It was late in the spring of 1981 when the owner of a small construction company that worked on highway construction jobs walked into a federal courthouse to face a federal grand jury that was looking into whether bid rigging had occurred on recent highway contracts in the area. The man was understandably nervous. He said he had never engaged in bid rigging, but he didn’t know what to expect in the small room where the only people would be him (no lawyer allowed to go with him), a couple of government lawyers, and the grand jury members. Could he convince the grand jury of his non-involvement in bid rigging?
Apparently he did, because he and his firm were never named in any of the indictments this jury subsequently handed down. The man’s credibility may have been established by one of the stories he said the told the jurors about a recent time when an economic downturn caused highway construction work to grind to a near-halt, with only a limited numbers of jobs available. The man said he won a few small jobs with bids that earned him either no profit or even produced losses he could accept, while hoping for a better day later.
The essence of his position was: It was hard, but I kept my crews together for a better day. And I kept their families together. I didn’t lose my good people because I didn’t force them to leave home, scrambling to find work wherever they could. He said he told the jurors that he thought laying off his crews would be a “last resort.”
Therein lies the leadership lesson to be learned from this quiet, private, small business leader who made a practical pro-people decision almost three decades ago. It is apparent in the frequent news of frequent layoffs that too many executive leaders view those layoffs as a “first resort” to contain costs and to keep the polish on a short term stock price, as if the duty to “maximize shareholder value” can refer only to the next short term earnings report and never to the long term viability of a company. Keeping the good crews together for a better day seems to be absent too often from the list of options crossing executive minds. The people from the finance department, charged with calculating the number of “heads” needed for the layoff to hit its near-term goal, are doing work that turns the word “headcount” into an obscenity.
We are not naive; we know firms may eventually have no choice but to lay people off in a last resort. It’s the “first resort mentality” that we believe leaders of character must avoid. There’s a hidden price to be paid if they don’t. We believe employees are understanding of what happens in hard times and forgiving of a layoff that is carefully considered and explained. But when there’s a second layoff, and a third, and still more, then trust is betrayed forever and even if many of those people laid off later return, things will never be the same. Trust, once betrayed, is rarely restored. Trust operates in the long term and “first resort layoffs” can miss the point. Even those who survive the layoffs now live and work in fear, with trust gone.
2 Comments
The article reminded me of a quote from a CEO, who said when asked if layoffs were in the future, “I don’t know if we can afford to keep our employees”. This is all too common of a response when the 3-legged stool of Customers, Shareholders and Employees focuses unequally on Shareholders. Oh, to work for a privately held company again where decisions are made for long term gain and not short term profit.
Your blog entry reminds me of a story I recently read on Yahoo! Finance about Steve Wynn opening his new Las Vegas mega-resort, Encore. (See the original: http://tinyurl.com/9k326o) As you may know, Vegas is experiencing tough times — as are all of us — during this economic downturn. MGM has laid thousands off, as has Harrah’s; Boyd has stopped construction of its Stardust replacement.
Whereas MGM and Harrah’s have used layoffs to reduce costs (and in MGM’s case, as a public company, its investors’ returns and its stock price, at least theoretically), they miss the point: They have victimized the now-former employees — and their families! — to make a buck, forgetting that it is the employees who deal the cards, maintain the casinos, greet the guests, serve the drinks, etc. that keep the customers happy. During good times, they’ll need those folks again, but the bitterness of being “expendable” will last, I bet!
Wynn, a billionaire and the man who re-made Vegas in the late 80s and again in 2005, has a reputation for being good to his people, recognizing the value they bring and the dignity they deserve. From the Yahoo! article:
“Wynn said he views layoffs as an absolute last option, and he’s willing to drop his room prices to keep people in the building and his employees working.”
And in his own words: “If I lay off employees, I cause a ripple effect of insecurity and fear that is much, much more difficult to overcome than is raising the price when business is good.”
Why don’t more executives and leaders get this? Employees are no less human than executives; they deserve respect!