Layoffs are a crime against staff. New leadership approach is needed.

By: Kamil Toume

layoff

LOS ANGELES, California (CNN)— It was described as one of the most grisly scenes Los Angeles police had ever encountered: the bodies of five small children and their parents, all shot to death, in two upstairs rooms of the family’s home.

“The reaction on their faces was not a pretty sight,” neighbor Jasmine Gomez told C”There was an officer who came out of the house throwing up.” But even more incomprehensible to some was the story that emerged after the bodies were found Tuesday: A father who, after he and his wife were fired from their jobs, killed all six family members before turning the gun on himself.

In a letter faxed to Los Angeles television station KABC before his suicide, Ervin Antonio Lupoe blamed his former employer for the deaths, detailing his grievance against Kaiser Permanente’s West Los Angeles Medical Center, where he and his wife Ana had worked as technicians.

As reported by CBS news, a city employee is held back by friends from confronting city managers at Costa Mesa City Hall after a maintenance worker jumped to his death Thursday, March 17, 2011 in Costa Mesa, Calif. Police say a Costa Mesa maintenance worker jumped to his death from the roof of City Hall after he was called in to get his layoff notice. Costa Mesa police Lt. Bryan Glass says the man jumped at about 3:20 p.m. Thursday. The Orange County Register says two witnesses saw the man jump and attempted to save him, but he was pronounced dead at the scene. The City Council voted earlier this month to cut more than 200 jobs in a drastic move to plug a $15 million dollar budget hole.

Another tragic story of how the financial crisis can drive people to despair was revealed in Amorgos. According to naxos-news, a 75-year old man in Amorgos killed himself because his son was fired from ERT.

According to the website, the pensioner from Arkesini of Amorgos, put an end to his life at about 7 a.m. on July 30. The 75-year old man could not stand the fact that he could not help financially his now unemployed son who is married with children, while he had continuous custody of his second son with serious health problems.Those who knew him say that from the day his son was fired from the musical part of ERT, the old man was really in distress. Day by day, he was falling into depression since he could not accept the fact that he could not financially support his unemployed son and his family.

On Tuesday, he left the house and after a while was found at the Arkesini reservoir, where farmers collect the rainwater, opened the heavy lid and fell to his death. On the same day the stock market nose-dived, a major investment bank failed and the financial services industry appeared set to shed jobs by the tens of thousands, Hewlett-Packard Co. contributed to the gloom, saying it would add 24,600 people to the unemployment lines as part of a restructuring in the wake of its acquisition of EDS.

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When people lose their jobs, they get angry and depressed—not a big surprise. Angry and depressed people who believe they have been treated unfairly can lose psychological control and exact vengeance on those they deem responsible. We have all seen too frequent cable-news coverage of the fired employee who returns to the workplace with a gun and wounds or kills people. It’s not just the occasional anecdote. Research shows that people who had no history of violent behavior were six times more likely to exhibit violent behavior after a layoff than similar people who remained employed.

And some research has looked directly at the health consequences of losing one’s job or being unemployed on mortality. A study Layoff-Unemployment-Stress-Inspirational-Bible-Verses-e1342264870461in New Zealand found that for people 25 to 64 years old, being unemployed increased the likelihood of committing suicide by 2.5 times. When two meat-processing plants closed in New Zealand, epidemiologists followed what happened to their employees over an eight-year period. The odds of self-harm and the rate of admission to hospitals for mental-health problems increased significantly compared with people who remained employed. A recent National Bureau of Economic Research working paper reported that in the United States, job displacement led to a 15 to 20 percent increase in death rates during the following 20 years, implying a loss in life expectancy of 1.5 years for an employee who loses his job at the age of 40. Even in societies with strong social-welfare provisions, job loss is traumatic. A study of plant closures in Sweden reported a 44 percent increase in the mortality risk among men during the first four years following the loss of work.

A study by The Brookings Institution followed individuals who faced long-term unemployment for 20 years. They found that incomes fell by 30 to 40 percent in the year in which they lost their job, and moreover, the incomes remained 20 percent lower 20 years later. During a boom, future earnings fell by approximately $65,000. However, in a recession, it can fall anywhere between $100,000 and $120,000. The study also found that job stability, health, higher mortality, and lower achievements by children were also attributed to job displacement during severe recessions.

Given the millions of layoffs that occurred four to seven years ago, a large percentage of the workforce may be suffering from general distrust of their own employers, a sense that they can’t commit to their new employer because they can’t be sure that their job is secure, and a feeling that they don’t want to get burned again.

CEOs are completely blamed for layoffs?

sony-studios-layoffsAll the time,the heads of any company meet and decide to cut expenses by laying off some people. Who should go? Finalizing the list of convicted,those who will be executed literally in the company for a mistake they are not responsible for. Any CEOs or executives who are prouldly calling themselves leaders and approve layoffs are particpating in a crime against staff becuase they contribute to fatal situations where people might committ crimes,suicide and many other incidents that may end with death or a very servious situation.

I was witness to an incident that happned with one of my colleagues here in the UK who was working as a finance manager in a company for five years, and drawing to the close of the financial year last march 2015, the CEO has decided to make some budget cuts to save some money and proposed to layoff some of the people and my colleague was among them. A month later and following many rounds of discussions between the manager and CEO to find other solutions to the financial problem other than cutting positions and making staff losing their jobs. The CEO made up his mind without any justification and fired the manager claiming that he has the support from board members and shareholders to have budget cuts through layoffs. 

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The problem with the “Please the shareholders” way of thinking is that all the shareholders care about are short term profits. Thelayoffs long-term health of the company does not matter to them as long as they get their dividend checks and the stock price keeps going up. If it doesn’t, then they whine and cry for some form of fix to make it happen. Layoffs are a great way to drive short term costs down, but the long-term price for morale and company performance can be horrid. Drive efficiency to make sure you are operating at the best level, but cost cutting just for the sake of cost cutting is a sure way to run a company into the ground.

On his way back home that day, the finance manager fell on the ground unconsciously in the train station due to the stress that he had experienced all the day in office. By a mere coincidence, there was a doctor nearby, he gave him some medications, helped him to regain his strength and go home. After a week in hospital suffering the results of the layoff, the CEO kept his decision arrogantly and did not listen to the wide spectrum of solutions presented to him from all staff members to account for the savings without resorting to the layoffs.

Does this CEO deserve to be in his position knowing that his salary a year will pay the salaries of ten employees in the same company? The conclusions are obvious: By maintaining the inflated salaries of CEOs—and other C-level executives—at the cost of laying off thousands of workers, a company’s productivity and values are totally damaged. This means that any Board of Directors that allows layoffs to balance the books when other options are available is damaging the human values or social human contracts between staff and management. Such CEOs shall be sacked and kicked out of company doors as soon as their pens’ ink touches the layoff notice.

Most of the time, those fat overpaid CEOs and self-centered executive management claim that it is the only solution in their hands to save money while the options are many to balance the books and save the real assets which are people. My simple question here is that if this CEO decided to consider other options rather than firing some staff,what would be the reaction of the employees to the CEO and the company in return? 

Through the cycles of business, nearly all of our Clients have been rocked by the economic downturn through the years. Leaders of these companies are good people who have had to regauge strategies, squeeze even more out of profit margins, and cut back their workforce to stay alive. In the midst of all the turmoil, we began to collect best practices in the area of layoffs. Here is what we have found, using our research within Southwest Airlines and TDIndustries, both ranked in the top ten of “100 Best Companies to Work for in America,” as benchmarks.

servant leadership

Because Southwest has such a high loyalty to its People and a track record of not using layoffs to solve financial problems, their people perform at heroic levels on a daily basis and volunteer to make huge personal sacrifices on behalf of the company in touch times, following 9/11,they were the only airline not to lay off any worker,not to reduce their flight schedule and the only airline to make profit in 2001.Immediately following 9-11, their top three leaders volunteered to work without pay through the end of the year and on 9-14, they fully funded the Employee Profit Sharing Plan. Employees requested a way to contribute and $1.3 million was raised in a pledge to LUV Fund.


In December 1993,
Volkswagen AG (Germany) announced plans to reduce their workweek from five to four days. hour cuts were negotiated to avoid massive layoff. At VW productivity increased, absenteeism declined, and its Wolfsburg plant now operates more than 150 schedules to accommodate the needs of workers and customers. And in April 1994 VW, as set out in its most recent contract of December 1995, continues to work 28.8 hours per week and to introduce further flexibility in hours of operation.

One of the solutions which was adopted by VW was work sharing which is an unemployment insurance benefit that promotes job retention. Work sharing allows employers who need to temporarily cut costs to reduce the hours and wages of their employees, rather than enact layoffs. When unemployment levels remain elevated, and with tens of thousands of employees out of work, work sharing may be a useful policy tool to help the company retain its current workforce and weather future economic downturns.

Simply speaking, reducing work hours and retaining staff in place as it is better that all to suffer a little than few to suffer the most. It is a reflection of good management and leadership approach to the business downturn.

Work Sharing has support from a Full Range of Economists Economists from all spectrum of the political aisle support and encourage the measure. According to Kevin Hassett from the American Enterprise Institute for Public Policy Research, work sharing is the “best option” to improve the employment outlook and mitigate the permanent damage that this long-lasting recession has on the “careers of a generation of workers.” Hassett continues by saying it is a “proven cost-effective program that promises significant—and timely—results.” And, in a recent article in the Wall Street Journal, Hassett states that he hasn’t “encountered any hostility when he raised the topic with fellow Republicans.” Mark Zandi of Moody’s Economy.com recommends the program as a way to help small business due to its “large bang for the buck” (that is, $1.69 in Gross Domestic Product (GDP) spending for every dollar spent on work sharing) in order to “minimize job losses.” The Center for American Progress describes it as a “job strategy that works.” Additionally, in 2002 the National Governors Association promoted work sharing as a “best practice” for assisting workers in an economic downturn.The New America Foundation also cites the long-term negative ramifications of extended periods of unemployment, and states that work sharing is a way to “mitigate layoffs, keep more workers attached to the labor market, and help businesses remain solvent during extended periods of economic downturn.”

The New America Foundation also studied long-term unemployment. The study cites higher incidences of poverty, social exclusion, psychological impacts and an increased reliance on state assistance for the long-term unemployed. Work sharing programs can help thousands of families avoid unnecessary pitfalls simply by giving employers the flexibility to withstand major business downturns without eliminating jobs. The study also showed that work sharing has in fact had an effect on limiting permanent job losses in 2008- 2009. It also suggests that while wages were decreased temporarily, it “allowed millions to escape the life-long consequences of joblessness and labor force detachment.”

The main advantages of this program are:

  • Retain job and financial security from wages.
  • Retain health insurance and retirement benefits.
  • Earn higher wages under work sharing benefits than traditional unemployment insurance benefits.
  • Avoid the loss of skills—while remaining available for advancement opportunities.
  • Avoid the long-term loss of income that is associated with extended unemployment.
The only disadvantage:
  • loss of the income. And again, back to the statement, it is better for all to suffer a little than few”laid off” to suffer the most.
Germany’s program, called ‘Kurzarbeit’ (literally ‘short-time’), is the most widely used example of a successful work sharing program. Unemployment in Germany dropped to 6.1 percent, a full percentage point below the rate at the start of the downturn. In regard to Germany’s success, economist Kevin Hassett states, it is “clearly and directly attributable to a specific economic policy…a secret medicine that can cure unemployment, or at least minimize its spread.”Despite a steep drop in GDP—worse than the U.S. and the European Union—Germany was able to increase employment by 1.9 percent while also bypassing the U.S. in GDP growth, albeit slightly. It is important to note that the OECD estimates that only 25 percent of Germany’s success can be attributed to work sharing. Employer agreements with unions, worker protections, reduced overtime, and work-hour accounts attributed to the majority of nations success. To reiterate, work sharing is not a cure all, only part of a larger commitment to preserving employment

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While some companies were trying to save the workforce and economy in the long run,some companies cut jobs and laid off approximaly 20 – 30 % of their workers.

Cisco:

After a plunge in stock by more than 20% in 2011,Cisco Systems, Inc. announced in July plans to trim about $1 billion in operating costs by cutting 9% of its full-time workforce, or 6,500 employees

The company accepted more than 2,000 early retirement packages and downsized their senior management team — losing 15% of its vice president-level positions

Barclays

With cuts of 1,400 employees already in 2011, Barclays announced in August it will layoff a total of 3,000 staffers by the end of the year.

Credit Suisse: 2,000

As part of its plans to cut back on $1.3 billion in spending, Credit Suisse is laying off 4% of its workforce. Out of the 2,000 employees who will lose their jobs, 500 will take place in Switzerland and several hundred investment banking positions will be cut in the U.S.

Newspapers headlines made the point clear at the top of the article about the dreadful effects of layoffs on people’s lives, Work sharing is one of the solutions to the layoff but providing the suitable solutions requires one type of leadership which is the servant style. Protecting and sacrificing for the team in times of difficulty is the top priority for leaders,when CEOs provide the sense of security and belonging for their teams, those in their custody would feel secured and they would work tirelessly in return. If they feel unprotected, disposable and invaluable for their companies, the immediate reaction is to work less, become selfish as they should care for their own interests not the company and the worst part those who stayed in their jobs after layoffs will feel unsecured and invaluable due to the situation encountered by their colleagues.

Leaders who sacrifice for their teams, their teams would sacrifice their time and energy for them. It is a delicate dance. For all businesses in times of good and bad,always put people first in your calculations and people will put business first.

 
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