Why You Should Treat Layoffs Like Band-Aids
“You have to do things from time to time that you wish you didn’t have to do–such as letting longtime employees go because the company has outgrown them. Most people find that duty so distasteful that they put it off as long as possible, but sooner or later it has to be done. I try to give departing employees more than enough severance to carry them until they can find new jobs.
Even more difficult are layoffs due to something you haven’t foreseen. Luckily, I never faced that at CitiStorage, but I had some close calls, notably after 9/11, when demand for our delivery services dropped about 70 percent overnight. We suddenly found ourselves 10 to 15 percent overstaffed. Other companies were laying off people right and left, and our employees were scared.
I told them not to worry: There would be no layoffs at CitiStorage. Instead, we would absorb the losses through temporary measures. For example, we’d reduce the amount of our matching contributions to employees’ 401(k) accounts. We’d also cut back on overtime and stop the lunches that we sometimes bought for employees. We eventually rescinded the cuts as the business returned. It took about a year, and people didn’t mind. They knew we were saving jobs, including theirs.
Sometimes, however, you have no choice but to order layoffs. In that case, remember three rules. Rule No. 1: Do them all at once. Dragging things out will destroy morale and make a bad situation worse. Rule No. 2: It’s better to cut too much than to cut too little and be forced to repeat the process. Rule No. 3: Make sure all remaining employees understand that what you’re doing is saving their jobs. Be very clear that it’s a one-time emergency measure, and that their positions are secure.”