Managing Accounts Payable, December 2008

Copyright 2008
Institute of Management & Administration

All Rights Reserved

Managing Accounts Payable

December 2008

SECTION: ACCOUNTS PAYABLE Vol. 2008 No. 12

HEADLINE: Layoffs: How to Make the Most of a Difficult Situation

BODY:

Main Article

Probably the most dreaded task of any AP manager is to lay off someone. Unfortunately, layoffs have become all too common during the current economic turmoil. There's no easy way to do it, but there are some things to do that will help make the task less onerous.

Should Be Rational

While there may not be a good layoff, employment analysts say, a better layoff is possible if an organization approaches the downsizing rationally; communicates effectively and early; supports managers conducting the job cuts; offers counseling and training for laid-off employees, and their families if necessary; and invests in the remaining workers.

"Companies are so afraid of lawsuits about favoritism that instead of creating a logical plan to do with merit, competence, or need, what they do is the great 'fairness' thing, which is typically the first in, first out system," said ArLyne Diamond, founder of Diamond Associates, a management consulting firm in Santa Clara, Calif.

"They penalize some very good people, and since the rumor mill always knows what's going on ahead of time, the best people leave early and get other jobs," Diamond said.

Do It Strategically

Employers should be upfront about where job cuts will occur, Diamond said, to avoid unwanted attrition. Moreover, management should announce that there are some critical areas where there will not be layoffs--if this is the case--and explain the situation as early as possible, she said.

Patrick M. Wright, director of the Cornell University Center for Advanced Human Resource Studies in Ithaca, N.Y., agreed that when a layoff becomes inevitable, a major challenge for the company involved is to figure out where to make cuts. It does not make sense, he said, to think about a 10 percent layoff across the board "where you're laying off 10 percent of your R&D scientists when your future is built on generating new discoveries."

He said that corporate headquarters is not always the best place to decide which jobs to cut. "I think one way to think about it--instead of talking about numbers of jobs to cut--is to think about a reduction in labor costs," Wright said. "And let companies or business units figure out how they're going to achieve that reduction."

Sometimes employers can avoid layoffs with this approach, perhaps cutting hours and using other creative approaches, rather than eliminating jobs, Wright said. It is easier for a company to boost hours if things pick up again than it is to bring back employees who have been laid off, he added.

Diamond said that while re-hiring laid-off employees happens, it is not a desirable approach. "The back and forth is bad for everyone," she said. "It's like taking the romance out of a marriage. Once trust is broken, it's almost impossible to build it back again. The employment contract is first and foremost a relationship."

Model Approach

In an article titled "Managing a Downsizing Process," in Human Resource Management magazine, author and University of Colorado business professor Wayne Cascio sites Palo Alto, Calif., company Agilent for its intelligent and caring approach to a 2001 layoff.

The company took extensive measures to avoid letting employees go, Cascio said, such as instituting a hiring freeze, followed by a mandatory three-month across-the-board pay reduction of 30 percent. But when a layoff became inevitable due to continued dropping market demand, Agilent handled the process with honesty and integrity, according to Cascio. He cited Agilent as a model of how to conduct a downsizing in a caring way and how to communicate that caring. Cascio said that employees supported the cuts at the company, and morale was not destroyed.

Layoffs should always be an employer's last resort, he said. "Where a layoff doesn't make good sense is when companies do it only because their competitors are doing it or they're trying to reassure investors that they're taking some tangible action, to show Wall Street that they're doing something," Cascio said. Unfortunately, he said, "it happens a lot."

Dignity and Respect

If cutting jobs arbitrarily is the biggest mistake companies make during a layoff, Diamond said, the second biggest is treating employees like thieves--escorting them out of the building at the time of termination--because of an excess fear of security breaches. "You need to treat people with care, respect, and dignity," she said.

"There will always be the one or two people you can't trust at the highest and lowest levels," she said, "but if the people you're firing were going to steal the secret sauce, they would have already done it." Instead, Diamond said, companies should be providing all the resources possible to prepare a laid-off employee for another job and sometimes another career.

She said that one of her pet peeves is laid-off employees not getting competent career counseling. Employees who are leaving need help with everything from updating their resumes to dealing with personal stress, Diamond said. And when the employee being let go is the family's primary breadwinner, she said, other family members may need counseling as well.

Dealing With the Survivors

In the wake of a layoff, the survivors--employees not laid off--may feel guilty about their good fortune, warned Laura Crawshaw, founder of Executive Insight Development Group Inc. in Portland, Ore. Moreover, she said, if the company has not given a lot of advance warning about job cuts, communicated a sense of caring, and treated exiting employees with the utmost humaneness, the remaining employees "will also be fearing that the next knock on the door" will be announcing a layoff for them.

Crawshaw said a company should be truthful about its rationale for layoffs, something along the lines of: "Our intent was to build the organization; our goal was to grow and have many happy employees. But the fact of the matter is that the market has changed. To our deep regret, we've had to close divisions."

Finding the Silver Lining

Cascio noted that layoffs are not always a bad thing for companies. "Sometimes organizations are just overstaffed, and you don't have any choice," he said. "You have to get rid of excess capacity. Other times you might just have an asset that's not performing well, and somebody else can make much better use of it."

"But the broader point," Cascio said, "is that you can't just pretend the company is the same. It's not." He said that the employees who remain following a downsizing will need training for new or altered jobs.

"If you go on a crash diet, you have to have new clothes," he said.

This article is adapted from Making Job Cuts Less Cutting: Honesty, Conveying Caring and Respect Recommended, which appeared in the July 28, 2008, issue of the Human Resources Report, published by the Bureau of National Affairs (www.bna.com).

ý

Sidebar: Delivering the Bad News to a Laid-Off Employee

For employees who get the pink slip, caring and respectful treatment by their employers can soften the blow. Consultant Laura Crawshaw says that being fired is a sort of death--the termination of one's work life. "The employee is being confronted with a major loss," she said, and whether or not it works out in the long run, at that moment it is traumatic.

So how do you lay someone off "in the most humane fashion?" While managers need to pay attention to legal and other limitations, Crawshaw said, they also need to understand the emotional realities of the situation. Because of their difficult role, managers may tend to "retreat into the automaton" mode, Crawshaw said. But managers with the task of firing people must understand the emotional aspects, she said.

"The bottom line is treating people with dignity and respect in that moment," she said. "In my view, you let people be who they need to be at that moment; they might be quiet, get angry, criticize the organization, vent about a certain supervisor, and I think a respectful response is to listen.

"Understand you're not going to fix it or solve it or hand a job back or defend the company's decision. Trying to do that will be frustrating and provocative," Crawshaw said. The best approach is to "reflect back that you're listening," she noted.

Employees' reactions to being laid off are different. Some can be either "fight or flight," Crawshaw said. A fight response might be arguing or attacking a supervisor or attacking the person doing the terminating, she said. A manager needs to understand that the employee being let go is trying "to survive this moment," she said, adding, "If you understand that, you can have a lot more empathy. You won't take it as personally." Crawshaw said those in the "flight" mode are in shock and not thinking clearly; they can withdraw and not have any questions and just "clam up."

"It's a hard thing," Crawshaw said of laying off workers. "You may need some support, certainly talk to HR, your boss, and others who've been through it before."

(Source: BNA's Human Resources Report)

Sidebar: Delivering the Bad News to a Laid-Off Employee

LOAD-DATE: October 31, 2008