Why Are Layoffs So Harmful?

I read an interesting Newsweek article titled “Lay Off the Layoffs – Our over reliance on downsizing is killing workers, the economy – and even the bottom line”, by Dr. Jeffrey Pfeffer. (Thanks to Mark Graban that pointed me to it). The article shows that lay-offs do not save a company money: not in the long run, nor in the short-term. In fact it may have even more detrimental affects on a company than many realize. The article states with reference to empirical evidence that:

“…contrary to popular belief, companies that announce layoffs do not enjoy higher stock prices than peers—either immediately or over time.”

It is an interesting read for everybody for those who have been laid-off and even better for the people deciding to do the lay offs.

Manage the Bottom Line by Leading People

I think that the story behind the story is once again the topic of management and leadership. I strongly believe that in any situation it is always about people. That means that it is the people (managers) and their way of running a company that is the root-cause here. I have said before that you manage processes but you have to lead people.

When you have the “just manage people” mindset, then they become an assets on your spreadsheet and when hard times are upon you, cutting costs by reducing your capital makes sense – right? Well no – isn’t that obvious – Apparently not?

“In the face of management actions that signal that companies don’t value employees, almost every human-resource consulting firm reports high levels of employee disengagement and distrust of management.”

“Layoffs are more like bloodletting, weakening the entire organism. That’s because of the vicious cycle that typically unfolds. A company cuts people. Customer service, innovation, and productivity fall in the face of a smaller and demoralized workforce. The company loses more ground, does more layoffs, and the cycle continues.”

This reminds me of one of Dr. Demmings most commonly used quotes:

“Running a company on visible figures alone is one of the seven deadly diseases of management.”

In this case it is financial metrics. It seems that in a recession most management executives are thinking of short-term financial metrics and not the long-term health of their company? I am sure that these managers do not intend to do this and that they probably believe that they are doing the right thing. However it is this focus on managing rather than leading that is the problem.

Managing the company’s business (The process) is more important than leading the people (organization). The end of the quarter’s bottom line is more important than long-term viability. Although this seem to be common practice, there is ample proof of companies that thrive by doing differently. Yes, by simply motivating and empowering their people. That is what makes them great companies, and also immensely profitable.

We are driven by this need to satisfy investors, whom I may add are also typically about short-term gain. It seems that everything revolves around the need to make money now.  This could be called the myopic salesman approach, which is to pick up the closest shiniest pennies and not to look ahead and possibly see a pot of gold on the horizon. Even if there is not a pot of gold on the horizon, by looking at the long-term horizon of an organization you will be signally to important stakeholders that you cared for something of lasting value. And dedicated people appreciate that!

So how are you doing in looking at your bottom line in context of your most valuable assets? Have you been one of those downsized in a short-term bloodbath at the altar of the quarterly report gods? What would it look like to forgo a downsizing and enact something different that kept the long-term horizon in place? I’d love to hear your thoughts!

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Gilad Langer is Consulting manager at NNE Pharmaplan
He can be reached at
gilad.langer@gmail.com

Image Sources: jeffjonesillustration.com, media.cnbc.com, images.cxotoday.com

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Management by Objectives – Why?

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Management by objectives. Why? What is the perceived goal? What is the origin of this approach and why did anybody in his right mind think that it would work?

Maybe it stems from the thinking that we can impose tasks on people and that, by itself, will motivate them to do what they need to do. Old school thinking, if you ask me. Unfortunately, this is how many companies are managed and this practice usually only works when a high degree of self discipline and self motivation exists in the followers.

Q: But what happens when motivation and discipline erodes? How does a leader regain the lost ground when self motivation dies?

A: Good leadership steps in the motivation gap and fills it with appropriate tools and practices that brings out the very best in people.

Even in military circles, this type of management by objectives approach has been proved wrong. The best soldiers are the ones that are motivated, self disciplines, and are empowered to take action by themselves. This is achieved by making them decide what the objective are based on guidance and mentoring.  It is followed by instilling in them a sense of invincibility about these their objectives.

“Leadership is the art of getting someone else to do something you want done because he wants to do it” ~Dwight D. Eisenhower

This continuous cycle of empowering, motivating and inspiring applies in any environment and embodies the difference between leadership and management – a topic that has been widely discussed in the blogosphere. Essentially, it boils down to this: You mange a process and but you have to lead people. That is the difference.

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You can set goals and metrics for a process, but that will eventually backfire with people. You can set short term goals on occasion and it will work, but basing one’s leadership style on a “management by objectives” approach with no regard for what drives and motivates your people is simply not going to work.

The works of  W. E. Deming, statistician, professor, and author helps put all of this in perspective. Although an unlikely source, Deming provides some of the most inspiring thoughts on the topic of leadership and management. His profound views on what is required to attain superior quality are enrooted in leadership.

Deming describes “The deadly 7 diseases” – of management:

  1. Lack of constancy of purpose.
  2. Emphasis on short-term profits.
  3. Evaluation by performance, merit rating, or annual review of performance.
  4. Mobility of management.
  5. Running a company on visible figures alone.
  6. Excessive medical costs.
  7. Excessive costs of warranty, fueled by lawyers who work for contingency fees.

Another interesting source to learn about the difference between leadership and management is through the achievements of lean organizationsLean is a set of principles that come from the Japanese manufacturing industry, specifically Toyota. Lean focuses on the elimination of waste in order to achieve business success. It is a very widely used concept in the manufacturing industries and has spilled over to many other industries, such as healthcare.

Although much focus is put on the techniques and tools in this domain, many are just now discovering that the fundamental principles have to do with people, management and leadership. One the most remarkable things that I have experiences when observing lean organization is the fact that there are no heroes, not one person that everybody points out and said it was him. They have one of the most highly motivated workforces imaginable and their success speaks for itself.

What are some of the most effective “processes” that you have seen in leading people toward an effective outcome? Please share your experiences where you have seen better results through better leadership processes.

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Gilad Langer is Consulting manager at NNE Pharmaplan

He can be reached at gilad.langer@gmail.com

Image Source foxstore.com

Is Good Leadership Timeless?

I would argue that the concept of leadership is timeless, and therefore what made a good leader 100 years ago will also work today. And it will work just as well in the future.

That being said, I believe that in the future leaders will have to focus on some of specific competencies such as adaptability and multi-cultural understanding to remain an effective influence on the teams they lead.

Search for Meaning

People need a meaning for doing the things they do. Simply doing something because we have to, or because we are asked to, only works in the short-term. In order for us to really do our best, we have to be passionate about it. Passion does not come from yearly employee incentive plans or monetary gifts. It comes when we believe in what we are doing has a meaning and that meaning is important for us.

The only way one can get passionate about something is by inspiration and motivation - we have to believe in it.

That is exactly what leadership does and why it is needed in organizations. You can manage a process but you have to lead people.

One of the things that characterizes these modern times and will be more important in the future is adaptability. We are all aware that the pace of both technology and business is increasing. Technologies that took decades to evolve 100 years ago take a few years today. Business concepts and practices are diversifying as we attempt to deal with globalization.

The next generation leaders will have to master this diversity and dynamics.

They will have lead diverse people in a multicultural setting, while at the same time keep pace with the advances in technology and shifting business practices.

That is why I believe that environmental influence is going to be an important to leadership development aspect. The environments in which we are able to operate, interact, and transform also say a lot about leadership ability.

We are all products of our environments and I would venture to say that being in the right environment has a lot to do with leadership development. Obviously, great leaders understand on what to focus.

Darwin once said, and I am paraphrasing,

“It is not the strongest of a species nor the most intelligent that survives, it is the one that is most adaptable to change.”

So, do you feel that leadership is timeless? What elements of leadership are needed more than ever where you work? What components of leadership are decreasing in their importance there? Is your leadership adapting, or is it staying stagnant? I’d love to hear your thoughts!

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Gilad Langer is Consulting manager at NNE Pharmaplan
He can be reached at
gilad.langer@gmail.com

Image Source: dartmouth.edu

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