UNPLANNED LAYOFFS

Steven Cesare, Ph.D.

A business owner from Minnesota called me the other day with some bad news. One of his three branch offices is underperforming and as such, immediate, unplanned employee layoffs will have to occur as a cost cutting mechanism to bring that branch’s financial metrics more in line with the revised budget forecast. At the present time, it appears that 15 employees will be laid off. With that outcome in mind, here are some meaningful issues I shared with the owner to make this traumatic process, both fair and legal, with the salient intent of preserving as much of the company’s heretofore positive culture as possible.

First, unsurprisingly, we addressed budgetary impact. I asked him to verify that the prospective layoffs would in fact demonstrate sufficient cost savings to remedy the failing branch. In general, employee layoffs are conducted when revenue drops; when many green industry companies transition from landscape services to snow services. Those seasonal layoffs are conceptually similar, though procedurally quite different in this case. These layoffs were wholly unplanned; it is a triage response to financial failure. Thus, to avoid potential legal scrutiny, the business owner must show that the identified employee layoffs are correspondent to the revised branch budget as the solution to maintain ongoing business operations.

Second, employee layoffs should never resemble a game of musical chairs. There must be some systematic process in place to avoid inevitable clams of discrimination. This process is not meant to be bureaucratic; it is meant to be fair, defensible, and job related. Never forget that everyone is a victim in our country! Everyone! To minimize these always-anticipated legal claims, I strongly suggested that the business owner and his Branch Manager evaluate each branch employee using the Performance Planning Matrix categorizing them as Deadwood, Problem Employees, Work Horses, or Stars. From that point, based on each employee’s job performance and job potential ratings, the business owner and Branch Manager should identify the Deadwood and Problem employees for immediate layoffs, and then escalate to the Work Horses as financially necessary.

Third, the issue of separation pay was broached. I forcefully admonished the business owner to refrain from using the expression “Severance Pay” due to its rigid legal meaning, application, and implications. While no separation pay is legally required, the business owner and I agreed that something should be given to soften the employees’ transition. I know it’s business; but we are still people. Aren’t we?

The company has a bi-weekly payroll schedule. Accordingly, we considered either two weeks or four weeks of separation pay for the 15 soon-to-be former employees. It was decided that two weeks of separation pay would be given to each employee on his/her last work day.

The actual dismissal date promoted extensive discussion, factoring in current production schedules, unrealized cost savings, amount of advance notice, and cultural impact. Relying heavily on the Branch Manager’s input, it was decided that the layoff date would occur in the next couple of weeks, on a Friday, with no advance notice. This latter point generated several animated opinions regarding fairness, risk management, and cultural norms. It has long been my professional opinion that no advance notice should be given, due to the high probability of a sudden spate of workers compensation injuries, a negative tone surrounding the “lame duck” employees, as well as the awkward nature of “survivor guilt” experienced by the ongoing employees.

Next, I strongly recommended a year-to-date monthly review of branch performance be conducted to determine when/how this tragic trend began. The Branch Manager, the Sales Manager, and the business owner are the likely points of base accountability. Clearly, somebody did something wrong, or somebody did not do something at all. With the monthly performance metrics as a backdrop, I instructed the business owner to compile a Start-Stop-Keep exercise as a post-incident autopsy to prevent further reoccurrence.

Unplanned layoffs are damaging. They damage the laid off employees’ lifestyles, the management team’s alleged expertise, and the essence of the company culture which took years to cultivate, and now will require an extended period of time to heal. As a capitalist, despite the direct business ramifications, issues like procedural fairness, interpersonal respect, and functional accountability must never be minimized.

Because after all, we are still people, aren’t we?

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