MBA Homework: how would you lay off your team?

Purdue University LogoI received an thought-provoking query from a graduate student at my alma mater, Purdue (where I earned my Masters in Education) that I thought would be interesting to discuss here on my blog and especially to open up for your thoughts:
“The scenario for our assignment is as follows: I am a VP of a major company. Said company gives me a list with 60 names of non-managerial positions (making up about 10% of “my” employees). These people will not have a job in 6 months. We are told June 1st, and thus no more positions as of January 1st.
“I need to write a paper telling exactly what date I would tell my employees, and reasons for why I chose the date.”
There’s more to the situation than this simplistic scenario, but it’s a good jumping off point. Here’s how I would handle this situation…

The most important question is: are these employees who are working on long-term projects, or are they day-to-day staff a la a support team, customer service, etc. Think salaried versus hourly. The answer is very different based on the perceived cost of losing their services.
My first though is to let them go at least 30 days early so that you:

  1. Avoid The Christmas Layoff syndrome (which is a ghastly thing to do to anyone) and
  2. Have the budget to give them a decent severance check as they walk out the door.

In any situation where you announce a layoff you are going to have a percentage of the workforce immediately walk, walk a few days later, and then a smaller group stick through to the end, with the quality and enthusiasm of their work inevitably degrading over time.
As a result, if my team was doing day-to-day tasks, I would give them a 30 day notification on 1 November, offering them a 14 day severance check when they left the firm over and above their accrued salary, vacation time, etc. If they were able to stay through until 1 December, I would double that bonus check, offering them an additional month of pay. That essentially gives them sixty days to figure out their next move.
If they were long-term project workers, I would announce it earlier, perhaps 1 October, that the team was being shut down at the beginning of December, and that the projects needed to immediately switch to document or terminate mode. If only individual workers on a team were being laid off, then the responsibilities would need to be shuffled around so that existing employees would be clearly tagged as adopting specific subtasks and the departing workers then focusing on documenting and handing off their work. If another group in the firm or an outsourcing team were going to take over, that’d be the focus of the next two months. If the projects were simply to be cancelled and dropped, then a final post mortem document would be produced at that time.
Since project-based employees are typically salaried, not hourly, and are typically paid more, I would also offer them better incentives to stay. For example, while the hourly workers were offered a 14-day bonus for sticking around, the salaried workers might be offered a 30-day salary bonus to ensure the transition was smooth, and a 60-day bonus if they stayed through until the very last day.
In both cases I would also contract with an outside job placement agency to come in and help my employees update their resumes, get profiles on LinkedIn, and learn how to write good cover letters and interview effectively, all for those last few weeks of employment. The productivity will go down at that point, of course, but they’re people and being able to help them land on their feet is more important than a few thousand dollars of company budget.
That’s my opinion, but I’ve never been in those particular trenches, laying off a group of workers. Have you? Even if not, how would you handle this particular situation and what kind of answer would you offer up to this professor if you were in this class at Purdue?

5 comments on “MBA Homework: how would you lay off your team?

  1. I think the accepted business practice is to lookup their birthdays in HR records and put a pink slip into their birthday card. Sorry, been spending too long on the Dilbert site. Do any businesses go to the lengths described in your post? Often the allocation of extra bonuses and payments is so tied up in HR and finance and head office approval that all a middle manager can do is spend their own money on a framed Inspirational poster for each staff member.
    I do like the personal touches such as writing a recommendation in advance, offering to forward contacts through LinkedIn. I would probably do it in a big bang approach Oct 1 with a couple weeks notice and use of company resources (phones, printers, mail) to look for other jobs. Even Nov 1 is harsh as December and January are slow hiring months. A big bang approach lets you tell the remaining staff that there are no more layoffs on the horizon to prevent them from jumping ship.

  2. Dilbertesque is the norm. Unfortunately, some ‘genius’ decided that layoffs should be hush-hush and workers should simply stop producing due to the rumor-mill and wait for their demise.
    I think the entire tact of layoffs shows terrible leadership. It truly means that expectations have not been appropriately set and that someone isn’t watching the numbers.
    I’ve worked for companies that were very transparent, letting employees know months ahead of time that tough decisions had to be made. Buyouts and shifting employees to other openings were accomplished first.
    It’s not fair to ‘dump an employee’ on the street after they’ve been loyal to you. Be loyal to them and give them a heads up. If you require some employees to stay, offer bonuses for folks to stay.
    Open and honest!

  3. The first thing I would do is ask which calendar Purdue is using that only shows six months for the time span between June 1 and the following January 1 dates.
    My calendar shows seven months:
    1. June
    2. July
    3. August
    4. September
    5. October
    6. November
    7. December
    I could be wrong of course because I got my doctorate from a west coast school.
    If I am correct, I would keep the sixty employees, fire the grad school prof and dismiss the students who didn’t catch the error from the grad school.

  4. I’m the 22 year old Purdue student who submitted the scenario- my mistake. I believe the purpose of the assignment was to take the January 1st deadline into consideration with the holidays. A circumstance that obviously plays on morale and loyalty.
    So, for technicalities sake, we are told July 1st.
    Thank you to those who have responded constructively. All have offered helpful opinions and possible solutions. I am in the middle of writing the paper and will share my personal thoughts upon completion.
    Thank you again for the help.

  5. As a theoretical exercise, cushioning the blow with severance soothes conscience and timing to avoid holidays emulates Santa Claus. In the real world of business, you don’t get to practice either. Whether treated well or shabbily, all laid off employees will end up disgruntled and critical of the corporation in its marketplace. The ideal date is when you have figured out how you will redistribute the work being done in these positions and have implemented the plan. If you let people go early to have a severence pool without figuring out how work will get done you’ll be next out the door. The trick is to keep the news of the layoff quiet. If you can’t keep the layoff quiet, the affected employees will be in place retirees or job seekers on company time until the ax falls. The work just won’t get done. Unfortuately, for you as VP, you need to eliminate the positions at the last possible minute and quick exit the people (some could be tempted to do damage if they hang around) with whatever payment you can make. And, you must remember that if you give the exiting employees a severance, you must make certain they sign a waiver of all rights to sue the company. Sounds lovely doesn’t it. I’ve run six major downsizings and they ain’t fun.

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