Are Layoffs Unpatriotic?

by cv harquail on February 25, 2009

korman letter

A few weeks ago, Steven H. Korman published a provocative Open Letter to CEOs in the NYTimes and the Philadelphia Inquirer. Asking other CEOs to avoid layoffs, Korman urged corporate executives to focus less on protecting stock price, profits, and the short term, and focus more on protecting the people who are working hard trying to keep their jobs.

Having argued myself that layoffs often contradict an organization’s stated values and having explained the " One Truth and Three Lies" that keep managers from trying alternatives to layoffs, I can’t say I was surprised when others commented that Korman was basically naive. " "Layoffs are unavoidable," they claim. "This is a unique economic situation."

I agree that for some organizations, layoffs are unavoidable. The economic environment is so bad now that many organizations that could have pursued alternatives to layoffs months ago have missed their chance.

And yes, this economic situation is unique . (Korman tipped me off as to why it’s unique, by addressing his letter to CEOs and executives of any company and every company. Why should every CEO care about avoiding layoffs?)

Our unique economic situation calls for a new argument against layoffs.

Unlike previous situations where layoffs were considered by specific companies, in specific industries, or in specific regions in an effort to adapt to ‘local’ economic problems, the current situation is different in two ways:

  1. Economic problems are confronting every organization, every industry and every region.
  2. Layoff decisions made by one organization or one industry or in one region are affecting nearly every other organization, industry and region.

The evidence- based, business case against layoffs may not be enough for this unique situation. After all, the traditional case against layoffs has always been made from the perspective of the individual organization or industry, not the nation as a whole. We need an argument against layoffs that addresses the unique situation of our national economy.

The more I think about the collective, nation-wide implications of each individual organization cutting employees in an attempt to improve its own stock price, the more I wonder whether  these individual organizations- and their leaders- are making selfish choices that work against the interest of the US as an economy and as a nation. Said another way, I’m wondering: small flag

Are Layoffs Unpatriotic?

Here are 7 arguments for Why Layoffs Are Unpatriotic. Wait– let’s switch that around and focus on the positive:

7 Reasons Why Alternatives to Layoffs are Patriotic

1. Every employee who is not laid off is an employee who remains an active contributor to our national economy.

2. Every employee who is not laid off is another employee who can continue to pay taxes — the taxes that fund not only the stimulus program and the war in Iraq, but also fund all the other services that we collectively depend upon as as society.

3. Every employee who is not laid off is an employee who will not need to receive unemployment benefits, who will not need to use a food bank, and who will not need to visit a homeless shelter after her home is repossessed by a bank that can’t sell it anyway. Said another way, every employee who is not laid off is another employee who won’t need to depend entirely upon private or public charity while they are out of work.

4. Every employee who is not laid off is an employee who can continue to believe in the American Dream . The employee who is not laid off is one who can remain optimistic,  who can cultivate a can-do attitude, and who can continue to believe that hard work does pay off. (That’s American, right?)

5. Every employee who is not laid off is another employee who can contribute to your business, and through your business contribute to the larger economic recovery. These employees can contribute what they know about your business and your customers to deliver what your current customers need. These not-laid-off employees will help to protect and nurture the business that you have.

6. Every employee who is not laid off is another employee who will appreciate his or her importance to the organization, and to his or her coworkers. Another employee who will feel like part of the solution. These employees will recognize that their economic security depends on their collective ability to sustain the organization’s business. Perhaps the most cost effective program for developing organizational commitment and employee engagement is to have employees who are not laid off, and who appreciate the commitment to them that alternatives to layoffs demonstrate.

And taking it up a notch…

7. Every organization that chooses alternatives to layoffs demonstrates, in one way or another, that it has chosen to remain fully committed to its business. Every organization that chooses alternatives to layoffs demonstrates the ‘can do’ attitude that has built and will rebuild this country.

come together flag

Let’s congratulate the organizations that are doing thier best to implement alternatives to layoffs. In these organizations, the pain of cutting costs is being shared across organization members. And, at the same time, these organizations and their members are making a collective ‘sacrifice’ of short term results for the better good of the entire economy.

And, perhaps instead of thinking of these organizations as suckers, socialists, or Pollyannas, let’s think of them instead as what they are: Patriots .

Now, I’ll call in the Marines for some John Phillips Souza while I put on my flameproof suit. In the meantime, tell me what you think about this alternative argument, by commenting below.

(Thanks to Tom Oswald at MentalShavings.com for the photo of Korman’s letter.)

{ 5 comments }

Nilesh February 25, 2009 at 11:55 pm

great points. agree 100% on this point

2. Every employee who is not laid off is another employee who can continue to pay taxes — the taxes that fund not only the stimulus program and the war in Iraq, but also fund all the other services that we collectively depend upon as as society.

Ian Ayres February 26, 2009 at 8:53 am

Another provocative post.

When managers go beyond the business case for alternatives to layoffs, they sacrifice shareholder profits for the greater good. For many this proposal is a non-starter because it is inconsistent with managers’ fiduciary duties. But if your post sparked a shareholder movement instructing managers to pursue layoff alternatives, there would be no fiduciary conflict. For some, an important question is one of audience.

CV Harquail February 27, 2009 at 11:32 am

Hi Ian-

The question of conflict over what constitutes fiduciary responsibility is an important one… because fiduciary responsibility is the most common argument for taking a short term view of success and for choosing layoffs over other measures. Share price is often both a narrow and a short term the ‘measure’ for determining whether executives have met their responsibility to shareholders. Despite the idea that share price supposedly incorporates assessments/predictions of the organization’s future financial picture, the 13 week evaluation cycle of quarterly earnings can shortchange both the organization and its stakeholders. It’s the goose and the golden egg tradeoff.
But you teach corporate finance, so you know this already.

There is some (legal) arguing out there, in the conversation about B Corporations, that suggests that fiduciary responsibility already includes responsibility to employees and to the organization’s long term health … This argument has been used to downplay the inventiveness (and purported need for) an organizational charter that explicitly includes these in the definition of fiduciary responsibility. Given that the growing number of B Corporations explicitly include employees welfare and public welfare as responsibility of executives, it begs the question– are B Corporations (with their explicitly broader definition of corporate responsibility) responding to the current economic situation differently than organizations with the more traditional charter?

Anyone need a dissertation topic?

Amy March 3, 2009 at 6:19 pm

Interesting. I’m not sure where I land on this issue, but you’ve given lots of food for thought. Found you via Intrepid Tuesday – congrats!

Fritz Ferell July 30, 2010 at 4:46 pm

@John I totally agree with that point

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