about how the
old work force would fit into the new, streamlined company. The final decision
about who would go was left up to a team of supervisors and HR staffers;
each employee was evaluated for specific posts needed to be filled, and
there were no unilateral decisions. Says Linda Villa, the AT&T human
resources vice president who led the team that masterminded the company's
recent layoffs: "It was of utmost importance to us that everyone was
treated with dignity and respect."
That attitude ought to carry over to the climactic meeting when a firing
takes place, often a life-changing moment for the victim. "This isn't
rocket science—you treat people the same way you would want to be treated,"
says Dan Nagy, a longtime out-placement specialist who now runs the out-placement
office at Duke Universty’s Fuqua School of Business.
But doing it right takes careful preparation. The experts say a firing should
take place on neutral ground, in a quiet, uncluttered office; they warn
managers who do the firing against using their own office because it's too
hard to walk away if things get sticky. Early in the day is better than
late—it gives the victim time to get important career questions answered—and
you should make sure the fatal meeting doesn't fall on the victim's birthday
or some other special day.
Bob Swain, chairman of Swain & Swain, a New York consulting firm, says
managers facing the job of firing people ought to prepare a script beforehand,
perhaps even reading it into a tape recorder a few times to ensure the proper
empathetic tone. Your remarks should simply summarize the individual's severance
package and outline how it's to be implemented. Avoid angering people by
making gratuitous remarks about their shortcomings. Says Swain: "In
trying to compensate for their own guilt, executives often say too much,
highlighting specific reasons that led to the dismissal."
It's all right to express regret about the situation and concern about the
employee's well-being, but don't get defensive or indicate in any way that
the decision is negotiable. Maintain eye contact, don't fiddle with papers
or pens, and never, ever fire anyone with alcohol on your breath. After
30 minutes tops, you end the meeting by standing up and escorting the employee
directly to a counselor. Don't expect to be viewed as any kind of hero;
even if you've done everything by the book, chances are excellent that at
least some people will make sure that their grandchildren curse your name.
Though the actual act of getting fired will stick with most victims for
the ages, what happens to them afterward is at least as important. No company
should attempt to guarantee new employment to the workers it lays off, but
all should at least give its discards a fighting chance to start again.
The best practice is offering flexible out-placement packages, geared to
the specific needs of each individual, Some technical workers may want retraining
to broaden their skills. Some laid-off executives may want help in starting
their own businesses. Many large companies have put together job fairs,
sometimes in their own cafeterias, during big layoffs. William M. Mercer's
Canty recalls one ITT division that found new positions for 75% of its firees
by using such job fairs as well as other methods.
Consultant Alan Downs is a special fan of certain layoff plans used at Hewlett-Packard,
Levi Strauss, and elsewhere. Under these plans, employees are notified that
their Jobs are to be eliminated but that they will remain on the payroll
for a specific amount of time—usually six months. In essence, their
job becomes finding a new job, inside or outside the company. Retraining
opportunities are offered. Placement specialists are assigned to aid each
of the endangered employees, and in some cases no new outsiders are hired
until the program has run its course.
The downsizing craze has ignited a frenzy of law suits from layoff victims
alleging everything from age and race discrimination to sexual harassment.
And, more and more, cases that reach the courtroom are resulting in lush
awards to employees. Says Ronald M. Green, a Manhattan attorney who often
defends corporations against discrimination charges: "Juries walk in
there ready to put employers' feet to the fire. Legal issues often give
way to a sense of shared humanity with the plaintiff."
The basic law involved in laying people off sounds simple enough. In lieu
of some contractual agreement, union or otherwise, all workers are so-called
employees at will. That means they can leave whenever they want and can
be let go at any time for any sound business reason. But things aren't nearly
that simple when you are shedding anyone in a protected group—including
women, minorities, the disabled, and anyone over 40 years old. To get rid
of folks in any of these categories, you may have to prove that their sex,
age, race, or physical condition was in no way a factor in the decision.
That has proved difficult for many downsizing employers recently, particularly
when it comes to charges of age discrimination. Tens of thousands of such
cases are being flied every year, and Green estimates that at least three
in four result in a settlement or jury award for the plaintiff. Jury awards
are often substantial because the law allows plaintiffs who win their cases
to be reinstated and collect double the amount of wages and benefits they
would have earned during the time they were unemployed—plus all legal
fees. If the aggrieved is a $100,000-a-year executive who has been grounded
for three or four years, you approach seven figures fast. (One measure of
current worker relations: Green interrupted an interview with FORTUNE to
counsel a client who called to say that a disgruntled ex-employee had just
arrived in his office wielding a pistol. Green's sage advice to his client:
"I told him to get the hell out of there.")
The proper defense against charges of unfair treatment, whatever the basis,
begins on day one of an employee's tenure. You make no guarantees about
longevity of employment," says Ralph Johnson. "The only thing
you promise people is a chance to use their skills and talents.. Regular,
formal evaluations are also a must; you've got to lay a paper trail if you
want to claim an employee's work has been unsatisfactory all along. In doing
so, however, the experts emphasize that supervisors must avoid any language
that implies that age or sex or race was an issue. Plaintiff's attorneys
trying age-discrimination cases salivate when they turn up smoking-gun evaluations
that say things like "this employee is less efficient than his younger
colleagues." A manager's off-hand remark about a worker's graying hair
or arthritic knee could be equally damaging. During a big layoff, employers
can help stave off litigation, especially large class-action suits, by studying
the demographic makeup of the exiting workers vs. that of those who remain.
Alarm bells should start ringing if the layoff results in a significantly
younger, whiter, more predominantly male group of workers. But such a study
may also turn up potential injustices easily remedied—older workers
just short of earning full retirement benefits who can be kept on for a
short time, say, or minority workers suitable for shifting to new departments
that may expand. Far better to make the effort to be fair than to try explaining
to a Jury someday why you didn't bother. In fact, say veterans of the layoff
wars, the most effective way to stay out of the courtroom in the first place
is to exhibit a caring attitude toward departing employees all through the
layoff process. That way you may avoid inspiring the kind of deep loathing
that leads to lawsuits. Says Green: "The angry employee, not necessarily
one that is simply hurt or displaced, is usually the one that sues."
A little kindness toward layoff victims goes a long way toward easing
anxieties among survivors as well. The workers who remain after a big downsizing
are filled with a range of emotions—relief, guilt, fear over their
own future. They will almost surely identify closely with departing colleagues
and react accordingly if an employer appears callous and arbitrary. As John
Parkington, a consultant with Watson Wyatt Worldwide in San Francisco, puts
it: "If you've seen all your buddies bum-rushed out the door for no
particular reason, you start thinking that maybe the same thing will happen
to you."
Employers can ease survivors' fears by striving to create stability after
a big layoff. Nothing eviscerates morale among survivors more readily than
repeated downsizings. Workers can develop a sense that management has run
out of new ideas and is instead subjecting employees to some sort of never-ending
pogrom. Says Bain's Reichheld: "Churn simply for the sake of churn
is evil; it destroys knowledge, trust, and growth." All semblance of
connectedness between employers and workers vanishes, and true teamwork
is impossible. At companies where layoffs have become a way of life, says
Reichheld, you rarely find the energy and cooperative spirit necessary for
success. "Business becomes a transaction between strangers," he
says.
Reichheld contends you can actually quantify the costs of excessive employee
churn. One fast-food chain found that profits at stores with the least turnover
were 50% higher than at those with the highest churn, partly because of
savings on training and rehiring costs.
Eventually, companies in continuous turmoil can succumb to what Peter Scott-Morgan
of Arthur D. Little calls "change fatigue." By hammering away
at workers' sense of security—Rambo reengineering, Scott-Morgan calls
it—management winds up with a labor force full of overly timid zombies.
Conflicts are forced underground, there to fester like so many untreated
wounds in the corporate soul.
John Koepke got back on his feet financially about a year after he
was fired, starting up his own small graphics company. His wee recovered
from cancer as well, after enduring surgery and months of chemotherapy.
But he still thinks about the gratuitously cruel way he was let go, and
he still finds it somehow bawling.
A friend helped him put it all in perspective a while back. Koepke mentioned
that he'd been especially shocked by his firing because he'd always thought
he shared the same goals as his chairman and the board. "That's not
the point," replied the friend. "You may share the same goals—but
you don't share the same values."