All the time, the heads of any company meet and decide to cut expenses by laying off some people. Who should go? Finalising 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 proudly calling themselves leaders and approve layoffs are participating in a crime against staff because they contribute to fatal situations where people might commit crimes, suicide and many other incidents that may end with death or a dire situation.
In 2015, I was witness to an incident that happened with one of my colleagues who was the finance manager in the company for five years. Drawing to the close of the financial year, the CEO decided to make some budget cuts to save some money and proposed layoffs to tackle the problem. Downsizing the company was the decision made by the CEO despite the different solutions presented to him by the finance manager to avoid the layoffs. A month later, the CEO made his decision and dismissed several employees and appointed a new finance manager to replace the one that he laid off. On his way back home that day, the finance manager fainted in the train station due to the stress that he had experienced all 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 the hospital suffering the results of the layoff, the CEO kept his decision arrogantly. He did not listen to the various solutions presented to him by all staff members to account for the savings without resorting to the layoffs.
The problem with the “Please the shareholders” way of thinking is that all the shareholders care about are short-term profits. The 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 of 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.
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 damaged. This means that any Board of Directors that allows layoffs to balance the books when other options are available is destroying the human values or human social 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 our Clients have been rocked by the economic downturn through the years. Leaders of these companies are good people who have had to gauge strategies, squeeze even more out of profit margins, and cut back their workforce to stay alive. During all the turmoil, we began to collect best practices in layoffs. Here is what we have found, using our research within Southwest Airlines and Industries, both ranked in the top ten of “100 Best Companies to Work for in America,” as benchmarks.
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.