Redundancy (Mass Layoffs)

Square wheels and the secret of continuous improvement

Square wheels 2Have you ever seen a vehicle with square wheels?

When I was about seven or eight I was taken to a motor-cycle rally with motor-bikes with square wheels. It was the funniest spectacle and had the crowd weeping with hysterical laughter, although with the benefit of maturity and experience, I can only think that it must have had the riders weeping for entirely different reasons!

Now for some reason I recently found myself remembering the experience and chuckling at the recollection. What brought it to mind I have absolutely no idea, but as I reflected on it, I realised it was a wonderful lesson.

Would you think of putting square wheels on your motor-bike or car? Of course you wouldn’t. The very idea seems insane - unless it was for a fun exercise like this one. It is the very insanity of the idea that makes it so funny. And yet there are times when we witness – or even do - things that could be analogous to using square wheels.

Perhaps a good example of this was the recent UK budget when the Chancellor of the Exchequer introduced a number of ill-conceived measures that he has subsequently been compelled to revoke. Why, you ask, is this like a square wheel? Well, it is symptomatic of what I call “nickel-and-diming” management; what is possibly more often identified as “a lack of joined-up thinking.” Unfortunately it is a pattern that is perhaps far too common in both political and commercial management.

Here you have the Chancellor justifying what he is doing by saying that he is trying to simplify the tax regimen. But because these efforts result in a decrease in tax revenues, he is compelled to find other sources of tax to offset that loss in order to “balance the books.” Thus he ends up contradicting his own stated objective; increasing complexity; annoying the people affected and having to reverse his hasty efforts because of the unforeseen consequences of his proposals.

It is easy to mock but how different are your commercial management initiatives? Think about the cost cutting measures; the redundancies and the “back to basics” campaigns that permeate much of your strategy. How different are they? Don’t they all point to a lack of seamless thinking?

Any effort to address a particular aspect of your operation could effectively be said to be retreading one side of the wheel and so creating, developing or perpetuating a square wheel. It is like squeezing a balloon; if you grip one end the air or problem simply moves elsewhere. Thus to be an effective leader you have to see your organisation as a continuous whole – as a round wheel – and manage it as such.

And of course that is something that you are really trying to achieve with your continuous improvement initiatives. However, in order for these to be successful, you have to recognise it is not your efforts that will enable this. It is simply a case of letting your people get on with what they have to do with clear objectives, clear values and a clear understanding of their role. Letting them roll, so to speak.

SOS: Save Our Society By Sustaining Organisational Success

Boy, does the news make depressing listening/viewing/reading! No matter what your source it all seems to be all doom and gloom. And now, with the chaos in Greece and the possible collapse of Euro, it seems that the world order as we know it is in danger of collapsing.

Of course the situation is serious and I don’t mean to belittle it. However, it is also indicative of the extent to which we have allowed governments and politicians to dominate our lives. Consequently, we now find ourselves looking to them to come up with a magic solution that will put all to rights and save the day. However, you have to ask if we are looking in the right place?

After all, politicians and governments are spenders not producers. And while they might have been able to stimulate economic growth in the past by borrowing to spend, that well is dry. Present national debt levels simply make spending our way to prosperity impossible. Consequently it is up to us in commerce and industry to respond to the SOS and save the day.

To begin to do so, however, we need to demonstrate a better understanding of economics than we have shown to date. And not least by recalling the lessons of Henry Ford. Remember, he incurred the wrath of businessmen of his day by doubling the wages of his employees and reducing the time they worked. Yet, he still appears to be unique for, even today, the normal reaction to adverse market conditions is to lay people off. Of course making people redundant appears to be commercially justified, but economically all it does is transfer the costs of labour to society as a whole. In Europe at least, that means transferring the burden to the state and so compounds the problems of government and leaves government less able to find other avenues of spending which might stimulate the economy.

So how do you avoid this? Well for starters you can begin to look at employment in a different light. Through universal employee ownership you can make your employees co-owners of the business and automatically create an environment in which they have a vested long-term stake in its success. This will give you the additional capability and resources to find alternative solutions to your commercial problems, without any of the negative economic consequences. Furthermore it will also ensure that:-

  • The overall economic situation will never deteriorate to the extent that they otherwise would;
  • The downturn will be shorter-lived; and
  • The business will be better placed to enjoy the recovery when the situation does improve.

More than that though, it will also create a shared vision and unity of purpose that will enable you to improve performance and hence your bottom line significantly and ensure the long-term success and sustainability of your business.

So instead of sending an SOS to politicians and government and looking to them to save the day, you need only look to yourself. You have the ability to not only sustain organisational success but, in doing so, to help save our society. What do you think? Are you willing to give it a try? You can be the hero!

Facing facts: why we need to move beyond redundancy and find a new solution

A relative recently sent me the following summary of the 2011 US budget to help me understand the situation. I cannot vouch for the veracity of the numbers but whether they are 100% correct or not doesn’t really matter. They give a very simple picture of the situation and also illustrate why it is a problem, wherever in the world you are. 

US Income: $2,170,000,000,000
Federal Budget: $3,820,000,000,000
New Debt: $1,650,000,000,000
National Debt: $14,271,000,000,000
Recent budget cuts: $38,500,000,000

All the zeroes are overwhelming so let’s remove 8 zeroes and pretend it is your household budget.

Total annual income: $21,700
Expenditure: $38,200
Amount of new debt: $16,500 ($38,200 minus $21,700)
Total debt: $142,710
Proposed expenditure reductions: $385

In other words the budget cuts proposed by the US congress are the equivalent to you reducing your expenditure by £385 in the face of a deficit of $16,500 and a debt increasing to $142,710. Hardly a sane solution, you will agree, and one that clearly lays up problems for the future.

The problem is that the entire western world is in a similar situation. This is serious because you stimulate an economy by stimulating growth, and historically we have done this through increased borrowing – something which is clearly no longer a viable option. However, it is even worse than that because repaying past borrowings has to come out of current income. This means reducing expenditure on other things, including things that we have come to take for granted.

The fact is that we have fuelled our past growth by unsustainable borrowing. This means we are not as prosperous as we like to think we are. Of course this has serious implications but the real tragedy of this is that we are not facing the truth. Expecting things to return to “normal” anytime soon is a fool’s dream. Yet we continue to live in that hope.

Neither the press nor our political leaders are being open with us and telling us how it really is. In the US the Republican refusal to tolerate additional taxes seems to be a denial of Canute-like proportions, while here in the UK our coalition government is doing its best to reduce spending and introduce “austerity” measures but is facing a tremendous backlash. The threat of industrial action is a result of a failure to communicate more openly and effectively. Yet, while softening us up for a prolonged struggle, they continue to focus on whether or not we will have a “double-dip recession” when the reality is that we are facing a significant decline in our standard of living. How can it be otherwise when you are spending your current income paying off your past debts?

The galling thing about all this is that, in this failure to face up to facts, we are delaying the development of new solutions.

The fact of the matter is that we have become too inured to thinking it is government’s responsibility to lead us out of these difficulties. Yet government is financed either by taxing the people or borrowing. As it cannot borrow, this only leaves raising taxes – a gloomy prospect in the face of a shrinking economy and declining incomes. Thus it is up to us as businesspeople to provide leadership and develop the solutions.

No more redundancyAnd the first solution is to call a halt to the pattern of redundancy that is default solution in a shrinking market. This is imperative as redundancy perpetuates the cycle of decline. Making people redundant is a double whammy because it causes the market to shrink further and compounds the situation while at the same time transferring the costs of unemployment to society.

Of course as a business leader you can argue that it is your responsibility to do the best for your business and that entails laying people off. However, if you look at the bigger picture you can see that this argument is based on self-interest and is not actually for the greater good. It calls upon a minority to pay the price for the rest and – even if you feel you can justify it on the grounds of eliminating your least productive employees – you know that it has a long-term price, both on the morale of the remaining employees and on the business itself. Furthermore, in the economic environment we currently face, where you cannot rely on someone else to be creating new opportunities, you are jeopardising the future even more.

That is why I recommend that you look at people as human assets; assessing their value to the organisation (rather than just viewing them as a cost) and building on that to create the employee ownership and hence the employee engagement that offers us all a brighter future: you, your business and the economy as a whole. 

Partnering in tough times

Tough Times 000014352702XSmall No doubt you have noticed - we are going through tough times. 

But, have you ever thought about what makes tough times tough?

One factor is that past practices no longer seem to work. There is a new immunity that means they have little or no effect. Nowhere is this more evident than in the Keynesian approach of spending your way out of recession. This is impossible because we have already been to the well too often and levels of debt are already way too high.

However, this does not have to be depressing. You see, it means that you have to find new solutions. It is that old "Necessity is the mother of invention" situation. It thus creates a time of opportunity and can actually be quite exciting.

To make the most of it, however, you have to throw off the trammels of traditional thinking. You also have to recognise that new ideas can come from anywhere. No-one has the monopoly on them. But, more importantly, they seldom happen in isolation. They are invariably the result of collaborative effort. Yet you so often overlook this.

Redundancy initiatives and headcount reductions are the perfect example of this. When you start to look to reduce your employee numbers you are effectively:-

  • Diminishing your intellectual capacity to come up with new ideas;
  • Undermining your capability to respond at the appropriate time when things do start to improve;
  • Transferring the economic burden of looking after your people to the state, and so exacerbating and prolonging the problem you are trying to address. 

And of course that is to ignore the breakdown in trust and the inevitable erosion of employee engagement that follows.

So what's your alternative? It has to be greater employee ownership. It is no coincidence that employee owned-companies do better than their competition in good times and bad, and recover faster from any economic downturn. There are of course may such organisations, but in the UK the John Lewis Partnership is the best-known employee-owned company. And for me the organisation's insistence on calling its people partners rather than employees is the epitome of what I am talking about.

To survive tough times you have to create a spirit of "all being in this together" that transcends conventional definitions of employee engagement. And there is no better way to instigate and inspire and inculcate this than through employee ownership. So if you haven't thought about this already you need to be asking yourself, "Why not?" Especially since there is a way that you could do this without equity and at virtually no-cost to your organisation or your "partners." 

Is Redundancy Losing Favour?

Is the workplace becoming more humane? Recent reports show that output in the UK has fallen by 6% while unemployment has only gone up by 2%. This interesting statistic has been used to suggest that unemployment is not going to be quite as big a problem as had been forecast.

Yet is this really de facto evidence of management doing more to hang on to their employees and looking for more alternatives to redundancy? Certainly there is ground for optimism. Indications are that many employers did try to find alternative solutions. But it could just as easily be argued that this is simply the inevitable consequence of a more technology based society.

The last recession was more than 16 years ago, and the lengthy interval makes comparisons so much more difficult. New technology revolutionised the way business is conducted and global competition has led to a fixation with the need to cut costs and improve efficiency. Initiatives like 6 Sigma and "Lean" have seen businesses re-engineer operations. Much of this has been at the price of jobs. Indeed, reduced headcount has been the primary justification for many technology initiatives. So much so that redundancy has been a common feature of the boom, and job losses occurred at a level never before seen in good times.

In light of this it is hardly surprising that job losses have been fewer than forecast. After all organisations that had already optimised staff levels simply would not have the capability to reduce their staff any further. Consequently a cynic might argue that the redundancies made during the recession showed that nothing had changed and that people remained the first target for managers looking to reduce costs in troubled times. Thus optimism about a more humane workplace may be misplaced. As ever, statistics are open to interpretation.

It is a cliché to say that redundancy is a last resort, but my argument against redundancy has always been based on two key principles:- 

  • The organisation as a whole is a team; and
  • The pain suffered to enable the organisation to survive any economic or business downturn should thus, as far as possible, be borne equitably by the whole team.

Until we have measures in place that incorporate these principles I remain unconvinced as to the progress that has been made in properly valuing people or the contribution they make as human assets. What do you think?

How to SAve Jobs - Ask Your People

Have companies that have laid off employees missed a trick?

Top Consultant's latest newsletter quotes the findings of a survey of 2,500 people conducted by the independent Keep Britain Working campaign, which indicates that there is more altruism in the workplace than had been previously suspected. The report indicates that, if it would help colleagues keep their jobs:

  • 96% of workers would accept changes in working conditions
  • 38% would accept a pay cut - 29% without reducing hours
  • 53% would accept a reduction in hours
  • 60% would take on extra responsibilities
  • 48% would change their role entirely.

What I find surprising about this report, is the tone that suggests that these findings are unexpected. I would have expected most people to be prepared to make some sacrifices to help their colleagues. The caveat to this is, of course, the expectation of a management lead - their setting an example. Not surprisingly this was also borne out by the survey which showed less of an inclination to do so if there was no management sacrifice. Then 10% would be prepared to take direct action with 3% ready to consider strike action.

In its first month the Keep Britain Working website received more than 400 innovative and effective ideas to help employers cope with the downturn other than by simply cutting jobs.

Redundancy programmes:

  • Cost the organisation in severance pay (at least in Europe);
  • Mean dispensing with past investment made in people;
  • Undermine the organisation's ability to snap back when the economy improves;
  • Result in additional costs when people discarded do need to be replaced.

They also have a major impact on morale, and one of the main contributory reasons for that is the atmosphere of fear they create, through the secrecy with which they are conducted. This, however, may be a two-edge sword, for it means that there is an almost total disregard for the contribution that their workers could make.

400 effective solutions in a month gives a hint as to what opportunities businesses may be missing by laying off people, which, added to the long-term consequences of redundancy, makes the whole approach even more dubious. 

Salvation, Sabotage or Suicide

"What distinguishes our age from any other is not the world-flattening impact of communication; not the economic ascendance of China and India, not the degradation of our climate and not the resurgence of ancient religious animosities. Rather, it is a frantically accelerating pace of change." Gary Hamel, The Future of Management.

Even our recessions come faster and threaten to hit harder than anything we have seen to date!

Hamel's statement, made before the recession, is fundamental to his case for a new management approach. He argues the historical management model is outdated, asking, "Why, then, are the views of senior executives, so often granted a higher co-efficient of credibility than the convictions of mid- and lower level employees? Overweighting the views of those who are furthest away from the customer, and have most of their emotional equity invested in the past, is hardly the recipe for building a resilient enterprise." 

The pace and severity of the recession seems to reinforce this and validate Hamel's view that, "It often appears that large companies have borrowed their change model from poorly governed third-world dictatorships." If the scale of redundancies and mass layoffs witnessed since the start of the recession and the reluctance of high level executives to forego their perks does not corroborate this, it certainly highlights the feudal practices still embedded in modern management practice. 

Hamel's solution is more proactive management systems allowing greater adaptability. Summarising a key theme that employees need more thinking time, he states, "Too much of what gets done in most companies is a response to some already pressing issue; there's no slack, no space for improvisation, and no way to defend projects that are not already useful." While entirely logical this actually presents a massive challenge for it runs totally counter to the traditional call for improved productivity. 

It also presents massive logistic challenges. Let's see why. 

The Mathematics of the Working Year

1. There are 365 days per year available for work.
2. We already have 2 days off per week (Saturdays and Sundays) for 52 weeks per year, i.e. 104 days, which leaves only 261 days for work.
3. Paid holidays entitle us to a further 20 days off work, which leaves only 241 days for work.
4. There are 9 public holidays a year which leaves us with 232 days for work.
5. In a company you can normally take off less than three days sick without a doctor's note, although not more than three times a year. That means that you can take a further 6 days off, leaving you with 226 days a year for work.
6. But a (generous) working day is only 8 hours, which means that one is actually only really working for 75 days. (226/3)
7. Allowing half an hour for lunch, and another half an hour for tea/coffee and nature breaks means you lose a further 9 days (226/24) which means you end up working only for 66 days or 1,584 hours a year.  

This is the UK figure and may vary slightly from country to country. It should also be noted that it does not include time spent in meetings, or training, which means that the average person is likely to spend considerably less than 1,500 hours actually working in any given year. This begs the question as to how much time there actually is for any proactive work of the type Hamel is recommending. Yet, he gives several good examples of companies that have successfully adopted such practices. 

That being the case, one can only wonder how companies that are laying off people due to the economic climate, can ever hope to compete effectively again. Are they really saving themselves for the future; are they sabotaging their future or are they effectively committing suicide?  One thing is for sure - if they wish to thrive, they need to change their strategies pretty quickly and the Zealise way offers the best hope for embedding adaptability and resilience to change.  

7 Competitive Advantages - Trumped!

The Institute of Directors (IOD) has identified that companies who do not cut training spend in a recession gain seven competitive advantages. Such companies: 

  1. Are well-positioned when economy recovery starts, as those businesses that do not survive will open up market share to those who do. 
  2. Remain competitive. Knowledgeable employees are more motivated and will find new ways of generating revenue. 
  3. Have greater understanding of customers’ buying habits and how to build on their loyalty, which helps to maintain repeat business in a recession. 
  4. Enable their people to stand back from the day-to-day operations and understand the strategic implications of their work. 
  5. Send one of the most powerful messages to their employees - that they are valued. When your employees are anxious about job security, it is more important than ever to demonstrate a commitment to them. 
  6. Avoid a long term skills shortage. (Apparently UK businesses are still recovering from skills lost during the 1990s recession due to poor investment.) 
  7. Benefit from increased productivity in the short term, as well as the long term.

The IOD concludes from all this that "the sooner you engage your staff, the earlier you can address and deal with the impact of the recession."

A recession, when time pressures are considerably reduced, is an ideal time to invest in training. It certainly takes courage and conviction, but the dividends can be huge. Remember, IBM became the company it did because Thomas Watson refused to layoff anyone during the Great Depression. Instead he required his people to use their time gainfully, improving themselves, with the result that after the Depression, IBM was, for a considerable period, one of the most successful companies in the world.

So just think, if training people during a recession can make the sort of difference the IOD depicts, how much more will actually valuing people deliver? If the key point is, as they say, that people need to feel valued in order to be engaged, this has to deliver all these benefits and then some.  

Will Your Principles Stand the Test of Time?

On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result not a strategy… your main constituencies are your employees, your customers and your products." Jack Welch, as quoted in the Financial Times, 12th March 2009.

Yes! This is the same Jack Welch who had the sobriquet "Neutron Jack" for his ruthless pursuit of shareholder value and insistence that the 'bottom 10%' of employees should be replaced every year.

Perhaps the man deserves credit for admitting he was wrong, but, while they might be surprised to learn that employees are the new number one constituency, anyone who fell foul of that earlier ethos is unlikely to feel charitably disposed towards him or inclined to forgive him as a result. In my book, Welch's revocation epitomises the lack of basic principles evidenced by so many business leaders. For me, a principle is a timeless value that supersedes any label and fuses the spiritual with the human and so underpins any human activity. For example, the Golden Rule, the call to "treat others the way you would like to be treated" is probably one of the most universal, essentially underpinning most moral, philosophical and religious belief. It is applicable to all walks of life, not least business, which is ultimately the provision of service. Unfortunately, with the pursuit of profit on the treadmill of growth, there has been an erosion of principles, with the concomitant loss of integrity, honour, humanity, morality and good judgment.

Zealise was in fact formed to redress this erosion: to help inspire people and organisations to better fulfil their potential by igniting the energy and enthusiasm that comes from within when we are all enjoying life and the part we play in contributing to a worthwhile goal as part of a larger team. How much of life is wasted if we are not happy in our work?

No business can survive without a worthwhile purpose; nor can it do so without good, engaged employees. This is why the blog "What is Business For" is so interesting. It is fascinating to read that governments are being encouraged to "switch from boosting GDP growth to measures that more directly relate to human happiness." I am sceptical about governments' ability to deliver great change, but I think that a shift in this direction might go a long way towards changing business priorities. To suggest that happiness would be a more worthwhile measure of success than shareholder value might seem radical, but employee engagement statistics already tell us otherwise. As employee engagement is inextricably linked to the organisational values, the starting point  for change would appear to be to re-examine principles and values.

Have you examined the principles in your organisation lately? Will they stand the test of time?

The Better Way to Manage People in a Downturn!

Eureka! Somebody else out there agrees that it is sheer lunacy to be laying off people at the rate at which business is currently doing.

4.4 million people have been laid-off in the US in the past 5 months, while here in the UK that number has topped a million! This is devastating in itself, but what is even more tragic is the way we wring our hands and shake our heads and do so little to change things. This stock response to economic downturn simply exacerbates the situation, yet business leaders persist and we all seem to think there is no choice.

But there is, and we need to act accordingly. Governments are pouring billions into their respective economies to encourage banks to start lending. Yet they are simultaneously insisting banks adopt more prudent lending practices. But such unemployment numbers mean there will be no-one for the banks to lend to, for, even if they wanted to lend to people without income, there will be little demand.

The logic of all this is clearly questionable. However, so is the role of business leaders, because , in compounding the problem, one can only conclude that:

  1. If they understand the situation, their actions in laying people off are the epitome of self-interest; analogous to commandeering the life-boats: or

  2. They do not understand economics at all and thus have no idea of the consequences of their actions.  

Either way they emerge with little credit for there are alternatives to redundancy.

It was to convey and promote this message that I recently created my Alternatives to Redundancy website, with a free guide to illustrate the alternatives. Now, in the past week, my friend Alex Kjerulf has posted a practical example of those ideas. I urge you to read it, but as you do so, just remember that people whose incomes are dwindling need something to encourage them, make them feel their sacrifices are not in vain, and continue to give of their best. The Zealise approach, with its unique no-cost ownership, not only gives this, but builds a platform for the highest possible level of employee engagement and thus maximises the prospects for sustained, long-term success.

Please bear that in mind when you click here to read Alex's post. We have to do something if we are to prevent this recession turning into a full scale depression - and soon! We can all do our bit.