When Layoffs Are Necessary, Emotions Must Not Interfere
TEC Worldwide is an international organization of more than 7,000 business owners, company presidents and chief executives. TEC members meet in small peer groups to share their business experiences and help each other solve problems in a round-table session. The following questions and answers are summaries of discussions at recent TEC meetings in Southern California.
Question: For purely financial reasons, I need to lay off one of my senior executives. I’ve fired people in the past for performance problems but have never had to lay off anyone to avoid taking a loss. I know I need to let her go, but I haven’t been able to bring myself to do it because she has been a hard worker and loyal staff member. Plus, her husband isn’t working and she has a family, so I feel responsible. The indecision is eating me up. How do I deal with this?
Answer: Successful entrepreneurs often share intense feelings of loyalty to those who help them start and grow their businesses. Unfortunately, that sense of loyalty can cause real problems under certain circumstances, and this appears to be one of them.
Your first move, and probably your most difficult, said Michael Barkin, president of Advanced Die Supplies in Santa Fe Springs, is to separate the business issues from the emotional and personal ones.
“When you own a business, tough decisions come with the territory,” he said. “This is one area where you sometimes pay a price for the perks that accompany business ownership. Emotion in the workplace is not a bad thing, but when it comes to taking care of your business, your family and the families of your employees, you have to set the emotional issues aside.
“Don’t let the fact that you feel like a failure for having to lay someone off stop you from doing what you need to do. Although it may seem callous, you can’t let the executive’s personal issues impact your decision. If her husband is out of a job, it’s not your fault. You aren’t the keeper of her family.”
Laura Tarbox, president of Tarbox Equity Inc. in Newport Beach, recommends a direct but sensitive approach.
“Tell her the truth,” she said. “Explain that this is a very difficult decision for you, but one you have to make in order for the business to survive. You will feel better and she will appreciate your honesty and candor. As a senior executive, she probably has access to the financial numbers. If so, she knows the company isn’t doing well and the economy is in a slump, so the layoff shouldn’t come as a total surprise.
“Above all, don’t put off the decision any longer. This kind of stress can negatively impact your performance in every area of the business. The sooner you get it done, the sooner you can focus your attention on getting your company back on sound financial footing.”
That said, there are still several business issues to consider before crossing the point of no return. First, how critical is this executive to the survival of your business? Can you let her go without having a major impact on sales, company morale or other areas that might have a long-term impact beyond your immediate financial situation?
How strong is her relationship with your customers? If she leaves, might she take some key accounts with her? An affirmative answer doesn’t mean you shouldn’t lay her off. However, it does suggest that you quickly get as close as possible to any clients that might follow her out the door.
Have you considered other options? If finances are the only issue, is there any way to restructure her job--such as putting her on straight commission, reducing benefits or deferring salary--that might make her compensation more affordable until your company returns to financial health?
Finally, from a legal perspective, have you dotted all your I’s and crossed all your Ts? You don’t need to document performance problems because this is a financial layoff. However, in today’s litigious environment, you need to consider all possibilities. Is she pregnant, over 50 or in a class protected by the Americans With Disabilities Act? Do you have an employment contract? Have you ever made any oral promises in regard to “permanent” employment at your firm? With so many issues to consider and the cost of lawsuits so high, you might want to consult with a labor attorney or experienced human resources person before finalizing your decision.
After all is said and done, if you still have trouble getting over the emotional hump, Ian Crockett, president of Hunter Barth Inc. in Costa Mesa, suggested taking the long-term perspective.
“I’ve had to lay people off in the past, and it’s never easy,” he said. “However, I look at it like being stranded on a desert island--you do what you have to do in order to survive and make it to the next day. Sometimes in business you have to go into that survival mode and make some very difficult decisions. If you do it right, however, things almost always turn out for the best for you and the employee.
“Several times, people I’ve laid off have come back to me later and said they were now in law school or doing something else they always wanted to do. The economy may be tough right now, but there’s still plenty of opportunity out there, especially for talented executives. If you treat the person with dignity and respect and handle the layoff properly, she will land on her feet and will likely find a position that better suits her skills, abilities and career goals.”
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If there is a business issue you would like addressed in this column, contact TEC at (800) 274- 2367, Ext. 3177. For more about TEC, visit https://www.teconline.com.
