Unnecessary Layoffs Reprehensible

Will Marré, CEO of REALeadership Alliance and author of Save the World and Still be Home for Dinner, recently wrote an interesting blog, Microsoft is Stupid, in lieu of Microsoft’s recent announcement to layoff 5000 employees.  Marré’s stand is that when a profitable company lays off employees, it is irresponsible and poor leadership.  He states, “I am of the firm belief that the foundation of Corporate Social Responsibility is that competent, committed employees should not be fired while a company is profitable.  It’s even more outrageous when Microsoft has tens of billions in cash languishing uninvested because they can’t think up new ways to grow.  This is an immense failure of leadership.”

While Marré’s view is certainly controversial, especially since it is not an uncommon practice of top leadership made famous by Jack Welch, CEO of GE, to me, it is dead on.  After all, shouldn’t a company’s top priority be to its employees?  Michelle Sterling, founder and President of building b: solutions, in Heads up HR: CSR is Knocking, states, “Research continually shows that the number one item that consumers look at to judge the CSR of a brand is how that company treats its employees.  Numero Uno.  Top of the lists.”  Marré states in Corporate Social Responsibility Needs HR,  “Doesn’t it make sense that an organization’s first social responsibility is to benefit and develop their own employees?  It seems that most American’s don’t care if businesses are recycling if they treat their own people like trash.”

Not everyone agrees, however, with this viewpoint.  In Some Firms Cut Costs Without Resorting to Layoffs by Cari Tuna it states, “Some workplace experts say layoffs are a useful part of the business cycle, allowing employers to weed out poor performers, increase efficiency and promote a high-performance culture.” Tuna continues, “Today, many companies argue that alternatives such as across-the-board salary freezes and budget cuts are more harmful, because they can drive away top performers.”

I have to disagree.  Aren’t layoffs, instead, the ultimate failure in taking care of one’s employees? Tim Sanders, author of Saving the World at Work, states, “In my view, socially responsible companies don’t have layoffs when they are still viable or making money. It is not an expense reduction strategy with an upside.”

IAC Chief Executive, Barry Diller, was quoted in Diller to profitable companies: Lay off the layoffs at Huffington Post: “The idea of a company that’s earning money, not losing money, that’s not, let’s say ‘industrially endangered,’ to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one’s counting is really a horrible act when you think about it on every level. First of all, it’s certainly not necessary. It’s doing it at the worst time. It’s throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason.”

Employee layoffs should not be the easy way out for companies, even though they see a decline in profits.  Top leadership should be doing everything they can, trying every other option before resorting to layoffs, especially when remaining profitable.  In Some Firms Cut Costs Without Resorting to Layoffs Cari Tuna also explores what some companies are doing to avoid layoffs. Tuna states, “Some employers are freezing hiring, offering voluntary retirement packages, cutting hours, reducing salaries or delaying raises. Other cost-saving tactics include raising employee health-care contributions and slashing bonuses, employer contributions to retirement plans and budgets for training, travel and other perquisites.”  Alex Chang, founder of real-estate search engine Roost.com, has gotten creative to save of his employees jobs from moving to a smaller office space and allowing some employees to work from home and asking vendors for discounts.

The bottom line is that CSR must start with responsibility to employees. As Marré concludes in Microsoft is Stupid, “[Microsoft’s] first Corporate Social Responsibility is to hold leaders accountable for their persistent inability to use their resources to create products and services that people value.  Laying off 5000 people is reprehensible.”

Business Leaders Committing Suicide

I think we know by now that one of the biggest obstacles to an economic recovery is an off-the-cliff fall in consumer spending.  This is leading to lack of investment in new plants, equipment, research and development, exporting or any other growth producing activity.  Of course as more people lose jobs the more the fear contagion spreads so the more consumption and investment shrinks and the more jobs are lost.

All I hear and see from business leaders is hand-wringing panic.  By now we hear from idiot economists who didn’t foresee the sustainable bubble bursting that the world wide global economy is being “reset” at a lower level.  Steve Ballmer, CEO of Microsoft, recently said while he announced the layoffs of 5000 smart productive employees that his economic analysts don’t see a recovery in demand for personal computers for many years, if ever.  Meanwhile Microsoft made $4.17 billion in profits, which is enough to pay the people laid off for a decade even if they did no productive work.  What Ballmer did, of course, is what business leaders are doing all over the world.  He made sure the 5000 people he just fired and the millions that watched him do it would be too scared to buy a new computer or upgrade their software to Windows 7.

Yes, we are seeing the rotten cycle of short-term, me-only leadership.   Most CEOs today earn bonuses based on stock price increase based on maintaining high-as-possible short-term profits.  The easiest way to do that is cut expenses.  And the big expense target is always the same…employees and now product development.  What’s insane is that this kind of myopic leadership accelerates the decline in consumption and insures that few exciting or improved products or services will be developed.

The problem is our business leaders literally don’t know how to think differently.  They behave like sheep in a panic stampede.  Now is the time for leaders to lower the cost and time for consumers to buy their product by removing waste and all non-valued features.  Now is the time to invest in new solutions to the problems we face or the joys we desire.  Now is the time to remove the dysfunctional or obnoxious aspects of our workplaces.  Now is the time to dream of ways of creating sustainable abundance and attack the worldwide market with better ideas.  Most of all, now is the time for business leaders to step up to their social responsibility to creatively employ their workforce in producing value.

The needs of the world have not changed.  In fact they are growing.  The only reason leaders of profitable business are laying off people is that they are scared to think differently.  They are scared to lead.  They need to get out of the way and let someone with courage and imagination lead.  Next time a leader of a profitable enterprise layoffs hard working, value producing employees, he (or she) ought to lay himself off.

Oh yes, I am off to Washington D.C.  I am trying to get a certain Senator to support the 1% Percent Solution.  Let’s create jobs by unleashing our entrepreneurial energy toward socially strategic enterprise.