To say I’m not a fan of layoffs would be an understatement. Most are done horribly and do far more damage to the firm’s and CEO’s brand, making the company less competitive and often starting a death spiral that the company never pulls out of. This is largely because little of the data that surrounds a layoff is actually captured and is virtually never made part of the decision. The only predominant data element is cost savings, but that tends to be a tactical measurement and often pails against the impact from collateral damage that isn’t collected and reported.
When analytics are done right an entire event can be captured. As a result, there is a pretty good chance that layoffs, at least as they are now done, could become obsolete in firms that use analytics wisely.
Let me explain.
[ Related: How to rebuild your career after a layoff ]
The problem with layoffs
The big problem with layoffs is that they are virtually never focused on the related problem, but the symptom of the problem. For instance, the trigger for a layoff is generally failing financial results, but these problems are often caused by either external events or bad internal decisions, neither of which are generally caused by excessive staffing.
If a firm is making bad decisions or finds itself surprised by a market in decline the first best fix would be identifying how the firm got in the mess in the first place and fixing that. Then using the correction to make more surgical staffing changes. This would be like focusing on diagnosing an illness first and then defining a detailed corrective plan to not only address the illness but to prevent a recurrence.
Layoffs, by their nature, are invasive practices that attempt to deal with the symptom of a problem by making a huge change. This is like a doctor showing up with an axe and choosing amputation as a first resort. As a result, the related trauma has a good chance of being worse than the disease.
For instance, let’s take Carly Fiorina at HP. She did a lot of layoffs and HP never really recovered. She lost her job, and her desire to become the U.S. President, or hold any high elective office, is a nonstarter. It is really hard to fix anything with an axe.
The collateral damage from a layoff can be massive. One of the best managed layoffs I ever observed was IBM’s in the early 1990s. The laid-off employees had their salaries extended and they were given offices and resources from which to locate new jobs. Even so entire lines failed due to lack of skills and a large number of employees ended up at competitors who were then far more successful, taking IBM’s business. None of this was ever really captured.
Collateral damage from a layoff includes the migration of key skills to competitors, anger and disloyalty both in the people the leave and stay, and often a level of animosity that can tarnish the firm’s image and do long-term sales damage. Laid-off folks often become or have relatives or friends who are corporate buyers who then avoid the firm’s products, badmouth the firm on social media, and can torpedo executives from the firm who they held accountable long after those executives leave the company.
As a side note, the vast majority of CEOs who accept layoffs as a business option have never been fired or laid off themselves. They lack an understanding for any of the related problems and just see the tactical financial benefit.