Case Study: The Case of Bad News
When faced with the possible need to lay off employees or downsize, it is vital that the managers and leaders involved in the process lay a significant degree of focus on the aspects of justice and preserving human dignity in the workplace.
The first job for the administrators should be to identify the goals for the proposed work force reduction, then evaluate their importance to the company and then finally consider whether those goals could be met through any means other than downsizing.
Further, upon making the decision to downsize, it is also the leader’s prerogative to communicate the information effectively and clearly to those who would eventually be responsible for identifying the people that would be laid off.
The employees that are selected for layoffs have to be identified based on the set predetermined goals for the work force reduction whenever possible. When such goals are not clear in certain circumstances, then “across-the board” reductions can be undertaken based on the variety of factors including qualifications, experience, abilities, performance, diversity goals or multiple of these factors.
In addition to that it is the responsibility of the managers to inform the affected employees of the developments in advance and be given an honest explanation for doing so.
All the employees deserve and need a clear and honest explanation of the reasons for and the consequences of the layoff. There, specifically in such cases, needs to be emphasised the need for the free flow of information without any untoward attempts to control it. The manner in which downsizing is handled gives an insight into the nature of that specific organisation. (Weber, 1994)
2. Descriptive Summary
George Anderson had been newly appointed as the CEO of Astratech Communications International (ACI). The company had employees in three locations Mexico, Scotland and their headquarters in California.
All the hourly employees of the company across all locations had a singular Union in IBEW. His initial diagnosis of the problems faced by the company revealed growth and profitability to be the major sources of concern for the company, however, what caused these problems had yet to be identified.
After spending some time at the company, George discovered the company’s lack of focus and organisational direction were the major causes for their weaknesses. To understand and alleviate this problem, George set up a roundtable of middle managers and arrived at the conclusion that the company’s cost accounting was not up to the standards and decided to bring in a new CFO to curb the matter.
However, in the midst of these changes one of their bigger clients, Alcatel, cancelled their backlogs which positioned the company in a pretty precarious position wherein there could arise a need for companywide layoffs.
The CEO however decided to opt for another alternative. He decided to institute a company wide policy for 4 days week for all employees. This however meant that they wouldget paid for 4 days a week, however, for the managers it still meant working all 5 week days.
The information regarding the change was first provided to the executives who would be in charge of implementing the change and then to the regional head of the Union. While unhappy regarding the changes, both parties were willing to accept the decision. With the new policies and the reduced costs, the company slowly began to rebuild. However, this phase did not last as other clients began to reduce the quantity of their orders following a slow down in their consumer demands.
This finally necessitated the eventual lay offs which was estimated to be around 900. However, before finalising the critical details of who neededto be laid off, what criterion should be followed, and who should be protected for the betterment of the company, George decided to inform the staff and executives alike regarding the eventual downsizing that was about to take place. The news eventually was leaked to the news outlets and also created a significant amount of anxiety and apprehension among the workers.
3.1 What are the issues?
From this case, there are some pretty evident issues which can be observed. From the managerial aspect of his job, the first key element was identifying the short comings that he observed.
That was done accordingly and he eventually arrived at the conclusion that the workers were not to be held at fault, it was rather an unfocussed leadership that was to be blamed. He hired a new CFO in this regard.
The second issue that he faced was of Alcatel leaving which then causer significant financial strain on the company. To alleviate this the CEO instated a policy that reduced the work hours for every one down to 4 days a week. The third issue that he faced was that he faced was that of reduction in orders from other major clients which meant that he had to finally carry out lay offs and reinstate the remaining employees to 5 day work weeks.
From an ethical point of view the first issue was informing the appropriate personnel regarding the restraining of the work hours which would be a significant blow to the pay to the employees. The method and order of relaying the information would be crucial.
The second ethical issue was in expecting the managerial staff to continue working 5 days a week despite getting paid for only 4 days. The third and final ethical issue was that of deciding to lay off 900 personnel across all branches of the company and the manner and order in which the information was released.
3.2 Why are they issues?
As is required of the CEO identification of the problem remained the first step and in his attempt to streamline the direction and focus of the company, rather that punitive actions, he implemented additive actions by bringing in a new member to the company.
However, in responding to the issue of the leaving of Alcatel the ethical issue of identifying the problem and finding alternatives to lay offs became the primary concern. Following that the way and manner in which the information was delegated and distributed became important regarding the cutting back of work hours.
Then finally when there remained no other alternative, thr review process for directing the lay off process needs to be assessed. Following that, the manner in which the information was distributed also need to be analysed to see if proper ethical considerations had been made before sharing the information.
3.3 What we have learned about it?
The first part of the process where in a new CFO was hired was appropriate as the problem was promptly identified, and then non subtractive measures were implemented so as to curb that issue. The CEO had obligations only to the chairman and his executive team to inform regarding the new inclusion.
After that the decision to cut back hours to maintain competitiveness was also done in a proper manner. Where in consultations were first done with the Chairman, then decisions taken as part of the strategy moving forward and then the relevant people including the executives, who would be responsible for implementing the task and the regional head of the Union were both informed clearly and with due justifications for the actions.
However, in case of the lay offs, the decision was arrived at with due consideration. However, the relay if information was done prematurely.
No clear metrics had yet been decided to decipher who would be laid off or what criterion to be put forth. In addition to that no assurances regarding which groups would be safe and what the deciding indices would be had yet been designed. In prematurely relaying this information he caused undue apprehension and anxiety among the work force which could demotivate them from performing their duties.
This stage required proper analysis of the situation to decide who to be laid off and whom not and the deciding factor to be predetermined prior to informing the employees regarding the lay offs.
There are several issues here that needed to be addressed. The primary goal for the CEO was fulfilment of his duties towards the company. He adjudicated his responsibilities in an efficient manner by informing the Chairman of the loss of a client, including the executives in deciding the prevalent problems, informing the executives regarding the cuts to the work hours, informing the regional head of the Union in clear and reconciliatory tones.
However, the mistake undertaken here was that of prematurely informing employees regarding the layoffs when no concrete assurances or criterions could be made as yet. This created a sense of apprehension and animosity among the employees.
The following recommendations could be made based on the case study.
- Creation of a team to consider the criterion for lay offs was the correct move, however, the CEO should have waited for the report from the committee prior to making the announcement.
- The information need not have been relayed directly to the employees, rather after formulation of the requisite criterion, individual supervisors could be involved in relaying the information regarding specific lay offs.
- The information need only be released from the CEO directly once all parameters had been analysed and identified based on which the layoffs needed to be done.
Weber, L.J. (1994). Ethical downsizing. Managers must focus on justice and human dignity. Health Program. 75(6). Pp. 24-26. Viewed on: 9th September, 2019. Retrieved from: https://www.ncbi.nlm.nih.gov/pubmed/10135164