Earlier this week my company laid off 167 employees, our organization calls it a RIF, a Reduction in Force. This is the third time in three years that our company RIF’d. The surprising element about this round was that for the last five months we were assured that a RIF wouldn’t happen again. Leadership who so adamant about the impossibility of this never happening again, that their message revealed a chasm in the leadership skills of the VP’s who are running our organization.
The three layoffs were all very different and under different groups of leadership and I would like to explore the impact of these layoffs overtime and the differences in execution.
In my first year with the company, over four years ago, our leadership made an announcement that 10% of the lowest ranked employees in my department would be let go in four months. These cuts would take into account each employee’s quarterly review as the determiner for who gets let go. Four months passed and on a Friday afternoon 50 employees were walked out of the building, no severance was given. This RIF (Reduction in Force) was straight forward and there was little complaint from those who were let go. The four months was enough time to affect an employee’s review ranking so it was not impossible to shape up. During this time the leadership of our department were clear about their expectations and gave those struggling all of the attention they would need in order to be successful. They were authentic in their approach in that our leaders were confident about their goals, were empowered to help, and offered hope to those who wanted to improve (Northouse, 2013). It was great leadership moment because although it was clear that the bottom 10% represented a strata of lazy employees, there were some who took leadership up on their offer to help. In turn our leadership helped those employees get out of the bottom 10%. This showed true authenticity and was good to see from both perspectives. From a struggling employee perspective, extra emphasis was given towards your success, and from a top employee perspective, it was empowering to see leaders caring about, and working for their employees.
Roughly 10 months after the 10% cut, on a random Wednesday all employees received an e-mail that said (paraphrase): “Our organization is overstaffed, and we are offering all of you a three months’ severance package to leave, you have 72 hours to make a decision.” Woah! You’re probably saying, really? The organization dubbed this the “VRIF” or Voluntary Reduction in Force. At that point we had a department of 400 and within 48 hours over 220 employees had taken the severance! 24 hours into the VRIF they shut it down and revealed that too many people had taken the package and the option to take it was over. Needless to say this destroyed departmental moral. Staff level employees received an e-mail at the close of the week that stated how much they were appreciated that stayed back. Leadership said they looked forward to better times. That was it; little mention was made of VRIF after.
Finally, earlier this week, 10 months after the VRIF, and after months of saying there would be no further layoff, we were blindsided by an additional 20 members of our department (167 in the organization) who were RIF’d. We were led into a meeting at 9:45am which was set up to explain that there were no more planned layoffs, everyone laid off had been notified, and that it was needed to “right size” the company to reflect the amount of customers we have.
These three lay off followed different patterns and resulted in different employee behavior. In the first, we were told about it, we were supported through the process. After the layoff the staff level moral was shaky, but OK as we all knew it was coming. The Voluntary Reduction a year later was a complete shock. For some people it was a great way to leave a company with three months’ severance, and on your own accord. Those that stayed behind felt uneasy that leadership couldn’t make their own decisions as to who should be let go. Furthermore, leadership never offered an explanation or way to make peace with the staff level employees. They were inauthentic and within six months all of the VPs had been fired. Finally, this most recent layoff felt like a betrayal betrayed as they felt that leadership wasn’t being honest with the company. Had they been authentic and said that if we start to lost customers, then we will lay employees off, they staff level employees could have prepared. Instead they tried to make it as quick and painless as possible. In this case leadership has hid from the fallout of layoff and has little to offer but canned responses. In the future I hope that those in leadership understand the stress that layoff’s put on those that do not get let go. It erodes moral but is also an opportunity to show strength and guidance for the future, and that should our leaders main concern; that is, “What can we do to make sure we support those who are here, and boost back trust and moral.” Unfortunately our leadership hasn’t taken the time to do this, because when they did in the past, it showed.
References
Good Leaders are Authentic Leaders (YouTube), Retrieved from https://www.youtube.com/watch?v=r6FdIVZJfzg
Northouse, P. G. (2013). Leadership: Theory and practice. Thousand Oaks: SAGE.
Pennsylvania State University World Campus (2014). PSYCH 485 Lesson 8. Retrieved from https://courses.worldcampus.psu.edu/fa14/psych485/002/content/11_lesson/printlesson.html
Adam L Bennett says
Morgan,
Thanks for your post! First, let me say that I was intentionally vague. My company has a no blogging/internet comment policy and I didn’t want anything to eventually be found later down the line. It’ll try to paint a sharper picture.
As for your great questions: My company is a private company in the education industry and for the past three years we have seen significant decline in students enrolling and current students staying with the school. It’s a tough problem to solve because the company does a good job in customer service and creating leads. The company tries to keep a certain ratio of cost of services to student. This includes a per student cost to: customer service, marketing, outbound sales and administration. Part of the problem to the enrollment has been the declining number in new students being enrolled. Potential students who were previously unemployed and had lots of time to take courses are now finding jobs and are less inclined to stay in school. This inverse correlation to the economy hasn’t been felt in the private education industry since it’s boom in 2006 and 2007. Previously to our current circumstance, we had not encountered volatility. The past three years have been downward trending with no end in sight. Knowing this trend should help VP’s develop a system for assessing company strength against operating costs. From there they could develop a way to let employees know the delta in this ratio, and without holding an all-hands meeting, everything would know when to expect volatility. Lucking for the company, it is nimble enough to hire up if an increase in enrollment happens.
As an update to my original post, the VP’s did have a Q&A with staff level employees. It was an odd meeting as the VP’s allocated 1 hour but during the meeting gave a 50 minute presentation on the future of the company, with a few questions peppered in. The space didn’t feel honest enough to ask real questions, so by the end most everyone felt the same if not worse about the strength of their leadership. At this point, all employees are demanding strong, deliberate, and communicative leaders. They want to see honesty in the form clear direction including what realistic expectations as to the viability of X-amount of employees. I think it would be OK to acknowledge the strength of the company so that employees feel involved and part of the success. Instead employees are left in the dark, and always fretting that a layoff looms under every dark cloud.
Morgan Leslie DeBusk-lane says
I found your blog post intriguing. I have a few questions and comments.
I would probably venture to say that your situation, or at least your companies situation, is not uncommon in today’s economic instability. Without knowing the particularities it is very difficult to understand the three different approaches leadership took towards layoffs. At least from my experience, this level of transparency (or communication) is vital in maintaining and developing moral in this instance.
Interestingly enough, research does identify various avenues for which layoffs affect both those leaving and those staying. As you mentioned, the type of layoff directly contributes to aftereffects of employee moral and subsequent performance (Brockner, 1992). It is also evident that purely stating we are “over staffed” is and probably a deep overstatement to the overall issue at hand. As such, there is a myriad of decision points that are made throughout such an evolution that greatly contributes to the end decision (Arce & Li, 2011). As such, profits, size of layoff, future worker output, and many other factions are often brought together at the higher levels of organizations to format a plan for layoffs (Arce & Li, 2011). To this degree, and as you were apart of, how the organization focuses on the aftermath of such a layoff directly correlates to future moral and expectations of employees left behind (Brockner, DeWitt, Grover, & Reed, 1990). Also, as you mentioned, how organizations lay people off strongly shapes the opinions and perceptions of those that are left and stands the change to affect their performance. (Skarlicki, Ellard, & Brad, 1990).
As I mentioned earlier, it is extremely difficult, for both those staying and those leaving, to understand the reasoning—short of “we are just overstaffed.” I’m sure there was a lot more to it. Layoffs are never easy, however, as research has demonstrated, it can have profound affects to those leaving, those staying, and their future performance at the company.
So, this begs the questions: What were the conditions that were explained in each situation? Was there a conversation to be had with the VPs where employees could ask questions? What type of work is this—does it naturally have a volatile attrition rate of companies or employees—meaning, do these companies come and go very quickly or was it something like Ford or GM and could never fail?
Thanks,
Morgan DeBusk-Lane
References
Arce, D. G., & Li, S. X. (2011). Profits, layoffs, and priorities. Journal of Business Ethics, 101(1), 49-60. doi:10.1007/s10551-010-0707-7
Brockner, J. (1992). Managing the effects of layoffs on survivors. California Management Review, 34(2), 9-28.d
Brockner, J., DeWitt, R. L., Grover, S., & Reed, T. (1990). When it is especially important to explain why: Factors affecting the relationship between managers’ explanations of a layoff and survivors’ reactions to the layoff. Journal of Experimental Social Psychology, 26(5), 389-407. doi:10.1016/0022-1031(90)90065-T
Skarlicki, D. P., Ellard, J. H., & Brad R. C. Kelln. (1998). Third-party perceptions of a layoff: Procedural, derogation, and retributive aspects of justice. Journal of Applied Psychology, 83(1), 119.