High Tech companies have collectively laid 95’000 human beings off in 2022, following CNBC and, Tech-Co, claims that to date, the same have sent home another 84’479 people since the start of 2023.
As 18th century French essayist, Philippe Néricault, used to say: “la critique est aisée et l’art est difficile!” (To criticise is easy. Delivering real art is far more complicated!) I do not envy any leader who needs to turn to layoffs in order to prevent their organisational boat to sink. Furthermore, judging whether they were right or wrong in taking such a difficult decision would be arrogant and incompetent from my part, not knowing the data, fact and reasons that led them to send bread-earners, fathers and mothers home, without a job.
But, in so doing, some leaders demonstrate decency and humanity (Diego Barreto, iFood CFO, for instance): “I thought about the losses and identified feelings, such as anxiety, stress and sadness. Personally, I feel a HUGE sadness, as a partner and executive at iFood, for the negative impact on these people’s lives today, despite the enormous positive impact we’ve caused on their journey so far. They all made wonderful deliveries, innovated and teased us about a better future. Unfortunately, we had to make a decision”…
How does this compare with Goldman Sachs firing 3’200 persons (“being given 30 minutes to collect their things and leave”) via a… Zoom call or the surrealist exchange between Elon Musk and Haraldur Thorleifsson, calling on his CEO to know whether or not he was fired and getting insulted in return, are interesting manners to demonstrate that “People are our Biggest Assets” to name a few?
My point is therefore not to criticise those deciding such layoffs but to encourage them, us all as business leaders, to reflect on the consequences of these as well as the… missed opportunities they represent.
- When laying-off, have you thought of the impact on those who stay? The way you treat those you “abandon along the way” is a powerful indicator to them about how much the organisation truly believes that “Our People are Our Biggest Asset”… Does anyone still believe this to be the case in Twitter or anywhere else in the Tesla “empire” nowadays? Compare this to an article I had read, back in the 90’s in Fortune magazine, about Levi’s Jeans. Levi’s had committed some strategic mistakes and consequently had to lay off. This had everything to be a traumatic event, in what was a family owned company. But Levi’s:
– Decided to treat and position those they had asked to go, as heroes whose sacrifice would prevent the Levi’s Boat from sinking.
– Created an association of Levi’s alumni, with regular reunions paid for by the company (if I remember correctly), whose objective it was to keep these dismissed employees together and in contact with the company
– Committed to directing itself to the dismissed, in the first place, when it comes to re-hiring. And when they did, if my memory is not letting me down, 90% of those contacted decided to leave their new job to go back to Levi’s. How does that compare with Goldman Sachs? - Treating People as a disposable asset has a negative impact on Trust: Economies, like Brazil, have traditionally treated people like a flexible and easily dispensable asset. As soon as the lightest cloud appears in the economical horizon, layoffs threats are emerging. No wonder that the country of my heart has one of the lowest trust coefficient between business leaders and employees. What sort of a loyalty can you decently expect from people you treat in such a way? The extraordinary engagement and motivation I often see in Brazilian employees, is nothing short of a miracle in such a culture. Compare this to Japan, where layoffs are a public shame for the leaders and a traumatic suggestion they may not be as competent as they should… Recently, Nintendo’s President, Satoru Iwatawho, despite a drop in the company’s results, took a public stance, saying he would not fire people, because that might solve a short-term problem, but would have a dramatically negative impact on the long term.
- Resorting to layoffs is a wasted opportunity: Have you thought of the sort of cohesive, generous, grateful and highly motivated culture you would create by rejecting to resort to layoffs and collectively reduce salaries, hand their destinies back to the employees and fight together to get back to a better situation? Layoffs create fear, killing Psychological Safety, reduce initiative and credibility by having everyone playing safe and hiding in the mass. Creativity goes out of the door, employees switching to obedience and compliance in a desperate attempt to be safe. Is this how you truly want to save your company? There musn’t be a lot of you knowing a Swiss family business called Bobst, the World’s leader in producing machines/selling services to the packaging industry. Since generations, people being their biggest asset is truly lived there. In the early 80’s, a downturn in business brought layoffs to the surface. But Bobst chose to close its ranks, lower the revenues to the shareholders and asked its people to prepare it for a fast upscale, once business would emerge from a tough storm. This is how Logitech was born: its two founders, Borel and Zapacosta when working on creative projects for Bobst IT department.
- The layoffs reflex belongs to the old Economy: One of our duty, as leaders, is to rethink the notions of Economy, Jobs, Employment, Wages etc. Hiring under false promises and laying-off as soon as people are no longer needed, belongs to an outdated form of capitalism. The above examples are just attempts to provoke our reflection. But we need to go deeper and consider those themes with far more respect and authenticity, should we wish to attract and motivate the bright young generation in the business world.
Criticism is easy and art, truly challenging. Please do not see here an easy and unfair judgment. The moving self-disclosure of leaders such as Diego Barreto sufficiently shows the wound it is to let “our” people go… It is time for us to rethink our Economy.
Great though-provoking article, Didier! The layoffs conundrum is something that leaves most of us without any reasonable simple solution. Nobody can negate the necessity for a company to adapt its internal capabilites to the demand and keep an healthy balance between revenues and costs, but every round of layoffs makes the promise of respecting the pact between employers and amployees (dedication vs job security) totally ridiculous as at the first problem the organisation is ready to change its mind on it. I’ve worked for several family owned company among them Ferrero and I can tell you that the owner would.prefer to lose profit in the short term rather than jeopardise this promise of mutual loyalty. Maybe one way of getting a more wholesome vieew on this topic could be to consider the cost of NOT laying off people as an investment on future higher productivity thanks to a guarantee loyalty. If wre trasform everything in financial values maybe more organisations will realize how “financially stupid” (not to mention the human side of it) is to rush to laying people off people . And also long term investors should understand this point and sustain the company in its efforts to follow this approach.
I hope all.this might provide a.small contribution to the discussion of this topic…
I’ve experienced even more disturbing layoff as the “economic” one. Somewhere in Africa a manager was asked to reduce head count, no other explanation. He laid off a painter paid 300$/month supporting an extended family with this amount. The manager own expenses was (estimated) over 1000$/month. Where is the logic and where is the humanity? This manager was disturbingly sleeping well! This happened in early 2000 and I still find it very disturbing.
On other note, thank you Didier for, yet again, a great article.
Thank you, dear Olivier, for this touch of humanistic realism. I do believe that such decisions will increasingly be damaging to those taking them in that way. Thank you for your support!
Thank you, dear Olivier, for your realist humanism. I do believe that such actions will increasingly damage the reputation of the leaders and organisations perpetrating them… And you… still remember 20 years after! Thank you, proud to have had you as a student!
Fantastic article. I will chew on this for a long while >>> The layoffs reflex belongs to the old Economy: One of our duty, as leaders, is to rethink the notions of Economy, Jobs, Employment, Wages etc. Hiring under false promises and laying-off as soon as people are no longer needed, belongs to an outdated form of capitalism. <<<<
Thank you, Nicola… at the age of social networks and hyper connected Z generation, rumours will spread fast on such kind of ethics and, organisations laying off the wrong way, will find it increasingly difficult to attract talents. Thank you!
The first misconception in my opinion is considering people as an asset. People are not assets and should not be treated as such. This has gone so wrong before (look at slavery in Brazil, people were the most precious asset and they were still slaves), people must be treated and considered as people, simple as that. With their competence, feelings and social desires. Analyzing another aspect, every time there are mass layoffs, certainly there is, there was or will be an error in the conception, planning, unfolding and execution of the organization’s strategy and the strategic managers must be held responsible for this. Nobody throws millions of dollars out the window (which organizations dare not measure) without a crass error having been committed. In this way, there is an opportunity for the concept behind the management that integrates these factors to be reviewed and updated so that they are more sustainable.
Thank you Fredjoger, for this provocative (and perfectly correct) parallel between slaves being assets too and people. I also take your point that mass layoffs are the sign of dramatic mistakes and the victims are rarely the perpetrators. I recently saw the comment that it was less about the what (layoffs may be needed to “save the boat”) but very much about how you do it (with respect… affection and recognition for all those people invested in the organisation). Thank you for having bothered to read and share your thoughts. Much appreciated!