Even though there are signs that the global economic crisis may be passing, organizations and their leaders are still facing very difficult decisions, often involving ‘downsizing’ or ‘right-sizing’. Laying people off is relatively simple: you make the decision and tell people they are fired. What’s so hard about that? Well, apart from the immediate trauma, what happens to the ‘survivors’ and to the organization’s recovery to acceptable levels of performance?
Regardless of what level you hold in your organization, you will likely be involved in some kind of merger, downsizing, re-organization, or another high-impact change in the next year. You would be well-served to look at these seemingly inevitable business realities as ‘corporate heart attacks’, an unintended attack on the heart and soul of your organization and the people in it. i The success rate of these radical change efforts is said to be somewhere between 15% and 30%! Personally, we don’t like those odds. If you are leading a high-impact change—or are on the receiving end—it is possible to beat the odds, to survive and then accelerate your recovery by following the fundamental principles described here.
Surviving a Personal Heart Attack
What would you do if your doctor told you that you were going to have a heart attack in three-to-six months? Here are three potentially life-saving questions you might want to consider:
- What would you do between now and then to get ready for your heart attack, to
increase your chances of survival?
- Where would you want to have your heart attack? or What resources would you
want to be present when you had it?
- Afterward, what would you do to accelerate your recovery and a return to hopefully
even better health?
Life-Saving Question # 1:
If it were an actual personal heart attack, what would you do to get ready? I don’t know about you, but I’d begin doing everything I could to get as strong and resilient as possible. I’d probably start eating better, exercise regularly, get frequent health check- ups, and learn everything I could about heart attacks and how to survive them.
Life-Saving Question # 2:
What resources would you want to have around? Personally, I’d want to have my heart attack standing in the middle of the best cardiac center on the planet! Barring that, I’d want to have my heart attack in the presence of skilled people who knew exactly what to do to minimize risk and maximize survivability.
Life-Saving Question # 3:
What would you do to speed up your recovery? We’re back to # 1 again: I’d eat good things, get the right kind of exercise, get check-ups and do whatever my health care professional told me to regain my strength, or even improve my health.
If we had foreknowledge of an actual heart attack, most of us would do whatever it took to increase our chances of survival. Yet, it appears that many leaders seem to go into automatic when initiating mergers or other high-impact change efforts. It’s as if they walk into the negotiations, and then into the planning, then all the way through the roll out, with their fingers crossed that it will all work out. Quite often, it does all work out for a handful of senior people who are tasked with making it happen, but they unfortunately often leave a trail of bodies—including, it would appear from the statistics, large financial ones—in the process.
This need not happen. Organizations can survive corporate heart attacks. In fact, if the three questions raised above are intentionally addressed and a few key principles are followed, virtually any merger or high-impact change can succeed.
Surviving and Recovering from a Corporate Heart Attack
First, a few fundamentals:
- Downsizing is a fact of life now.
- The only choice is how you are going to handle it.
- The way downsizing is handled, especially by top management, impacts not only
those who leave, but also the survivors, and therefore is a critical factor in
accelerating the recovery of the business.
- It is possible to handle downsizing so that the survivors come through it relatively
intact and willing to work hard again for the cause, and those who have to leave
do so with dignity and a good word for the company they served so long.
Some wisdom for those planning the downsizing action:
- Many executives feel so bad about having to take such a step that they distance themselves from the process and their own feelings of empathy. This can result in inhumane treatment for loyal and dedicated people who happen to be in the wrong job at the wrong time.
- Or they make those who have to leave ‘wrong’ or ‘bad’ to justify what they have to do. This can deeply disturb survivors who worked with these people and saw the good work they contributed.
- In this case, the ‘right’ thing to do happens to also be good for business.
- You can do it fast and poorly, avoiding the ‘balloon payment’ at the front end, but then you have a terrible time getting the survivors on board and committed again. You can do it in a timely fashion but right and get back on your feet a lot quicker.
Factors affecting survivors’ reactions and return to high performance:
1. Is the layoff fair?
- Was the layoff justified? Can I/we see the rationale?
- Was it a true last resort, or the result of mis-management or errors in strategic
- Whose fault is it that this is happening?
- Are others in our industry having to downsize for the same reasons?
2. Is the layoff congruent with our corporate culture?
- There is an unspoken ‘psychological contract’ that exists now which must be
recognized, such as, ‘You’ll have a job here as long as you work hard.’
- What is our ‘contract’ in this regard and do our leaders recognize and respect it?
- Are our leaders carrying out this layoff the way we usually do things here?
3. Did the company provide enough notice for people to get their lives in order?
- In a recent insurance company example, security guards walked through the company handing out pink slips. They stood by the desks of those being let go— many of whom were loyal 20-year employees—until they logged off their computers, put their personal things in a cardboard box and left via taxis lined up at the curb.
- In another war story, following the advice of ‘downsizing consultants,’ people were herded into the parking lot and names of survivors read off out loud, the remainders told to get their things and leave.
4. How well did leaders and managers attend to the impact on people when making the announcement?
- In another example, announcements of a likely layoff went out two weeks ahead of time, meetings were held in each department to celebrate past accomplishments and prepare for the loss, and people were given a week to get closure and leave. (See the detailed example in Part II.)
5. Did leadership and management communicate clearly what the reasons were?
6. Did management share in ‘biting the bullet’ or were cuts only made at the bottom?
7. What were the criteria used for deciding who stayed and who left? How fair do those criteria seem?
8. Did the company try to assist people through the hard time with post-layoff services like job-placement, counseling, advertising on their behalf in local and national newspapers, etc?
9. How were employees involved in the downsizing decision process?
Factors that tend to increase the intensity of negative reaction to layoff among survivors’:
- If someone close to me is laid off.
- If I have been a loyal, committed ‘company person’ and I see people treated poorly,
my own commitment is threatened. If it looks to me like people are being respected
as they leave, I can get back into the swing of things faster. I may still grieve and be
angry, but I can more easily forgive and forget.
- Is there more threat or more opportunity here now, after the layoff? Am I/we better
off now than before?
Action Implications for Layoff Planners:
Before the Layoff
- Look at the congruence of the move with your corporate strategy and culture.
Does it fit both? Is cost-reduction via layoffs the best way to get where you want to get
short and long-term?
- Provide as much notice as you can. Rules of the game in HR usually require giving
people a certain amount of legal notice, but how much time do they need to get their life
in order and move on? The Golden Rule is a good place to start. Ask yourself, How much
time would you like to have? 30 days would seem to be a minimum. Longer than 60 days
and you begin to have ‘lame duck’ people and a ‘waiting’ mind-set.
- Prepare supervisors for the layoff process. People who can naturally understand and address the personal and team issues around a layoff are rare birds. Most leaders find it so hard that they avoid it or do it poorly. Wise leaders provide training for managers and supervisors who will have to be delivering the tough news so they can do it with respect and class.
- Identify key opinion leaders at every level and have face-to-face meetings with them to get their support for the new organization. Don’t ‘sell’ the new situation, just tell the truth and ask for their support.
During the Layoff
- Over-communicate. Give people as much information as you can as often as you can. The more you can tell people, the better able they are to make their plans. It also helps survivors trust the company and its leaders. A lack of information will be filled in by employees’ imaginations, which is often not true and/or not helpful to the company’s strategic objectives and image. Use face-to-face communication by the most trusted senior people to deliver the important messages.
- Provide concrete assistance to those leaving and staying. It would be good to increase the awareness of your Employee Assistance Programs and set up counseling resources at every level to help people with the transition. Everyone but especially senior executives, deserve a solid transition-management experience to help them regroup and move on. Job-finding assistance is a great move. One company took out ads in national newspapers alerting people to the fact that a lot of good people were going to be available.
- Treat everyone, especially those leaving with respect. Some layoff planners make people ‘wrong’ or ‘bad’ to justify letting them go. The message should be that a lot of good people are going to have to be let go because they don’t fit or don’t have the skill sets needed for the new situation, but that they are not to be underrated because of this. In research, it turns out that how respectfully people are treated matters more than the monetary aspects of their severance. This was a surprising and important finding.
- Get out there. Face to face contact needs to be increased. People need more than ever to see leadership out there ‘in the trenches’ taking questions, encouraging people, empathizing with them. Create an ‘open door’ managerial stance for this time and encourage people to just drop in a talk about what’s happening to them.
- Use ceremony. All important life transitions are handled best when there is ceremony attached. Take time to hold celebrations and recognition ceremonies where people can be acknowledged and appreciated and said ‘good bye’ to. Do it on company time and pay for it.
After the Layoff
- ‘Circle the wagons and head out again.’ Regain momentum with a strong, visual, face-to-face re-commitment to the company’s (new) strategy and mission. The survivors need to be re-focused and aimed in a common direction as soon as possible. They need to get the sense that, ‘We are going somewhere! We need to move forward together!’ This attitude must start with your top leadership team, all managers and supervisors.
- Solicit employee input. Take time, in natural teams, to solicit ideas for improving how to work better or smarter, how to re-focus and create a stronger team faster, etc. INVOLVE people in planning for the next stage of the organization’s future.
- Address job enrichment and other motivators. What motivates people turns out not to be money but things like variety and challenge, elbow room in decision-making, feedback and learning, being in on the big picture and room to grow and develop new skills.
- Clarify the new career paths ASAP. People need to know where do I go from here – now? Create the new opportunities and bring people in on them to help them see a brighter future.
Downsizing is an opportunity to create a new organization. When coupled with re- engineering and/or re-organizing, it can be a way of ‘starting over’ and placing the system into an environment where new things can be invented and energy can be generated to revitalize the company.
Key Questions For Layoff Planners
- How rapidly do we want to recover from our downsizing?
- What are we willing to do for and with those who are let go?
- What could we do with the survivors to help them get on board again as soon as possible?
- If I were let go—or survived—how would I want to be treated?
Doing Right-Sizing Right – Part II: A Model Case Study
In this piece, a courageous CEO employed what John believes is the right way to ‘right-size’. See how many of the principles from Part I are modeled by the leaders of Kripalu Center, among the largest and most-respected health and personal-development organizations in America.
How It All Started
In mid-November, 2008, Garrett Sarley knew something had to be done. Something radical. As CEO of Kripalu Center, he and his leadership team realized they were starting to feel the breeze of the coming economic tsunami in their faces. ‘We had almost doubled in size over the past five years’, he told me recently, ‘going from $16 million to $29 million in revenue and seeing our Guest Stays and Gross Revenue increasing steadily. As a result of that trend, each year we invested funds in improving the facility and developing exciting new programs. Each year we could see the hard work of the Kripalu Team paying off.’ In October, 2008, Garrett and the Division Heads met to finalize the budget for 2009. Concerned about some ‘softness’ they were starting to see in Registrations, they projected a modest 4% increase, and began thinking about alternatives in case things got worse. Things did get worse. Much worse. What to do? First, Garrett and his wife Ila, who was President of Kripalu, decided to take a voluntary 15% personal pay cut, hoping this would create enough financial buoyancy to avoid further cuts for the 250 full time and 150 part time staff. Following their lead, Directors took a 10% pay cut, and Managers a 5% cut. To head off the rumor mill, in large meetings with the entire staff, Garrett candidly shared the new reality of the situation (including the financials), and invited everyone to meet as departments to create a systematic process to reduce costs. As a result of these departmental meetings, significant reductions were initiated in HR, Training, Marketing, and staff travel. Within a few weeks, the negative financials appeared to be leveling out, and cash reserves still looked to be sufficient and secure. Fingers crossed. . .
When The Bottom Drops Out
‘Then, in December,’ Garrett recalls, ‘the bottom fell out. . . Within two weeks revenue projections went from $30 million to $24 million and Guest night projections sent from 100,000 per year to 70,000. We met for days and days of grueling meetings, thinking hard about what to do with the remaining funds. The Holidays were just ahead, and 2008 had been a very good year up to that point, so we made the difficult decision to honor our commitments to our people and pay bonuses, staying consistent with our core values of integrity and sharing the benefits of success with our team. Even though things fell apart in the last two months of the year, the first ten months required every staff person to work extremely hard to provide a quality educational and retreat experience for the many guests who visited. We felt like it was only right to reward that hard work for the year just past, especially since we were heading into a year when many cuts had to be made.’
What the CEO Did
By the end of December Garrett saw that changes—even significant changes—to the existing financial, physical, mental, and emotional systems were not going to be enough. ‘Radical transformational action was called for’, Garrett recalls. ‘My partner, Ila, and I decided we needed to do what had to be done by leading from the front. First we re- committed with our managers to the guiding Kripalu principles that would shape what we did next. We agreed we would “operate from the moral high ground”, treating people with transparent honesty, so when the dust settled, everyone involved would know they had been respected and treated fairly. We committed to hold decisions closely until we had created the right context for sharing the painful information. (We did not want to give rumors even a chance of leaking the news.) Then, in a carefully-planned and scheduled All Hands Meeting, here’s what happened, in his own words:
- I decided not to use PowerPoints. I just sat in a chair in front of the room and talked with all 400 of our people, person-to-person, reminding them of our mission, who we were as a community, what we valued.
- Replaying the past two months, I spoke from the heart, telling the truth as completely as I could, sharing the numbers and our decisions, not holding anything back.
- I explained how we had responded early and deep to what was happening, looking hard for 20% ($6 million) that had to be taken off the budget to stay afloat, explaining how every manager had taken a pay cut. I said, ‘And, working in your teams, YOU found $4 million in savings! But we still need $2 million more. It is our last resort, very reluctantly agreed to and planned for, but we are going to have to reduce staff to create that final $2 million.’
- Then I laid out what had to happen. I explained that ultimately it was my decision to let 85 people go, AND That I had asked Managers and Department Heads to decide who stays and who goes based on ‘Who would be the team with the best chance going forward’. Finally, I explained that people were not being fired for personal reasons (not legally ‘For Cause’), but because their position was being eliminated.
- No personal agendas were being allowed to guide the staff-reduction process. I shared that even my sister was one of the people being let go.
- It was quiet for a moment. Then I invited questions, and responded as authentically as I could to emotions, comments, whatever came up. There were questions about why we had decided to renovate an Annex that created a debt service, adding to the short-fall. Some wanted to know why it had to be now. Others wondered if we could cancel or postpone programs. Some just cried. (The ‘Denial’ and ‘Bargaining’ and ‘Anger’ phases of the Grief Process, while anticipated, were happening all at once, live, in the moment.)
- Even though it was one of the most difficult moments of my life, I knew we had done everything that could be done to do what had to be done with respect and compassion.
- After responding with honesty and compassion as best I could, I wrapped it up and explained that the process would commence immediately after the meeting. We had set in motion things we hoped would make the traumatic situation as survivable as possible for everyone – those leaving and those staying. This included:
– State resources standing by outside the meeting—and for the next few weeks—with Job Training and Job Search support.
– A special room set aside for personalized Job Search assistance staffed by Kripalu people with experience in that area.
– Coaching and rehearsing sessions for managers and supervisors on how to have the conversation(s) with those staying and those being let go. This would be a person-to-person experience, not conducted in an automatic, impersonal fashion to protect Supervisors and Managers from a difficult situation. They were going to have to ‘hold the burn’, as we say in the practice of Yoga, and feel their own difficult feelings as they spoke to each person.
– Allocation of $250,000 for severance arrangements, which generally worked out to about 3-4 weeks pay for each person being let go.
- Garrett then spent the day wandering around and connecting with each department and the HR office. He personally connected with everyone who had to be let go and thanked them for their contributions and energy during their tenure at Kripalu. Tears and hugs were shared and this personal connection seemed to be as important as anything to those who lost their jobs. Garrett made every effort to be involved with the whole process personally with people.
Even if your organization is different in some ways from the example here, look at how Sarley thought about, planned, and carried out the layoff he had to execute. Can you see how the way they carried out the downsizing were done in a way that was congruent with the core values of that organization? How The Golden Rule, so simple and so fundamental, was operationalized throughout the process? What are the core values or YOUR organization? How would you plan and carry out a layoff in your organization where The Golden Rule and the recommendations in this article were embedded in what was done—and how it was done? There is certainly a layoff in your future. How will you do it? Or how will it be done to you? Why not do it right and see what happens, see how fast the organization returns to health and new life?