Laying people off gets us ?…another lesson from cactus.

by cactus

A friend of mine – I’m gonna call him Gilbert – was telling me about some happenings at his office that might sound familiar, as I’ve heard quite a few variations on this theme recently. Gilbert is a middle manager at a Fortune 500 multinational, which, like many companies large and small, had a couple well-publicized rounds of layoffs this year and last, and one kind of phantom round in 2007 (which I believe puts them ahead of the layoff curve). The phantom round was somewhat disguised by a simultaneous generous early retirement offer to which all employees sixty and over were eligible.

The interesting thing is this… the end result of these layoffs, as far as Gilbert is concerned, is that the likelihood of an incompetent person being fired from the company has decreased since 2007. This is because, in ordinary times, a manager will get rid of those he deems incompetent because he knows he will be allowed to replace those individuals when suitable replacements are located. Furthermore, in the interim, before a competent replacement is found and hired, there’s enough slack in the system that the functionalities formerly performed (or not) by the incompetent employee can be performed (and performed better) by others in the organization.

On the other hand, in times of large scale layoffs, there is no slack. There is nobody else there to take on the functionality during the intervening transition. But there is also no intervening transition. When there are layoffs going on, many (most?) spots on the org chart that don’t have people’s names on them stay empty. Eventually, many of these empty spots disappear. Those who manage staff understand that they will retain the responsibilities, even if they don’t have the resources, and a lousy resource is better than no resource at all. So in times of layoffs, they don’t volunteer their reports, even the ones they would normally like to fire.

Now, you may be thinking… well, when a manager like Gilbert is told he has to reduce his head count by X as part of some layoff, he’s going to pick his X least competent employees and fire them. But it turns out that is only partly true. See, layoffs are also occasions in which the needs of the organization are “rationalized.” That is to say, a number of functionalities are deemed redundant, and the folks who do those jobs are let go, whether competent or not. The decision about which functionalities are no longer necessary are often made by someone high up in the organization, and according to Gilbert at least, are usually wrong.

The logical end result of Gilbert’s theory… the company he works for now has a greater percentage of incompetent people working in it now than it did before it started laying people off. That would otherwise make the company that much less competitive, except that its main competitor has undergone exactly the same process.

Your thoughts?
by cactus