Examining layoff ethics

The economy has been hemorrhaging jobs for the past two years now, and every time we’ve thought we were seeing the light at the end of the tunnel, it turned out to be an oncoming train instead. But this drastic number of layoffs raises serious, or at least puzzling, questions about the ethics involved in layoff decisions.

I’m not so naïve that I think companies aren’t forced by financial circumstances to trim jobs, often in an effort to stay alive. Nor do I believe that people are owed a job for life. However, sometimes the layoffs are handled poorly, and other times the company takes other actions that belie the need for shedding jobs in the first place.

For example, consider the recent actions of Delta Airlines. After shedding thousands of jobs, demanding pay and benefit concessions from employees, and knocking hat-in-hand at the door of the federal government looking for a handout, Delta executives threw themselves a benefit bash of epic proportions.

The tab for the party cost the airline $43 million in bonuses and pension protection — in order to keep the perks intact in case of bankruptcy — and this in a year during which the company lost $1.3 billion, according to recent news reports. What does this say to the employees who were previously cut and are now trying to make ends meet?

A company can choose the layoffs option for the right reason or the wrong reason. I think one “reason” that’s indefensible is as a move to “send a message to Wall Street.” In these cases, which are all too common, a company in financial trouble wants to look like it’s doing something, even if the cuts probably won’t have any measurable effect on profitability. The goal is to pump up the stock price — at the expense of the laid-off workers.

Many times layoffs are simply the laziest way to improve the bottom line. Rather than find other expenses to cut or, better still, find ways to increase income, unimaginative executives simply start dumping workers until they reach the numbers they want.

Both of these explanations for implementing layoffs raise questionable ethics. However, of greater ethical concern is how the layoffs are actually conducted.

I remember well the first high-tech layoff I endured back in the mid-80s. When the dust finally cleared, management had gotten rid of all the “troublemakers.” These were the people who asked questions, who brought up sticky issues in meetings, and who refused to settle into the role of “yes men” (and women). I was too new to be a “troublemaker” during that round of layoffs, but I knew I’d be a candidate for a future round. Robbed of its brightest and best, the company languished for several years before completing the descent from a Fortune 500 company to bankruptcy.

Perhaps the fairest way would be to use seniority, the method promoted by the much-maligned unions. This ensures that employees who have contributed the most to the company receive some consideration for their past efforts. It also relieves the burden on older workers. The argument against this is that it removes the company’s flexibility to make case-by-case choices.

Another argument against seniority is that often the longer-term employees make more money. So cutting their jobs, eliminating their salaries, and having their work done by lower-paid employees can cut salary costs overall. I find this logic to be ethically questionable, because it penalizes the longer-term workers for their years of contribution to the company and resulting financial success.

Managers are rarely the ones who make companies successful. Most often it’s the work of long-term employees who have helped build the brand or the product. In a just situation, these employees should have earned some protection from the vagaries of the market.

Another related practice I find questionable is looking first in the salary column and then deciding which salaries should be cut without much regard for the name attached to the salary. This is a quick-and-dirty way of reaching the bottom line “numbers” that may have been handed down from above. My concern with this is that it reduces the value of employees to a number, a dollar figure. That approach depersonalizes the individual, and once again, penalizes them for previous high-quality performance.

In fact, the problem with many layoffs is that very depersonalization. Individuals become little more than commodities to be brought on board or sloughed off as the P&L statement dictates. Perhaps the worst layoff situation is one in which you have someone being laid off in one room, while someone else is being hired in another — often for a job that the discarded worker could be easily trained to perform and might be willing to accept.

This is an all-too-common experience and, again, is often related to the fact that the newly hired worker will work at a lower salary than the veteran. It would seem that at the very least the company should make an effort to see whether current workers could handle another job and whether they’d be willing to work for a lower salary. If the alternative is unemployment, the employee might just be more than willing.

The outcome of shoddy layoff practices is the current climate we are experiencing, in which many employees feel little or no loyalty to the companies they work for. As readers have pointed out in the past, many of them want to feel connected to their companies. But when they realize they are disposable cogs subject to the whims of management, they find it a hard feeling to nurture.

The other problem for company leaders is their inability or refusal to understand that trends are cyclical. There will come a time — although it’s hard to imagine it, given the shambles the economy is in now — when job openings will outnumber qualified employees. When that happens, employers with a record of marginalizing employees may go begging.

I think that to be ethical, businesses should consider layoffs — except for seasonal employment or in industries in which variations are to be expected — as a last resort, after all other options have been considered. When layoffs are necessary, layoff decisions should then be made with the understanding that managers are dealing with real people, not just statistics — and these employees often represent a value that can’t be quantified by a spreadsheet.