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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CEO Seeks Employee Input, Prevents 450 Layoffs

Last month Paul Levy, CEO of Beth Israel Deaconess Medical Center in Boston, found his organization facing a $20 million budget shortfall caused by the economic crisis.  Instead of ordering the layoffs of the 600 workers necessary to cover the $20 million deficit, Levy decided to discuss this problem with his employees and to solicit their feedback on how the medical center should respond. 

Levy said the following at a meeting with employees of the medical center:  “I want to run an idea by you that I think is important, and I’d like to get your reaction to it,” Levy began. “I’d like to do what we can to protect the lower-wage earners – the transporters, the housekeepers, the food service people. A lot of these people work really hard, and I don’t want to put an additional burden on them.  Now, if we protect these workers, it means the rest of us will have to make a bigger sacrifice.  It means that others will have to give up more of their salary or benefits.”

What followed was an enormous amount of applause by the medical center employees, the vast majority of whom expressed their willingness to take pay cuts so that none of their coworkers would have to be laid off.  Over the next several days, Levy received over 600 emails from employees suggesting various ideas for reducing expenses.  These ideas enabled the medical center to find creative ways to trim $16 million in expenses, which saved 450 of the 600 positions that had been originally slated for layoffs.  (They are still looking for ways to keep the remaining 150 people in their jobs.)

Two of the pillars of workplace democracy are sharing information among employees and involving them in the decision-making process.  Paul Levy’s experiment with these innovative management practices will undoubtedly have a huge impact on the workers’ motivation and loyalty towards the organization.  Instead of facing sudden traumatic layoffs, the employees of Beth Israel Deaconess Medical Center were given a unique opportunity to participate in the decision-making process, and the center followed through and implemented the ideas that were generated.  The results have proven to be a huge success.

I wonder how many additional layoffs could have been prevented during the past year if executive managers had been more willing to seek out and act on the knowledge of their team members….

Source: Boston Globe

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