Au Contraire Newsweek Part I

 The cover page headline onthe Feb 15 edition of Newsweek was "LAYOFFS ARE BAD FOR BUSINESS"; the downside of downsizing. I'm sure, as in all things in life, some (layoffs) are bad, some are necessary, some are good; it depends. However this article, authored by someone who should know better, a professor of organizational behavior at Stanford University's Graduate School of Business, is an amateurish and wrong-headed treatise and draws erroneous and just plain silly conclusions. The author makes the point that all layoffs are bad for the company, for the economy (as laid off people don't spend as much--quite a revelation), and for the individual (another startling finding). Hard to dispute these latter two but I don't believe they meet the test of the ink and paper used. Regarding the first conclucion, there's much to dispute just using common sense: in my dispute process I'll also insert some experience and reality based study, and over the next four weeks pick off their most absurd conclusions.

Absurd conclusion #1. "There are circumstances in which layoffs are necessary for a firm to survive." Agree. However then the author critiques United, Delta, and American airlines for going through extensive layoffs (they all faced bankruptcy), and lauds Southwest Airlines for never having a layoff and now being the largest domestic U.S. airline. The author thus claims that this story proves that layoffs are bad. The facts are correct but the analysis and conclusion is worthy of a kinder-gardener. The previous major airlines were "old industry" reeling from years and years of caving into union demands and resulting in a cost basis that prevented survival. Southwest did a brilliant job of starting from scratch with policies and costs that enabled it to grow profitably. But those are the reasons the tables turned; not the fact that American and Delta and United had layoffs.

We all see it time after time; a researcher mixes up cause and effect. Tall guys dunk more than short guys; that's true. Is it true then that dunking makes people taller? Layoffs were the effect, the result, of history and structured costs, not the cause of failure. More absurd examples next week.

Comments

[Doug]

I did a turnaround at a firm that had to do its first layoffs ever (over 100 years in business) and the CEO was devastated. What's your opinion on regular firings like GE where a certain percent are cut every year? It seems that this would help not having to do layoffs in one fell swoop and let the underperformers go in an economy where they could still find jobs.