Sunday's Times had an essay by "ethicist" Randy Cohen that made a remarkably black and white argument about when it is and is not ethical to layoff employees. I had a mixed reaction to the article. On one hand, I agree that too many organizations use layoffs as a first or early resort and that there are too many times when senior executives slash employee jobs just to protect their own pay –and there is an argument from some research that companies that do layoffs at the first whiff of trouble are at a competitive disadvantage. But I think that Mr. Cohen's arguments strike me as too moralistic and too naive at times. This really bugged me:
"This is not to assert that Caterpillar can never downsize. Companies
must be able to shrink as well as grow, to adjust to changing
circumstances. (A restaurant with fewer customers needs fewer waiters.)
But prudent staffing must be part of an ongoing strategy, not a panicky
response to an economic downturn."
The economic collapse that led to layoffs at Caterpillar wasn't predicted most industry experts and economists, let alone by most corporate leaders. I think that simply calling layoffs at Caterpillar a "panicky response" is sort of like criticizing people for a "panicky response" to Tsunami. I am sure, in hindsight, that executives might have been better prepared, but I think Mr. Cohen does not show quite enough understanding of how hard it is to manage during times of harsh uncertainty.
I was also a bit disturbed because,although I think that many companies do not show enough loyalty and humanity toward their workers, Mr. Cohen seemed to saying that any leader or company that did not first try practices short of layoffs was immoral:
"Before adopting the ethics of the overcrowded lifeboat, before tossing
thousands of non-millionaires over the side, gentler — and more
equitable — methods must be tried. Everyone’s hours might be reduced,
diffusing the pain. Dividends to stockholders can be eliminated. Pay
cuts can be instituted company-wide, with the deepest reserved for the
highest paid (that is, those most able to endure them)."
That "must be tried" really bugs me. In the case of Caterpillar, I wonder whether the workers, shareholders, and analysts would have agreed with the strategy of reducing hours or more severe pay cuts — management works under many constraints that sometimes make such actions difficult. Also, as Cohen notes, Caterpillar executives have taken some cuts (but perhaps not enough).
I spent much of my early career studying organizational death and decline, and am working on the topic again a bit, especially in my current HBR article. When I first studied declining and dying organizations in Michigan in the early 1980s, I thought that layoffs were misanthropic and any company that did not spread the pain equally was immoral. But as I have seen the difficult and complex set of constraints that executives face in organizations of all kinds and sizes, I have learned to avoid pointing the morality finger at those leaders who do layoffs — there too many times when it puts the remaining business at risk or when because of immovable constraints (such as union contracts, work rules, or the nature of the work) cost-cutting short of layoffs is not feasible. There are also other times when, to save the company, or at least a lot more jobs, a company has too many workers with the wrong skills, and although perhaps they should have realized it sooner, they get in a position where a restructuring is needed to change the composition of the workforce, and layoffs are the only viable path. There are even times when paying no dividend may end-up hurting the stock so badly that layoffs are a better path for the common good over the long haul.
Layoffs do massive damage to people, I am not defending them as humane acts, but there are too many times when they are the lesser evil. And if they are the best choice NOW because of PAST managerial incompetence, that is horrible, but life does not have a rewind feature.
I do agree with Mr. Cohen that some CEO's out there are not taking there fair share of the hit, although even then I worry that if we take the finger-pointing too far here that executives won't have the right incentives for managing organizations well on the both the way up and on the way down the economic cycle — and everyone will suffer as a result.
Finally, perhaps it is my weird bias in life, but when people claim to be more ethical than others, it always makes me squirm because so often they end-up taking the same –or worse –actions than those they demonize. As my father-in-law likes to say, "when people talk about ethics, I hide the good silverware." I agree with many of Mr. Cohen's points, but I guess his moralistic tone bothers me above all else. Too many ethical and unselfish executives I know who have done layoffs have suffered mightily as they tried to balance efforts to keep their companies healthy — or at least alive — and to save as many jobs as possible in the wake of the current awful and largely unexpected mess. Mr. Cohen is mighty quick to trumpet his own moral superiority when discussing executives who did not plan for these extremes or who believe that –for the good of the whole — layoffs rather than spreading the pain more evenly are the best strategy.
I wonder, if he walked a mile in their shoes, would he be as ethical or as competent? Morality, like management, is something that is a lot easier to talk about than to get right every time given the messiness and uncertainty of the world as it exists (rather than the world we wish it would be).
