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By Dr. Marie Gould Harper
Program Director, Management, American Public University
This is the third of a three-part series on organizational justice.
One of the most uncomfortable jobs a leadership team has to do is to lay off employees. My first memories of an organizational layoff involved a number of companies that were reducing staff positions to cover their financial losses.
The layoffs were “across the board” cuts, based on how effective and efficient the decisions would be for the future of each organization. The choices were based on how their balance sheets looked at a given period versus whether the firings would have an adverse impact on productivity if the proper decisions were not made.
At first, several of the companies eliminated seasoned employees due to their high salaries. The thought was that cutting a smaller number of highly compensated employees would be the best way to go; cheaper labor could be hired to perform their duties.
For example, if there was a highly paid director, the position could be eliminated, especially if the job was not responsible for generating revenue. The responsibilities of this position could then be distributed among lower-level employees.
While this approach seemed logical, it could also be perceived as the organization turning its back on older employees. That perception often leads to allegations of age discrimination.
Profitability and Cost Are More Sensible Considerations when Deciding on Layoffs
The next wave of layoffs took a different, more sensible approach. These organizations reviewed their lines of business to determine which departments were profitable and which had lost customers. Instead of taking the “seniority” approach, these companies shut down divisions that were in the red and costing the company money.
I prefer the second approach. Why? Besides fitting well with the concept of organizational justice, using profitability and cost as deciding factors for layoffs makes better financial sense when those reasons are appropriately communicated to others in the organization.
Organizational Justice from the Employee Layoffs Perspective
Let’s look again at the three-part concept of organizational justice in terms of employee layoffs:
1) Distributive – If you lay off your senior employees to save money, you lose some of the most critical corporate knowledge. Did these employees have the opportunity to mentor the next generation of leadership (i.e., succession planning)? If not, who will do that once the veterans are gone?
Once you announce the layoffs, how willing would these employees be to assist in the transition? What would motivate them to be team players if they were “lame duck” employees? How will their surviving peers interact with them? Employees in this situation whom I have spoken with say their co-workers treated them like they had the plague.
2) Procedural – If I were among those employees let go, I could accept the decision if I was told the layoffs were based on a lack of demand for the company’s products. That’s more reasonable than being told we were getting too old and making too much money. Why would a company leave itself open that way for potential discrimination lawsuits?
3) Interactional – We have come a long way since the days when employees were simply informed that their positions had been eliminated. Also, their dignity was further stripped from them when they were not allowed to pack up their personal belongings or notify co-workers that they had been let go and say goodbye. Today, most companies fortunately exercise compassion by treating laid-off workers with dignity and respect during this awkward process.
Companies now take the time to tell the remaining staff what happened and why and provide an opportunity to answer questions about the layoffs. Companies must remember that how they treat those they’ve let go will affect how remaining employees perform their jobs afterward.
About the Author
Dr. Marie Gould Harper is the Program Director of Management at American Public University. She holds an undergraduate degree in psychology from Wellesley College, a master’s degree in instructional systems from Pennsylvania State University and a doctorate in business from Capella University. She is a progressive coach, facilitator, writer, strategist and human resources/organizational development professional with more than 30 years of leadership, project management, and administrative experience. Dr. Gould Harper has worked in both corporate and academic environments.
Dr. Gould Harper is an innovative thinker and influential leader, manifesting people skills, a methodical approach to problems, organizational vision and ability to inspire followers. She is committed to continuous improvement in organizational effectiveness and human capital development, customer service and the development of future leaders.