Do Layoffs Fix Anything, or Do We Have Them Because Everyone Else is Doing It?
According to the article from Stanford Graduate School of Business, they don’t make anything better.
Academic studies have shown that time and time again, workplace reductions don’t do much for paring costs. Severance packages cost money, layoffs increase unemployment insurance rates, and cuts reduce workplace morale and productivity as remaining employees are left wondering, “Could I be fired too?”
The cost-saving effects of layoffs are almost non-existent. So why? It’s one thing to be losing money and need to cut costs. It’s another to be a pretty profitable organization with layoffs that don’t wind up cutting costs.
This is where I want to share my own experiences with layoffs. This latest round of layoffs was the 5th time I’ve experienced a series of layoffs at my organization, and I’ve learned a few things over the years. Let’s review.
1. My first experience was in a small organization that was starting to lose money. The sales model wasn’t working, management and the Board wanted to change that model and do something completely different, and the entire sales staff was let go. This round of layoffs made sense. It wasn’t working. It was time to cut some costs and make a change.
2. My second experience was in a law firm. When every law firm was cutting staff and letting go of associates. That firm wasn’t losing money. It just wasn’t making as much as the partners wanted, and there were a lot of other firms cutting staff to ensure their partners continued to make their money. This was my first personal experience with what we see going on now. None of these big tech companies or companies in the legal services space is at risk of losing money. Many of them are publicly traded. You can look them up yourself. The others will tell you that the company is still in good shape and profitable. They are just trimming costs or re-focusing, etc.
This first law firm layoff experience was instructional to me because this was one of those workplaces that talked about “family” a lot. They prided themselves on the collegial atmosphere and the warm, friendly culture that had existed for decades. When push came to shove, however, the firm looked out for its bottom line, its “PPP.” (Profits per Partner).
3. My next experience was at another law firm. This time it was restructuring the department that I worked in. This experience came complete with the consultants coming in to learn about how we worked and what each of us did. If this sounds a lot like the ploy of Office Space, you’re not far off. I had an opportunity to leave before completing that process, and I took it. The lesson? Don’t wait to be let go. Keep your options open.
4. The next one was with a software company that had made a massive investment in buying and upgrading an existing tool that wasn’t working out as planned. That one was on management, and I don’t think anyone disagreed, including management. But the CEO didn’t pay the price for that mistake. Another lesson learned.
5. Now, starting in 2022 and rolling into 2023, we have the tech industry and related industries like Legal Tech announcing layoffs or quietly laying off a percentage of their staff. As mentioned above, Google, Microsoft, Amazon, etc., still record huge profits. No one is losing money. They aren’t reporting the same ridiculous growth and profitability level as they did in 2020-21, and the people who made the most during those years are not making as much this past year. As the article above says:
I’ve had people say to me that they know layoffs are harmful to company well-being, let alone the well-being of employees, and don’t accomplish much, but everybody is doing layoffs and their board is asking why they aren’t doing layoffs also.
Boards and shareholders love layoffs because the stock market loves layoffs. Watch as each round of layoffs is announced and how there is an immediate bump in the stock price. If you own enough stock or private equity in a company that seems to lag in valuation, announce some layoffs and watch your value grow. The appearance of doing something to increase profitability is the short-term answer. It’s quite possible that it will not have any long-term effect. Still, when the economy bounces back, which it invariably will, you will take the credit for making the correct call on cutting jobs that probably didn’t need to be cut in the first place as you hustle to hire more people to fill those same positions.
Why do I share all of this with you? Am I just salty about people all around my social circles getting laid off and worrying about my position going forward? Yes, I will admit that is part of it. Most of my reason is to remind you that business is business and will always remain so. Over the last few years, there’s been a lot of talk about mental health benefits and caring leadership, and workplace culture being the key to employee engagement. That’s good, but don’t let it fool you. There will be a lot of talk about diversity and inclusion, your team’s culture, and avoiding burnout, even as those same leaders are cutting jobs and asking more of the people who are left, using the fear of losing your job as a tactic to get more out of you.
Please don’t buy any of it. Somewhere in that business, at the C-Suite level, the Board level, or Shareholder level (Or the partner level in law firms), there is someone whose primary concern is how much money they make. As Admired Leadership recently noted in a piece titled How Colleagues Are Terminated Really Matters:
Explaining away the legitimate needs of those on the way out by insinuating that everyone knows this is how business works is a cop out. Organizations and leaders who say they lead with values such as respect, integrity, and inclusion must prove it in every circumstance, not just in team forums and on-wall displays.
Take a hard look at what leaders are saying about layoffs and what they focus on. Do they seem personally hurt and concerned for the people leaving? Do they have honest and transparent explanations for why they made these decisions? Or do they repeat platitudes about “recession,” costs, and other bits of financial jargon to explain away something so painful to the same people they were calling part of the family a week ago?
Families don’t cut the number of kids when money gets tight. Your workplace is not a family and does not deserve a level of commitment that matches your family or your health. Layoffs are sometimes necessary, but mostly just a nice tool to perk up the value of a company for a specific part of the structure or to make up for mistakes made by the same people making these job cuts.
That’s business. I’ve argued for years that business has a vested interest in employee well-being. Caring about your people is how you get their best. I hope leaders will continue to grow in that regard, but as an individual employee, you need to care about yourself more. If your job isn’t meeting your career needs in terms of money, development, or work-life balance, find a better one. You owe them nothing. They pay you to do a job until they decide not to. You owe them that work.
That is all.
Edited to add this link where Ed Zitron argues that Google CEO Sundar Pichai should be fired. because he makes similar points about it being the BigTech CEO who screwed up, but it’s not them paying the price.
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