At a party the other night I was discussing the current economic downturn with a friend who is a business school economics professor. He had an interesting provocative view that I’d like to share.
All economies operate on cycles (check); on the down end of a cycle businesses look for ways to cut costs as revenues decline (check); forward thinking companies also focus on positioning themselves for the next upswing (check); this often involves restructuring and layoffs – letting go functions and employees that are less relevant to the future or less productive. This calls for tough business and human choices. In many situations, these changes are overdue but making the case for major change when performance is good is a tall order – it’s hard to restructure when our revenue stream and profitability is good – even if strategically it’s in our best interest. But the external driver of a soft economy gives an external reason to act.
The ability for US businesses to make these decisions with little government regulation is actually a competitive advantage for the US economy in the global marketplace. Many other countries – western europe as a case in point has many more labor laws which significantly increase the cost of restructuring which ultimately makes them less competitive. What this doesn’t speak to is the human toll on those affected which can be explored by the following leadership dilemma: How do we do what’s right for the business WHILE doing what’s right for our people?
1) How do we make proactive decisions to position our businesses at the front of the pack, acting before the doldrums hit? What foresight, courage and will does this take?
2) What can I do to treat people well during restructuring and layoffs? It’s not only the right thing to do, it makes good business sense. The costs of brutal or botched layoffs are well substantiated. It’s never easy, but most people do understand the need for hard decisions and want to be treated fairly and with dignity through the process.