Published October 2002

If laying off staff, keep ‘corps effect’ in mind

The terrorist attacks on the World Trade Center and the Pentagon intensified and pro-longed the economic slowdown that had already been under way. And, certainly, the Shenanigan Factor, courtesy of Enron and others, hasn’t helped much either.

The net result is that there are very few businesses that have escaped the cold hand of cutbacks of one sort or another. Some companies have been able to maintain their sales, though often at the expense of profit margins, while others have faced unenthusiastic consumers and a much-softened demand for products and services.

Because the economic impact has varied so much, the types of cutbacks have ranged from mild to severe to last-ditch desperation. Some firms simply had to postpone capital projects. Others had to adopt much more severe expense cutbacks, up to and including layoffs.

Of all the types of expense cutting, layoffs are the most painful. It is, perhaps, the only time when management envies those companies with union contracts — where layoff procedures are specified to the last detail, including who goes first. In most companies, though, it is a difficult decision that, no matter how coldly scientific the analysis, is ultimately always personal. In a small firm, where everyone knows one another so well, layoff decisions are an agony. And they are no fun at the receiving end, either.

There are all sorts of analytical models to help you shape a layoff decision if it comes to that point in your company. Cash flow is obviously a major factor, but continuity of critical operations is important, too, as are, of course, experience and performance.

One factor that is often overlooked, though, is the corps, or cadre, effect. The remaining workers are especially important to you. They will not only be the company during the downturn, they will form the basis of its rebirth. It is these workers who will retain and nurture your company’s values and goals and communicate them to the new workers hired when the firm recovers and begins to grow again.

When you are confronting the hard choices of who goes and who stays, then, you should consider not just the raw resume skills but the level of commitment, energy, communications abilities and emotional maturity of each worker. Each of these characteristics will play a role in how successful your downsizing is — both in surviving and in laying the foundation for your company’s later success.

The level of commitment to the company will be reflected in the worker’s willingness to put in the extra effort needed to perform under the pressure of thin staffing.

Some people are able to re-prioritize their work and step up to whatever needs to be done. Others react badly to mental stresses of this sort, and cannot be expected to perform well in those circumstances.

The level of commitment will also be seen in a worker’s ability to cast off any feelings of nostalgia and jump in and work with teams that must be reorganized and reconstituted after any layoffs.

Raw energy is important, too, not just in its own right and not even solely because there will be more work for each person. The reason is that the stress of friends and colleagues losing their jobs — and perhaps even guilt feelings about remaining on the payroll — can undermine a person’s confidence and productivity. High-energy people tend to convert that stress into activity and be less prone to moping around.

Also, of course, a high level of energy will, when the company is recovering, communicate the firm’s values in a much more effective way. Communications skills, in general, are of great value in these situations, and the higher the pressure, the more value they have.

Of all the characteristics you should look for, though, emotional maturity has to be close to No. 1. The individuals who hold the company together during its economic ordeal will be under considerable pressure until the firm finds its footing again. Emotions will be closer to the surface than usual, and effective teamwork will require more conscious effort (and less self-indulgence). Then, on the upswing, the same team will have to share and divest themselves of power and control as the company grows again and adds staff. Only the emotionally mature will be able to survive and thrive in this process.

It will take a corps, a cadre, of very special people to make this process a success for the company and for themselves. The task of management, when faced with painful layoffs, is to identify and select those people so that the company can hold together to find its future.

James McCusker, a Bothell economist, educator and small-business consultant, writes “Your Business” in The Herald each Sunday. He can be reached by sending e-mail to otisrep@aol.com.

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