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Morality of Downsizing

THE RIGHT THING; In a Downsizing, Loyalty Is a Two-Way Street

I’M not particularly good at firing anyone. I know few people who are. On the few occasions when I was part of a group of managers considering layoffs, the process was agonizing. I found it excruciating to sit down with a list of people with whom I worked every day and assess who might be expendable.

For me, at least, the underlying question was always whether what we were about to do was fair to the company, the employees and those of us who would stay. Deciding the right thing to do was never easy.

Now, as the economy has cooled and downsizing has heated up, the ethics of layoffs have once again come into sharp focus, not only for the managers making the cuts, but also for the remaining employees. The number of people laid off in the first three months of this year — 406,806 — was nearly triple the total for the same period of 2000, according to Challenger, Gray & Christmas, the outplacement firm in Chicago. And the numbers show no sign of subsiding.

The payroll is often the first place companies look when trying to save a bundle. But growing evidence suggests that such a response can be myopic. A survey by Mercer Management Consulting of businesses that used cost-cutting as their primary strategy in the first half of the 1990’s — a period that included a recession — showed that 71 percent failed to achieve profitable growth in the strong second half of the decade.

When employees recognize that layoffs may be more of a knee-jerk reaction than a smart business solution, ”there’s a cost to that,” said Bob Atkins, a vice president at Mercer Management.

”You’re breaking trust with your people,” he said.

Consider, too, that the highest number of layoffs during the last decade came in 1998, amid the economic boom, according to Challenger, Gray. It is no wonder that employees question how much they owe to their companies.

”If the 1990’s have taught employees anything, it’s that no matter how much they give to these corporations, they will give them nothing back in return,” said Jill Andresky Fraser, author of ”White-Collar Sweatshop” (W. W. Norton). ”Companies relied on aggressive cutbacks throughout the prosperous 1990’s to give one more short-term boost to the bottom line. They looked at their employees as yet another disposable commodity that could be squeezed dry and then thrown out the door.”

Whatever the reasons for layoffs, what ethical responsibility do employers and employees have to each other? If a layoff is imminent, do those employees who know that they are safe owe any loyalty to the company? And do employers owe loyalty to employees who have hunkered down in tough times and helped the business survive?

”The notion of loyalty has been so battered that it is naïve — indeed, even somewhat disingenuous — to expect that employees will be loyal,” said Daryl Koehn, a professor of business ethics at the University of St. Thomas in Houston.

Even when they do stay, employees may feel betrayed by a company that demands more work of them and gives back little in return. ”When people don’t feel a level of acknowledgment, that’s when they really constrict and, in the most serious cases, very significant sabotage against the company begins to occur,” said Michelle L. Reina, a management consultant and co-author of ”Trust and Betrayal in the Workplace” (Berrett-Koehler, 1999).

When considering layoffs, a company certainly has an ethical duty to make sure its decision will be a responsible one for the business. It also has a duty to treat laid-off workers fairly, by providing outplacement services and reasonable severance pay, and to ensure that those who remain have the tools and support to do their jobs.

When an employee decides to stay with a company — even amid fear of layoffs — he has an ethical responsibility to continue doing the good work he has always done. If he truly believes he cannot do so, because of some breach wrought by the layoffs, he should resign. After all, his responsibilities to his company do not change even if his perceptions of his employer have.

”We don’t have control over how an organization handles a layoff,” Ms. Reina said, ”but we do have control over how we choose as individuals to respond to it.”

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