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Changing layoff mantra

Stephanie Armour (USA TODAY) -- When it comes to layoffs, employers have long followed the axiom of last hired, first fired.

But in today's wave of layoffs, a new approach is taking hold -- and it has many employees thinking the unthinkable.

I might soon be out of a job.

Companies are trying to emerge from a downsizing not just leaner, but more competitive. So like contestants in an episode of Survivor , they're axing workers perceived to be the weakest members of the team. Now, employees with poor performance or fewer skills. or those who get paid more than their colleagues are more vulnerable in a downsizing than before.

After decades of preserving workers with tenure, the new approach is a seismic shift that's becoming increasingly apparent as companies lay workers off at an accelerating pace. There were about 29,000 layoffs in the week ending March 12, according to International Strategy & Investment, an economic research organization in New York. There have been about 476,000 layoffs since Jan. 1.

Just last week, Motorola announced it is slashing an additional 7,000 jobs. Compaq Computer announced Thursday that it is cutting 5,000 jobs.

Companies are free to make layoffs in just about any manner they choose as long as certain demographic groups are not disproportionately affected. And it's often permanent, because many workers who are laid off are never asked to return.

For example:

* Grand Rapids, Mich.-based furniture maker Steelcase is turning to performance as one measurement tool when shedding several hundred salaried workers. The company declined to comment further.

* Consulting firm American Management Systems in Fairfax, Va., has included performance as a factor when determining which workers to trim from its staff. Several hundred workers are being let go this year, but the company plans to continue hiring in other areas. The company declined to comment further.

* When Boston-based Clearway Technologies let workers go, Human Resources Director Kirsten DiChiappari says the decision over who to dismiss came down to workers' abilities rather than tenure.

"It was who was less productive, who were the problem employees, the black sheep of the group," DiChiappari says. "We had to make a decision based on who we thought would be a better team player or work harder at the end of the day.

"Management just looked at the skills they wanted," she says. "It was like they went shopping and filled up the cart with what they needed. It was like picking off a menu."

* When changed its business direction and laid off workers, the company sought to retain top performers and those with relevant skills. About 20 workers at the online visual search company were let go.

"Layoffs today represent an alignment of your strategy and your resources," says Michael Lyons, chairman of the Burlingame, Calif., firm. "You have to look deeply at the person and their skills set, their ability to be comfortable in the new environment and how effectively they can fit in. This is a business."

Performance is even used to determine who to demote or fire. Consider the system Ford Motor has for the top 20% or so of its salaried executives. The process requires 5% to get a C performance grade. Those who get the low mark are prohibited from getting bonuses or raises. Getting Cs in two consecutive years is grounds for dismissal or demotion.

"If companies want to get rid of dead weight in a layoff, they're free to do so. There are no laws that prohibit getting rid of inefficient or underperforming workers. Maybe people are just overpaid for the job they're doing. You can do a layoff based on people who are overcompensated," says Michael Karpeles, a Chicago-based employment lawyer. "The company just has to make sure the rationale for the layoff is carried out through the ranks."

Method to layoff madness?

The new method of picking whom to lay off is a change that has some employees feeling wary. After all, it used to be easy to gauge job security when seniority was most important. Now, the criteria seem more ambiguous, and it's harder for employees to know where they stand or why they're being let go.

"Were certain people kept on because of their relationships with certain senior managers? Did some people play the game better?" says Robyn Phipps, a high-tech public-relations manager in Denver who was laid off in January when her department was disbanded. "There were a lot of questions about who was let go and why, and I had them, too. You can't help but wonder."

Several factors are driving the shift:

* The new way business operates. Increasingly, more money and promotions are given to good performers rather than workers with the most tenure.

Using the same criteria in layoffs is a natural extension for employers. Consider compensation. The number of firms that pay employees with individual-performance plans has jumped from 17% in 1996 to more than 40% in 2000, according to a study by benefits and human resources consultants Hewitt Associates.

* Legal concerns. Some legal experts say that retaining employees with tenure in a layoff can wind up discriminating against minorities and women who have been later entrants into the labor force.

* The decline of organized labor. Union membership has dropped to about 13% of the labor force, compared with 27% in 1970. Companies that are unionized tend to still favor tenure, and unions have long fought to protect workers with seniority when layoffs occur.

"With the erosion of unions, that has eroded the notion of seniority," says Ellen Whitener, a management professor at the University of Virginia in Charlottesville.

To many, the new process makes sense. Employers want to use a layoff to their advantage, supporters say, rather than retaining workers based on rules such as tenure.

"This is how wars were fought. You didn't think about seniority on the battlefield, you thought about who your best people were," says Jeff Christian of Christian & Timbers, a Cleveland-based executive recruiting firm. "Today's business is a battle, and companies are looking for their best generals. For the companies and for the employees, it's a life-or-death issue."

But critics say the new method treats workers like commodities to be disposed of whenever business strategies change. They say it encourages managers to avoid performance problems by getting rid of workers instead of confronting issues when they arise.

And they say it's so subjective that layoffs are becoming little more than popularity contests, with managers keeping workers they like rather than those who may be better at the jobs.

"It's completely subjective," says Candice Johnson, a spokeswoman for Communications Workers of America, on the move away from seniority to skills and performance. "It implies that older workers don't have skills."

To be sure, the reason a worker is let go often depends on why a company is cutting jobs in the first place. In some cases, a firm may be shifting its business strategy and shedding an entire department. In those cases, job performance, salary or skills have little to do with the process. No one is spared.

Whittling Down The Workforce

But the new method is also being used in situations such as mergers or for cutting costs. In those cases, companies have to whittle just some of their workforce. That's when skills, performance and pay come into the picture.

And there's nothing illegal about it.

In fact, employers generally don't need any reason to get rid of workers, because most employees are considered employed "at will," which means they can generally be fired without any cause.

But random firings rarely happen, because employers fear dismissed workers will file lawsuits claiming discrimination. That's why most employers document their rationale for a dismissal. They don't have to, but it's good business sense.

The same holds true in layoffs. Any criteria may be used, but to guard against lawsuits, most firms review their layoff decisions to be sure the cuts won't disproportionately affect women, minorities and those over age 40. And they base their decisions on objective and quantifiable criteria, such as rankings given on job reviews, assessments that grade employees based on their skills or reviews of pay scales.

"When it comes to layoffs, it used to be that seniority was the most reliable criteria you had," says Helen Drinan, president and CEO of the Society for Human Resource Management in Alexandria, Va. "But the last decade has seen a real growth in companies saying they're a meritocracy and what matters is performance, not how long you have been here."

But as layoffs mount, the new process is adding to workers' worries. Already, many are questioning the reason behind job cuts. Nearly 50% of technology professionals at firms that had a downsizing say the company needed to cut wasteful spending rather than lay off people, according to a February survey by online recruitment and careers site

Suddenly, everyone is at risk, especially those who have been showered with large salary increases during the robust economy and tight labor market.

"In Silicon Valley, salaries have been inflated like real estate. They're making $200,000, and they should be making $140,000," says Betsy Sutter, a vice president of human resources in Palo Alto, Calif., who is involved in layoffs at her software-development firm. "People have gone in and commanded a high salary, and now, if they don't perform, a company is going to be much more likely to cut them off."

While the ranking and shuffling of employees may sound callous to some, employers say that's the new reality of today's business environment. Wall Street doesn't tolerate poor performers, and employers can't afford to, either.

"This is a business, and there is a tug and pull between your strategies and your resources," says Michael Lyons of "You have to see layoffs as an opportunity to become stronger. If you do it the right way, employees understand it, too."

But not everyone is convinced.

"Basically, it comes down to whether they like you or not," says Bonnie Russell of Del Mar, Calif., who has been laid off and since co-founded, an online source for finding lawyers. "Nobody talks about it. Sure, they talk about performance, but there are ways to show your performance is good if they like you."

(c) 2001 USA TODAY

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