E6S-020 Layoffs if you must- Financial Benefits & Metrics part 4

***Layoffs - If you must, you must - be proactive.***                                            

Disclaimer: The best way to disassociate your improvement program with layoffs is to not layoff.  But if you must, you must.  Included in this cast are proactive tactics to avoid damaging operations and improvement initiatives as a result.  This advice does not apply to when a company's market falls through and simply must cut to avoid bankruptcy.                                                           

I            The importance of not laying off because of a successful project: Argument about what happens after a layoff, especially when it is associated with an improvement project.                                           

II         Why hard savings are so heavily pushed.      Primarily due to ulterior motives, not for the overall health of the company: Share Holder "value" calling the shots, consultants pushing ROI, Internal posturing.  Basically by individuals who are more interested in their own payback.                                                        

III      Alternatives to the classic "layoff."   List common alternatives, (pros & cons)

a.       Classic Layoffs – Managers give some sort of economic reason why layoffs are necessary.  The laid-off individuals don’t get a clear message why they were selected, but they are escorted away, and the survivors are left to wonder who’s next.  Typically, though, layoffs seem to follow similar patterns for individuals let go:

i.      Low Seniority – the “new” guy. Sometimes used as a tactic by labor unions.  Hire expendable new people to save yourself when the time comes.  But also used when no other meaningful reason is found.

ii.      Poor Performance – Often a poor performer will be let go during a round of lay-offs.  Generally, though, performance is not brought up as a reason, and the company resorts to a lay-off, restructuring, and change of job function rather than focus on the performance problem

iii.      Political Outcast – When the person just doesn’t fit in with the “in-crowd.”  High School all over again.  Cronyism can fit into this category, where experienced people are replaced with the friends of newly added leadership.  In this area, performance and contribution are ignored, and people are often let go because they are different than others.

iv.      High Seniority – Also known as “ageism.”  Sometimes offered “early retirement." Singled out because they are highly paid individuals who may have hit a ceiling in their company contributions, (i.e. solid performers but may not be executive bound, but have accrued many years of incremental raises, have impending health risks, and are expensive to keep on the books.) 

b.      Alternatives

i.      Cross-train and move to another area (sales, PM…other area).  This is probably  the most popular recommendation given for Lean programs

1.      Pros:

a.       Moves people from where they are no longer needed to where they are needed. 

b.      Cross-training fills gaps when normal operations suffer an upset, perhaps an operations floating resource. 

c.       Keeps the “natives” in check, i.e. doesn’t create the normal backlash with regular layoffs. 

d.      Also a good way to wait for natural attrition to take place, and more importantly, preserves the integrity of your Continuous Improvement program.

2.      Cons:

a.       Is it worth it?  A typical lean project increases capacity for production, and probably reduces the direct labor requirement.  This means less line workers, and more sales.  How many line workers successfully transfer into a sales role?  Or do you play a “shell game” and move around 5-10 resources to cover these skills gaps & demands?  This would require a lot of human capital investment to be effective, and may be equally disruptive to the workforce as the layoff (i.e. spending more money as a result of the project rather than realizing the savings.) 

ii.      Pull trigger a month or 2 before the project. When you know you’re going to do a project and you’ve determined your financial benefits valuation, determine up-front how many and who will go before the project starts.

1.      Pros

a.       Layoff is not contingent on project success, and is less associated with the LSS program (LSS is the hero instead of the villain... for  a while)

b.      Workers and managers feel the pain of being short-staffed, which encourages participation and can spark a new innovative approach (invention is born of necessity)

2.       Cons

a.       It’s a risk.  Calculated risk up front that the LSS project will be successful (but a pretty good bet)

b.      Operations will knowingly take short term hit to metrics (yield, OTD, %OT maybe) before the project starts

c.       Stealth mode won’t work long.  It’s only a matter of time before people catch on to this tactic.  Smarter workers will notice the pattern, and people talk.

iii.      Fire for cause instead (and look up-stream).   Instead of choosing the weakest link to layoff, and using as an easy-out for poor performance, Fire for cause, but also look upstream.  For every individual contributor who is consistently doing a poor job, there is a manager and/or director who    is also doing a poor job in letting it persist, which is a more egregious failure. Why should they get off so easy?

1.      Pros

a.       Peers can get behind dismissal for poor performance.  They see it themselves, it affects them.  Some have been hoping for it for a while.

b.      Raises the bar for all performance expectations

c.       Saves on unemployment benefits (at least in US).  Those fire for (just) cause do not collect benefits, (unless wrongful dismissal is later determined by a court).

2.      Cons

a.       Still can shine poorly on LSS program if done after a project is successful, especially if the person fired is part of the solution. Best to not associate with the program at all.

b.      It’s not easy. Proper Performance Management takes hard work, consistency, and deliberate effort to develop individuals and a team.  People who disagree with this aren’t doing it right.