Finding a Leadership Opportunity in Alternatives to Layoffs

by cv harquail on March 16, 2009

Let’s say you’ve been convinced by the argument against layoffs and the recommendations for trying alternatives to layoffs. You’ve looked at a few of the Honor Roll organizations and decided to take that next step…BIDMC banner.jpeg

As you prepare to act, consider this additional option. Can you find a way to make alternatives into layoffs something more than just a cost cutting method? Can you expand your goals, so that alternatives are tactics for something larger than preservation?

Can executives pursue alternatives to layoffs in a way that (1) builds on on what defines the organization and (2) builds employees’ and leaders’ commitment?

In a word, yes. Here’s a role model to inspire you:

Paul Levy, President and CEO of Beth Israel Deaconess Medical Center (BIDMC) in Boston has engaged his entire organization in the effort to find alternatives to layoffs, through a process that should inspire other executives to take this big step. Paul Levy’s process demonstrates how alternatives to layoffs can be a leadership opportunity. The process through which these alternatives are considered and implemented can actually strengthen and grow an organization. Paul Levy photo.jpeg

Levy’s plan was brought to national attention by journalist Kevin Cullen, in an article in last Thursday’s Boston Globe/Boston.com. As Cullen writes, and as Levy recounts in his own blog post Update on the economy and its effect on BIDMC , on Friday, March 6th, Levy held a trio of Town Meetings for the employees at BIDMC. In these meetings, Levy explained the overall financial situation for the hospital and solicited ideas from employees about how they and the hospital could close the gap between projected costs and revenues. Levy explained:

Our focus has to be on reduction of personnel costs, our major operating expense. Here are some ideas to start the discussion: Eliminate the 3% pay raise for people who would ordinarily receive it starting April 1. (To compensate, in the future, new raises could start with the people who have anniversary dates of April 1 and after.). Reduce future earned time accruals by one or two days per year. Forfeit one or two days of past accruals of earned time. Permit certain floors or units to avoid layoffs by voluntarily taking pay cuts equivalent to the dollars that would be saved by the layoffs in that floor or unit. Ask people to take furloughs, unpaid leaves of absence for several days.

But the bottom line is the bottom line. If you don’t like these ideas, please help us come up with others.

What lessons can executives take away from this example?

Let’s start with what Levy did for this meeting alone:

Levy shared financial data during the meeting itself, and also in budget updates before the meeting and in blog posts related to the meeting. Turns out that Levy began sharing information about the hospital’s financial struggle back in November (three months earlier) when he brought the issue to the attention of BIDMC employees.

1. Tell employees the truth about the problem. Give them data and facts.

Levy gave employees the opportunity to think about the organization in general, as well as specifically about their own work unit or department. Employees were encouraged to consider what they as individuals feel they can give up. Then, he set up a trio of meetings in a "town hall" format, so that employees could ask questions.

2. Invite employees to generate ideas.

Levy created an online forum for employees to engage with each other. Employees have been using this forum to propose and work out the details of various tradeoffs. They have been sharing ideas, explanations, and arguments for and against different recommendations. The forum has also given employees some room to vent and to bond with each other.

3. Create opportunities for employees to explore and evaluate possible options.

In addition to these steps, Levy did something more — and we have to look back into the history of his relationship with employees at BIDMC to see it. To craft the process for considering alternatives to layoffs, Levy built on a history of previous challenges at the Medical Center.

Building on history

Over seven years ago, when Levy first took the wheel at BIDMC, one of his first acts was to send a letter to all employees. As Levy remembers it (in a blog post from January 2007)

When I arrived, the hospital was in dire financial straits, morale had plummeted, and there was an associated exodus of doctors, nurses, patients, and community support … (Levy quotes from the email he sent out on his first day) :

"This is a wonderful institution, representing the best in academic medicine: exemplary patient care, extraordinary research, and fine teaching. However, the place is in serious trouble, and we are going to have to work very hard during the next few months if we are to secure our future as a non-profit academic medical center. …

One clear recommendation will be a reduction of staff throughout the hospital. While the exact number is not yet clear, several hundred positions will be eliminated to bring our level of staffing down to what can be supported by our clinical volumes. Layoffs are distasteful, uncomfortable, and scary, but we will carry them out as humanely as possible and treat people with respect and dignity. The many people who remain will be part of a more efficient medical center, and one that will be able to continue to carry out our important mission." (January 7, 2002)

Building on a foundation of trust and shared success

Town meetings @ BIDMC.jpeg There is even more information about Levy’s leadership approach and about how he and the employees of BIDMC innovated themselves out of a serious financial situation, in a multimedia HBS case about Levy’s first six months. This case was co-written by my colleague Michael Roberto, management professor & blogger. Reflecting on Levy’s current actions, Michael writes on his blog:

We learned from our study that Levy had a number of distinctive leadership capabilities. Perhaps most importantly, he earned the trust of his workforce, and he built collective ownership for his turnaround plan. (emphasis mine) Those qualities enabled him to lead a very successful implementation of the plan, returning the hospital to positive cash flow after many years of heavy losses.

The trust that was created seven years ago, and the shared success from that recovery, help to make this turnaround look achievable.

Levy and the Medical Center are also building on their organization’s identity. Check out this sentence from BIDMC’s mission statement:

The mission of the Beth Israel Deaconess Medical Center is to serve our patients compassionately and effectively, and to create a healthy future for them and their families. Our mission is supported by our commitment to personalized, excellent care for our patients; a workforce committed to individual accountability, mutual respect and collaboration; and a commitment to maintaining our financial health. (emphasis mine)

Building on a shared identity: A commitment to financial health

I’m guessing, though I don’t know for sure, that this commitment to maintaining the Medical Center’s financial health was made explicit back in 2002. Because  the collective responsibility for the organization’s financial health is built into a core statement of the organization’s identity, the process that Levy has initiated not only makes sense but also is authentic.  And, this shared identity makes it appropriate to ask members themselves to make personal (financial) contributions to the collective effort to keep each other employed.

For Levy, trying alternatives to layoffs is not a new idea; it’s a practice that has worked successfully for him, in this organization, before. Moreover, approaching these alternatives in an open process that involves employees in generating, choosing and implementing alternatives isn’t new either — this process is similar to the process through which Levy lead the BIDMC to achieve financial stability seven years ago. So maybe for Levy and the BIDMC, their approach this time is really a return to ‘best practices’ and ‘core competencies’.

Even for organizations that don’t have a similar shared history, shared trust and shared identity, alternatives to layoffs can be a leadership opportunity. Managers, executives and leaders who have not built this competency, this level of trust or these relationships with employees shouldn’t assume that, without this foundation, it’s not worth trying alternatives to layoffs. After all, it was through their approach to a similar situation, albeit one that was less global, that Levy and the employees of BIDMC created the foundation they can build upon now.

Alternatives to layoffs are more than just a way to cut costs without cutting jobs. In addition to reducing costs, these alternatives– rightly unfolded– can help to build the organization and employees’ commitment to the organization.

That’s the picture from the executive’s point of view. How do the employees feel about this approach to finding alternatives to layoffs? Does this feel like real "leadership"?  Check out the 65+ comments on Levy’s blog, and the 718+ comments on the Boston.com article, to hear from the employees themselves.

Hat tip to Cali Yost for alerting me to the Globe article, to Michael Roberto for reminding me of the HBS case, and to Kevin Cullen and The Boston Globe for highlighting this act of collective leadership at BIDMC.

{ 3 comments }

Laurie | Your Ill-fitting Overcoat March 20, 2009 at 12:55 pm

I’m sorry to leave a comment that isn’t directly related to the post in question, but I just wanted to say that I read your comment on Akhila’s post about personal branding and authenticity (http://akhila.wordpress.com) and thought it was so insightful and inspiring. It gave me a lot to think about and I wanted to pop over and see your blog.

Thanks!
Laurie

Graeme Martin March 27, 2009 at 2:06 am

I’ve got to do a talk on how to do layoff’s quite shortly, and I’m goingto use this example. Great stuff, though, like all promising practices, it may not work in all contexts. I’m thinking about the industry I used to work in – construction, where layoffs were a fact of life, expected and factored into employees’ work choices and lifestyles. Similar with some other occupations, industries I suspect

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