October 21, 2008

Let's Slash Some Jobs!

Yahoo!, a company that announced profit excluding one-time charges of $123 million dollars in the last quarter, will slash ten percent of the workforce. When job cuts come to Wall St., we hear about how sad it is for those folks. When job cuts happen at Yahoo!, Wall. St. drives up the stock price more than four percent in after-hours trading. Ya-hoooooooo!

I've been asked to slash jobs ... 1998, 2001, 2002, 2005.

You are assigned a representative from Human Resources. The individual assists with talking points, prepares documents to aid the employee in understanding this "necessary reduction in human capital". Both you and the poor individual in HR greet the downsized employee, asking him/her to sit down.

The thought crosses your mind ... "I'm about to destroy this person's life." Then you think, "Who helps the HR executive eliminate an HR position?"

Your mouth is dry. No, really dry.

You wonder if the employee can see your heart throbbing at 140 beats per minute through your dress shirt?

Your hands get cold.

The employee sees a Vice President sitting next to an undisclosed Human Resources representative, with a beige folder opened in front of the seat the employee is being asked to sit in, and immediately gets that ashen look that, as a Vice President, you wish you didn't ever have to see.

You're supposed to read from the script, explaining to the employee that external market forces dictate a leaner and more nimble organization, and that unfortunately, as of this morning, the individual is no longer employed by the organization.

I've found that it is better to just wing it, to just say what's on your mind.

At this point, you lose any ability to predict what comes next.

I've had just about every possible scenario happen after uttering the pre-written or ad-hoc paragraph. I've been thanked (sincerely). Crying. Silence. Anger. Fist-smashing anger. Fear for my own safety (I've had security assigned to protect me from a potentially dangerous employee). Questions about how the employee will make rent payments. Questions about how the employee will pay for health care for her sick child. Disgust. One employee told me that s/he thought I was a mentor, somebody s/he could believe in ... prior to today.

Honestly, I cannot judge one single response. They're all valid, and understandable given the circumstances.

The first time you go through the exercise, you want to throw up after the employee leaves your office. By the time you've destroyed the lives of a dozen folks, you simply appear cold and unfeeling. Cold and unfeeling is a coping mechanism that only heightens the frustration of the employee being terminated.

When somebody from up high (a VC, a Board Member, the CEO, or an EVP) unilaterally decides to crop ten percent of the workforce, and makes you do the dirty work, you feel a bit of resentment.

The employee feels a lot more resentment than you do. And in 2008, the terminated employee must feel a rage that is unique to our business era.
  • You stayed with the company through positive comps and negative comps.
  • You stayed with the company even though the company only increased your salary by 3% a year, suggesting that you were "in the upper quarter of your salary band". Salary bands are the worst thing to ever happen to hard working employees.
  • You dutifully contributed to your 401k account, supporting the company initiative to be "Healthy, Wealthy, and Wise", only to learn that, through no fault of your own, forty percent of your retirement money is now gone. Imagine being in your late 50s or early 60s right about now?
  • You dutifully contributed to your employee stock purchase program, only to see the value of the stock you purchased drop by 67%. You could have got braces for your child, but you caved in to management's request to invest in your company, to "demonstrate" to Wall St. that you believed in your company. Now that things went sideways, is Wall St. (or your Sr. Management team) there to demonstrate that they believe in you?
  • You trimmed expenses from your budget so that your company could "make the third quarter numbers" promised to Wall St.
  • You stayed loyal to your company, because relocating would have required you to sell your home, and your home is now worth only 70% of what it used to be worth and there are maybe two qualified buyers out there looking for a new home.
  • You worked 60 hours a week to get that information system implemented, the system that the company now says provides enough efficiency to eliminate costly human capital.
  • You listened to the IBM commercials that suggested you work in an "on-demand" environment --- an environment that worked wonders for the profit and loss statement until your Sr. Management team built an entire business ecosystem off of on-demand easy credit that no longer exists due to no fault of your own, throttling the ability of your business to operate efficiently.
Yup, that's you. You did all of those things to support your brand. And now, all across America, folks like you are being terminated, all in an effort to help the brand meet quarterly profit projections demanded by Wall St. We're sold the excuse that the cuts help the brand become more nimble and responsive.

Ya-hoooooo!

3 comments:

  1. Anonymous3:59 AM

    Kevin,
    What an amazing post! Thank you for sharing.
    I think you forgot the other half of that equation, though. What did the C-Level Suite make in salary and bonuses each time you laid off workers? Didn't their bonuses rise that year? What % of that bonus or salary could you have used to keep even two of the people you laid off each time?
    Yes, I understand that businesses as they become successful, especially after a period of high revenue, become bloated and even you could probably justify some of the "trimming of the fat". But executive salaries and bonuses don't reflect reality, and once a threshold has been passed it is rarely ever seen again.
    What happened to Sarbanes-Oxley? What happened to making executives responsible?
    Why do we give billions to bailout and not a single CEO/CFO is held accountable as promised after Enron, Worldcom and Tyco?
    Why do the C-suite get away with nearly a billion of our $85billion and within weeks of the bailout go to European hunting trips and California spas?
    Why do the execs of Boscovs get bonuses while their employees worry if they will have jobs and their vendors are closing down since bankruptcy is so lenient Boscov's basically got all their goods since beginning of this year for free?
    Why do Mervyns and Linens and Things executives get away with tons of money as those close down hundreds of stores across the country?
    Oh yes, we were over-retailed, too many stores, etc. "Good" CEO's and CFO's won't take the job unless they are overpaid and guaranteed ridiculous severence. I've heard all the arguments.
    But what are you left with?
    Empty malls, unemployed workers who have no retirment or savings, Walmarts that are only stores left standing, and of course as in Gottschalks case, Chinese companies buying into the store to guarantee they can only buy directly from their Chinese owned manufacturing---no American goods, no domestic importers---just straight Chinese.
    Where's the accountability?
    And who's next to fall? Bonton? Nordstroms? Macy's? Start the bets, and just remember, the only sure bet is that the CEO/CFO will get that multi-million bonus even if the company goes under.
    K

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  2. I wouldn't criticize the concept of receiving a bonus.

    I would criticize the concept of receiving a bonus for work that is contrary to the benefit of the whole company.

    Say an executive receives a bonus equal to 75% of her salary for delivering a 14% pre-tax profit ... and receives a bonus equal to 0% of her salary for delivering a 4% pretax profit. Is there a problem with a bonus aligned with the success of the company?

    So the complaint is with bonuses that are aligned with negative performance. Always remember that the executive does not receive a bonus unless the Board of Directors approves the bonus.

    Blame, if justified, sits with the Board of Directors.

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  3. I found this Post full of insight. If i were ever laid off i would hope that person assigned the task of informing me has read this or has a similar mind-set (unlikely). And if/when i have to perform that task again, i am quite sure after having read this Post that i could do it with more sensitivity (which is about the only measure of effectiveness i am interested in when asked to perform this task). Thanks

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