An Open Letter to CEOs Who Are Considering Layoffs to Cut Costs

If “misery loves company,” as the saying goes, you’re in luck. Hundreds of companies, just like yours, are scrambling to survive these difficult economic times. Most CEOs will default to “cost-cutting,” which generally translates into layoffs, salary reductions, reduction or suspension of benefits, etc. Sound familiar?

These solutions are not inherently evil (as the press may choose to paint them), but they do pose a real challenge:

• Cut too little … and your organization loses market share and potentially “dies” in the near-term
• Cut too much … and your organization loses market share and potentially “dies” in the long-term

The hard-dollar cost/benefit analysis associated with cost-cutting alternatives is fairly clear. However, the predictable soft-dollar costs associated with the negative operational impact these alternatives can have (i.e., on productivity, organizational trust, corporate reputation, etc.) are often overlooked and, unfortunately, tend to be far more significant and insidious.

Having been involved in successful corporate turnarounds for over 30 years, I can confidently say that the greatest challenge lies within knowing how to surgically cut costs while optimizing near and long-term organizational performance. Regrettably, tradition decision-making processes are ridiculously inadequate in this regard.

For example: layoffs are traditionally driven by hitting a “hard” financial number; i.e., you need to reduce costs by “X” dollars (a number that usually has a lot of zeroes after the first digit). Someone within the organization does a “rough cut” of how many employees this will impact, and you announce it to the press to “soften the blow.” It’s always a round number (i.e., “Citibank will eliminate 53,000 jobs,” “Dell will cut 8,900 worker,” etc.), which means that their CEOs really haven’t got a clue about how many people will need to be severed and, more importantly, who they will be. As a result, the huge risk associated with any layoff is picking the wrong people. So, how are they traditionally picked?

Generally speaking, the selection occurs in one of two ways: (1) Managers select “known” poor performers, add a few employees they personally dislike, and guess at the rest, perhaps using some criteria like length of service, subjective evaluations, etc. to make their decisions seem less arbitrary; or (2) companies construct an “early/voluntary retirement” program, which costs more in severance but mitigates some of the organizational stress otherwise associate with layoffs. The reality is that your company loses good employees under either scenario and your remaining employees, having witnessed the randomness of the staff reductions, exhibit a diminished level of focus, commitment and productivity. This deadly combination ultimately weakens your firm’s operating performance.

There is an alternative; one that is so powerful that it enticed me to reevaluate how I consult with firms. Some associates of mine developed a series of workshops that significantly improve the performance of participants, both personally and professionally, in a way that inures to the benefit of the organizations they serve. These workshops have been consolidated into what has become known as the EnCompass Program™ (www.EnCompassResources.us).

The EnCompass Program™ helps individuals gain clarity of purpose and potential and provides them with the tools to effect immediate and sustainable change. As a result, many participants gain a renewed sense of commitment to their careers, passion for what they do, and the confidence to unleash their creativity and best efforts in a way that dramatically increases productivity. Others are confronted with the reality that they are not committed to their present career and should pursue their passions elsewhere. This revelation results in their self-selecting “out” of your organization, which results in no severance exposure and a collateral benefit of removing their negative influence from the rest of the employee-base. The business results are stunning.

This is not sales “puffery.” The impact of the EnCompass Program™ has been measured against standard psychological tests that are extremely well recognized within the context of organizational development and clinical psychology, and its performance exceeds anything of which I am aware (http://www.encompassresources.us/results.html). Participants routinely enjoy a higher level of performance, improved communication, and much greater satisfaction with respect to their personal and professional lives. Friends, family members and co-workers also note an almost immediate positive change in interacting with these individuals.

With the challenges you face today, you can’t afford to be wrong. In the past, when I was in your position, I had to rely on business instincts and a bit of luck to go along with the limited information that was available. Today, there’s a new tool that can help you execute the most important element of your job; i.e., how to attract and retain the very best employees to optimize business performance. If you do that right, you effectively will insulate your company from economic downturns and position it to capitalize more quickly when the economy rebounds. You will enjoy the competitive advantage of having the right employees in place all the time, regardless of economic conditions.

As a former CEO, I always thought it was my responsibility to provide the best possible work environment for my employees and the best possible results for my shareholders. If you share that philosophy, I seriously encourage you to explore the EnCompass Program™.

2009 © Dr. Terry O’Hara. All Rights Reserved.