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Jim Now

Management by Meat-Axe

One of the more frequent questions I get as a crisis manager is, “What are the best practices for laying people off, executing cutbacks or rightsizing?” (No, Target did not call me.) Management expert Tom Peters calls these management maneuvers “corporate capsizing.” The answer is pretty simple: There really aren’t any. Having been involved in a number of these exercises executed by really smart people in various industries over the years, I can report that management, management schools and the business community in general don’t have a clue, nor do they seem to want to have a clue about the impact of huge, meat-axe-like employment cuts.

Cleaver and Dragonfly by John Gateley, Flickr, Creative Commons License

Cleaver and Dragonfly by John Gateley, Flickr, Creative Commons License

In my line of work, one quickly learns that the most powerful players in a crisis situation are the victims. That’s because crises are predominantly about the victims they create: people, animals and damaged, sometimes destroyed, living systems. Having seen so many types of victims and victimization, among the most devastating, long-lasting personal victimization is involuntary job loss.

If this has not happened to you yet, it’s impossible to truly understand what I’m about to say. But read on anyway; our community needs to be prepared for this. If you have been fired, laid off or in some way had your employment removed without your permission, you know exactly what I’m talking about. You are about to relive those horrifying minutes and hours once again. But please read on because this may help those around you better understand what you were and are suffering through.

For someone who has been fired or laid off, at some point every day, and perhaps at many points every day, the moment the bad news was received is relived. Involuntary job loss is the most tenacious personal agony. The emphasis here is personal. Even though Target fired almost 2,000 people, every individual circumstance is a massive, negative, wrenching personal experience that affects many, many others.

As you are told the news and you begin absorbing the nature of your personal catastrophe, you begin to lose track of what you are being told, and your mind begins compiling a list of all those you have to call. You wonder how you are going to tell your family and how you will pay the bills. Job loss is a nightmare that just keeps on giving and reoccurring.

You may have to cancel a long-planned vacation. You’ll probably have to call the church and cancel your pledge to finance the school re-roofing project; have to call your mom; probably have to tell some of your neighbors so they don’t wonder why you’re home during the day all of a sudden. The pool of people who know or have to know grows quickly. There is a constant re-living through the retelling of that terrible moment. You then think about how you and your co-workers are going to get another job, and maybe even compete for one. Who will hire you?

I use the phrase “management by meat-axe” because no manager or leader, however experienced, really knows what’s going to happen when so many people are devastated so quickly. This is a subject very poorly taught, if taught at all, in management school. Nevertheless, there’s a pattern of three stages.

Phase 1: The big announcement, the preparatory hype, the deadly serious business-saving hypotheses, preparing the company and the community for the devastation that is about to occur. The only thing harder than being fired is waiting to be fired.

Then the notices go out and people are informed, receiving inevitable video footage of people leaving buildings carrying their belongings in various containers, maybe even being screened or escorted by security guards.

Phase 2: The initial cuts cause an extraordinary number of unintended consequences because a lot of good people leave, too. Management always assumes that the model employees will stay, anticipating the excitement of rebuilding an organization. It never really works that way. The some of the best employees, who could stay, leave early, always for reasons of their own, which are never shared.

Phase 3: Help wanted ads appear. The unintended consequence of so many people leaving so suddenly devastates key parts of the operation causing two things to happen. First, there is a frenzied attempt to rehire people let go who have key business knowledge. Success there is very limited, even when stupendous rehiring bonuses are offered. The damage is done. Second, the company is forced to advertise for these positions. When these ads begin appearing, recently displaced employees and their survivors are stupefied and become angry, sometimes publicly.

It’s the legacy of Albert J. Dunlap, the notorious “Chainsaw Al,” who just before the turn of the century made a name for himself coming in and cutting companies up. He wrote a book called “Mean Business” – and he meant it. Dunlap was a media darling for a while, then the roof caved in when he decimated Sunbeam, a wonderful small appliance manufacturer, more or less for the fun of it. Now they are gone, and so is Al. He essentially demonstrated that management cannot expect to correct a company’s problems or change company culture simply by threats and catastrophic firings – quite the opposite.

Corporate cultures are rarely changed by catastrophe. Culture is changed by strong, vision-driven, constructive, long-term leadership. Actually, the patterns of this this latest top management behavior look more like a strategy to sell the business rather than rebuild it.

How do you prepare a public company for sale?

  1. Step one: Bring in outsiders, who after a brief time on top announce dramatic cost cutting largely through mass firings and layoffs.
  2. Step two: Explain a plan for the future based on simplifying the business and changing the company culture, among other things.
  3. Step three: Start buying back stock with the money saved from the firings.

There is another strategy at work. Buybacks make the acquisition of the rest of the stock much easier later on because the number of holders is smaller and the stock buy-back process identifies who holds the rest of the stock, making for easier acquisition at sale time.

At this point, we need an inquiring, investigative, suspicious business medium, one that is skilled enough in this market, with the ability to analyze and expose what’s really going on. We need someone to speak for the thousands of people getting axed and the survivors who surround them.

One thing is really going to be true: Any company going through this largely management-contrived upheaval will be a different company. Only time will tell if the results are worth the cost to the community and the personal suffering caused by this huge, permanent, local carnage.

James E. Lukaszewski, ABC, Fellow IABC; APR, Fellow PRSA, BEPS Emeritus

If you have questions, or would like to dive more deeply into the subject of this blog, you can reach me 24/7 at; 203-948-7029 (voicemail, email, text). I look forward, as a friend and colleague, to helping you achieve the objectives you’ve set for yourself for having a happier, more influential, successful and meaningful career.

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