Workplace Democracy and the Layoff-Furlough Dilemma

There is a debate going on about whether companies hit hard by the recession are better off conducting layoffs or ordering furloughs in order to align expenses with rapidly-shrinking budgets.  The opinions of executives differ widely as to whether layoffs or furloughs are less damaging to employee morale and productivity. 

What’s interesting is that this is the type of decision that, purportedly because of its highly sensitive and potentially damaging nature, is made by executives behind closed doors without consulting with the very employees whose motivation the managers are trying to preserve.  The decision, once made and finalized, is then revealed to employees (who are often shocked and traumatized) and hastily executed.

This gut-wrenching dilemma does not have to be one that keeps executives up at night.  Executives do not have to try to guess which option would be less disruptive to workers.  In fact, many problems in the workplace originate from miscalculations by managers about how their decisions will affect their employees. 

There is a much better way to reach a decision about which would be the lesser (and more effective) of the two evils: ask your employees. 

Managers should inform employees about the company’s financial situation and should encourage an open discussion about which cost-cutting measures should be taken.  Having participated in the decision-making process, workers will take ownership of the final decision and its outcome, and management won’t be blamed for a decision that was dictated to the employees without seeking their input. 

Involving workers in the decision-making process is one of the best ways that companies can boost loyalty and employee engagement.


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2 Comments on “Workplace Democracy and the Layoff-Furlough Dilemma”

  1. CV Harquail says:

    One strange silver lining this economic crisis is the way that some organizations (and some leaders) have been nudged by the very extremity of their situations to try something ‘new’, like a participatory approach to cost-cutting.

    You and I have both blogged about Paul Levy at Beth Israel, one of the more prominent leaders taking this approach.

    It is surprising and disappointing that more leaders aren’t also using a participatory approach to cost-cutting, given the HUGE gap between what employees are willing to do and what CEOs will even consider asking for. Based on some recent research on employees’ perceptions of flexible downsizing, I crunched a few numbers to assess the size of this gap… and to ask why more CEOs aren’t trying alternatives… come to, and let me know if this analysis is useful to you!

    So glad to find your blog!

    cv harquail

  2. workplacedemocracy says:

    Thanks for your comments and for pointing out the great content and analysis on your blog!

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