In the News, Reviews

Employers: What size is the first shoe? Make sure it's big enough!

If first round of job cuts aren’t deep enough, there may be a second shoe.

We are experiencing (as predicted earlier) another larger than last month set of job losses. Companies have come back from the holidays and enacted reductions that were on the drawing board but were held off until the New Year.

We’re also beginning to see second rounds of cuts from companies that made modest reductions late last year and are having to now drop a “second shoe.”  Unless there has been very transparent communication that a secondary reduction would have to happen if certain metrics were not achieved, multiple rounds of layoffs is the worst thing that can happen for morale and management credibility.

Unfortunately, I have been at the planning helm of multiple layoff actions within my career (the darkest days and the most shameful moments of my career) and each time that the conversations and analysis was happening about how deep the cuts should be, I was the one who said, “cut deep enough now that we don’t have to come back later”.  My experience says that any percentage cut of less than 10% becomes nothing more than cosmetic.  The truth is that there is at least 10% wasted work and effort in every organization. That doesn’t mean that there is a full10% of bad people, it just means that the work that creeps in over the years creates extra efforts and time that don’t have any bearing on the growth and success of the organization. It is a hard pill to swallow but it is there.

In most cases, this waste is obvious but usually not dealt with by management because the person who is doing that work is “a good person”, loyal, and long-tenured. Or, it may be too hard to think about how to dole out the value-added work to others if that position is removed.  So the work and the person stay. The truth is that are also some people who are at the bottom of the performance barrel that need to go too as they drag down the great performers.  They are in that 10%.

Cuts of 2%, 4%, or 5% are invites to come back for a second round.  The dirty-secret is that the talent in the company knows it too.  They see that there is still waste work happening.  They understandthe hard decisions were not made on people.  They won’t say it for fear of pointing out something that might cause them to be cut next, and their anxiety goes way up and productivity goes down.  We are now watching companies come around for their second round.  For example:

– Starbucks laid off 2,000 employees in 2008 and are expected to layoff another 1,000 people.

Motorola announced in late 2008 that they would cut 3,000 jobs and they announced last week that approximately 4,000 more employees would be laid off.

Schlumberger stated last week that they would be cutting 5,000 jobs globally. This comes after announcing 1,000 layoffs in early January.

The rationale is that the economic conditions are clearer.  That rationale doesn’t play well with those who have to hear the message for the second time. It’s like ripping a scab off a healing wound. Companies that made the hard calls and cut 10% or more the first time are not going through it again.  The size of the first shoe that dropped definitely affects the fear of the second shoe coming down. For those companies who are still planning, keep this in consideration.  It is hard decisions for all involved but it may end up being better in the long run.