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There are a variety of ways to approach layoffs, if you're a company. If you have the time (and
money) to be courteous to the exiting employees, you will create better feelings among both the
exiting and remaining employees. However sometimes you simply don't have the time or the money.
Most companies are more anxious to keep good relationships with those who supply money than with
those who work for them, regardless of what's said in company policies. When there's a conflict of
interests, guess which side the senior management will side with?
Case in point: most young companies exist on fairly insecure financial assumptions. If you can show
a steadily increasing level of sales, the financial investors like you. If you can't, they rethink
their interest in you, *even* if they've signed an agreement to provide continuous funding over a
period of time. Take Excite -at- home for example. It was doing OK for a while, encountering the usual
problems associated with rapid growth and acquisitions. Suddenly it wasn't meeting its sales
targets, and several of the investors, including banks providing lines of credit, threatened to pull
their support. This fall hasn't been kind to most companies, and Excite was one of the ones to feel
the effects of sliding sales, so it had to declare Chapter 11 and lay off people. The whole thing
happened so rapidly that management didn't have much time to prepare the employees, and the layoffs
were sudden. The management might have much preferred to be thoughtful and considerate to its
employees, but probably didn't have much choice in the matter.
With smaller companies, the ax falls much faster. The CEO can get a call at 10 a.m. with a threat to
pull the plug, and have to produce evidence of appropriate retrenchment within 48 hours. With a small
company, there's usually a small number of senior managers, and within that time period they have to
devise a strategy that (1) reaches the desired target, (2) handles the legal implications of stock
options and promises made to senior people who now have to be let go, (3) gets it out of agreements
like leases that tie it to payments stretching out over the next <n> months or years, and (4) allows
the company some way to stay alive for at least a little while longer. Oh yeah, they also have to
deal with the feelings of employees. You can see why layoff strategies might get little attention.
When a company has the time to assess the long-term implications of what it's doing by retrenching,
it pays to look at the long-term effects of layoffs, not only on the current employees but also on
the local economy. You want evidence of long-term bitterness engendered by inattention to employee
feelings? Consider the plight of the smaller towns in the Rust Belt when the steel business was
pulling out. Consider the same thing in New England when the textile manufacturers were moving to
the hills of the Carolinas and Georgia and Alabama. And if you were there and can still remember it,
consider Seattle in the late 60's and early 70's when Boeing killed many of its development projects
because nobody was buying airplanes.
Don't get me wrong - as a company president I've had to do some retrenchment too, and it's
emphatically not fun. I've tried to be open and honest with employees, but the short truth is that
when sales are simply not there, there isn't any money to pay them, and usually they don't like the
idea of working for free.
Elna Tymes
Los Trancos Systems
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