When the threat of job loss looms, many employers find they have a heart.
Carmel Wroth | May 2009 issue
Like any CEO in this economic climate, Paul Levy, who runs Beth Israel Deaconess Medical Center in Boston, had to find a way to cut costs. He didn’t want to lay people off, so he did something unusual: He asked his 6,200 full-time employees for their ideas on how to avoid layoffs. They responded enthusiastically. Thousands showed up for the brainstorming meetings and, together, they came up with a plan to save about 450 jobs by cutting pay, reducing benefits and trimming other costs. Levy took a 10 percent pay cut and declined a 30 percent bonus for which he was eligible. “Presidents or CEOs often think they have to make all the decisions and control events in their organizations,” Levy says. “You should trust the people you work with because they care about the place and they care about one another. So why not trust them to come up with approaches that make it better?”
At least 4.4 million Americans have lost their jobs since the recession began, according to the Bureau of Labor Statistics. But some companies are looking for alternatives to downsizing. Toyota and FedEx cut executive pay and bonuses; Gloucester Engineering in Massachusetts organized job shares so people worked less but kept their positions; instead of dismissing junior staff, Simpson Thacher & Bartlett, a global law firm with offices in seven cities, paid them a greatly reduced salary to work for needy community organizations; B&W Trailer Hitches in Humboldt, Kansas, which manufactures custom truck beds and trailer hitches, pays employees to work on civic projects when the factory is idle.
At Vail Resorts in Vail, Colorado, CEO Rob Katz recently announced a salary reduction plan; lower earners were asked to take a 2.5 percent cut and higher earners were asked to give up 10 percent. Katz slashed his own salary by 100 percent for the year. “The key to good management is making decisions that come from aligning with the values of your stakeholders, not making false choices,” Katz says.
According to Wayne Cascio, a professor of human resources management at the University of Colorado Denver Business School who has researched the effects of layoffs in large corporations, massive force reductions don’t end up improving the bottom line. Why? Because the costs of the layoffs, and the ongoing hit to the company’s morale and reputation, are too high. “It’s one of the hardest things to do, to see your people as the source of the solution instead of the source of the problem,” he says.
Yet that’s what Levy did. “Trust the people you work with,” he says. “If you can’t trust them, you’re probably in the wrong place.”
Trust the people you work with.