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Qualities of a good leader: Avoid layoffs at all cost?

An article on our sister site,, this week highlighted the qualities of a good leader during a recession, culling advice from leadership experts and CIOs. The list includes qualities such as utilizing the ability to inspire those around you, having communication (and listening) skills, proving you can perform and drive results, being able to prioritize, and then — BAM! Avoiding layoffs at all costs. Something that seems almost impossible, as daily news headlines remind us.

In the article, Jason Jennings, an author, speaker and consultant who has studied more than 100,000 companies, said the most productive companies are completely opposed to layoffs. Why? As soon as layoffs begin, employees start to worry about themselves and their futures as opposed to their work.

But with expectations that unemployment will top 9% in 2009 and budgets that are painfully tight, aren’t layoffs necessary?

Oftentimes, they are. When demand for new cars virtually stops, carmakers need to pare back production, and that means job cuts. But when it comes to IT, there are some ways to prove value and cut costs without resorting to the proverbial ax. For example, some companies are relying on their project management offices to steer them through the recession – time-tracking and tying resources to specific projects. Doing so prevents redundant work on projects, speeds project completion (freeing up the time and the budget for more projects) and justifies positions. One IT executive in our recent article specifically attributed job preservation to his PMO.

And most recently, technology giant HP announced pay cuts for the entire workforce as a way of avoiding layoffs after a disappointing first quarter. Rather than scaling back the 100,000-person workforce by 20,000, CEO Mark Hurd preferred the pay cuts to trim the budget.

Jennings notes that besides the morale issues that layoffs cause, job cuts can be a short-term fix. When business picks up again, the recruitment and training for renewed growth will be a setback. No argument there. But if your management is calling for a headcount reduction and you have already made all the efficiency moves you can – what then? Have you found other creative approaches to avoid pink slips?

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Jennings advocates creative scheduling and cutting executives' perks and pay before contemplating employee layoffs. The most productive companies, he said, are completely opposed to layoffs. "They believe that layoffs are the worst things you could possibly do, and the last tool in the arsenal to pull out," he said. "If a company begins laying people off, the rest of the people stop worrying about their work and start worrying about themselves and their future." That leads to a noted drop in productivity in those who remain with the company. In past recessions, Jennings said he has observed a pattern whereby companies lay off workers to please Wall Street, but when the economy rebounds, "the costs of recruiting and training the new hires is more than the savings that were realized in the layoffs," he said. They also lose the "tribal knowledge" of how things are done in the organization. As a manager for the last 25 years, the most unpleasant task I have performed is to lay off an employee. It is a terrible disruption to a life, a family and an extended family. Depending on the company, labor is usually the largest cost. Typically companies try to reduce all other costs first, then offer packages for people near retirement, then ask for volunteers, etc. Jason Jennings has uncovered virtually nothing here. I doubt that anyone can find a company that wants to perform a layoff. Also, even if a company were to lay off employees “to please Wall Street”, Jennings would never be privy to that kind of information, as there would be multiple law suits. Additionally, you can’t just call a Wall Street analyst and say “Well, were having a tough time, so we’re going to have a RIF (Reduction In Force) of 8%. That tells the analyst nothing. People who have assisted in putting together a briefing for Wall Street and are familiar with company operations know that the analysts want to see the whole picture, from: What are you doing to increase sales/revenue, how will you position for the future, what non-core activities are you going to shed, etc., etc., etc.. . Jennings claims to have studied over 100,000 companies in 20 years. Let’s see, that is 5000 companies per year or 13.7 companies a day, seven days a week. What with having started two companies, speaking, writing and consulting, one must question his qualifications. Dean Lane Founder, Office of the CIO®