An Alternative to Layoffs

Or, solidarity at work

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Unlike a firing, in which a person is terminated from a company for just cause, such as poor job performance or bad behavior, a layoff is when employees are terminated due to business-related issues; for example, a downturn in projected sales, elimination of positions due to a merger, or workforce replacement due to the relocation of a factory.

For the most part, layoffs are not about the quality of an employee’s work; they’re about a reduction in the workforce. You can be the best journalist, software programmer, or warehouse order picker around. It doesn’t matter. When the business can’t afford you anymore, you’re gone. And, there’s not a lot you can do about it except sign some papers so you can get severance pay (if offered), your unemployment benefits, and start the process of paying your healthcare insurance through COBRA. Other than that, you’re on your own.

Some companies have tried to make the layoff experience more palatable. For example, when I worked for the Big Computer Company in the ’90s, impending layoffs were announced. To cushion the blow, employees were given the option of voluntary resignation, which came with a cash award. Other companies called this approach Early Retirement. But, for most, it’s “Thank you for your service, and here’s your severance check. HR will now escort you out.”

Layoffs are devastating

For those who have been through a layoff, it is a devastating experience, both for those terminated and for those left behind. Recovery is slow. The effects linger on.

Going through life knowing that at any moment, you could lose your income and healthcare insurance due to decisions that are beyond your control and in which you don't have a say inflicts emotional wounds that might never heal.

Granted, companies need to be able to cover their expenses in order to stay in business. Being able to meet payroll is essential. So, I understand the need to keep that expense manageable. But there has to be a better way than the lifeboat approach to survival… “Sorry, the lifeboat can only support 5, and there are 6 of you in the boat. Somebody’s getting tossed overboard.”

A better, more humane way

What if, instead of reducing the payroll expense by reducing headcount, companies offered employees the following option: We need to reduce payroll by 10%. We can let 10% of you go, or everybody, CxOs included, can take a pay cut on a fair and graduated basis – those making more take a larger but fair cut – until things turn around. This way, everybody gets to keep their job.

Is the idea simple? Yes. Will it be hard to implement? Yes. There are a lot of details and edge cases that need to be addressed. For example, what does a company do when it makes a dramatic change in the product or service it sells, and the layoff affects those without the skills needed to make the necessary contributions? Or, what does a company do when the intent of the layoffs is to increase profits by replacing humans with automation? 

These are real problems that need to be addressed. But, the biggest obstacle to overcome has nothing to do with business processes, the direction of the company, or edge cases. The biggest obstacle is this: will all employees be willing to take a hit on their income so that others might keep theirs?

Is solidarity possible?

If the willingness to make a sacrifice for the overall good of everybody is not there, there’s no solution to be had. Either we’re in this together in solidarity, or we’re not.

Right now, the jury is out about whether solidarity is possible. Given the trends, it seems as if we’d all just rather go it alone. Union membership has been down for decades, and the professional class might have associations and certifications, but these are not structures for organized action. In addition, there is a very strong delineation between the needs and motivations of upper management and everybody else. 

CEOs, VPs, and division heads are hesitant to give up the power to terminate by edict. Why should they? The tool works. Today, for those in charge, it’s not about the people in the lifeboat; it’s about the lifeboat. As long as they can run the business profitably, why should they give up the tools that allow them to get the lifeboat to shore?

Keeping everybody in the lifeboat, no matter how dire the conditions are, is the change that needs to happen. Making the change will require a well-organized, independent, unified workforce and an empathetic managerial class. It will also mean refocusing the intent of business from excessive profit-seeking to people.

The place to start

At first glance, ensuring the well-being of everybody in the lifeboat might seem like an enormous undertaking. It might be. But the place to start is at the beginning.

The first action I suggest is to make others aware that there are alternative methods to managing the cost of labor when business slows down. Layoffs are not the only solution. Hence, I hope you share this article with others.

The second action is to find small opportunities to implement an alternative, maybe at the team, workgroup, or department level. Imagine what life would be like if a VP went to a team and said, “The budget requires that your department reduce payroll by 10%; you all figure it out.”

In the past, if I were given the opportunity to take the pay cut so that all of my team members could keep their jobs, I would do so in a heartbeat.

But that's me. I hope others would act similarly.

Spread the word

If you think the ideas I propose here have merit, spread the thinking around, please. If not, my mind is open to any idea that will make things better and do away with the dread that the specter of a layoff incurs.