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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The End of Management?

Gary Hamel, best-selling author of The Future of Management and one of the leading proponents of decentralized, innovative, and democratic management practices, recently wrote an excellent article about the following three forces which he feels “will mostly destroy management as we know it”

  • New web-based collaboration technologies
  • Dramatic changes that have made the competitive business environment more challenging
  • New expectations that “Generation Facebook” will bring as they enter the workplace

Hamel believes that we are on the verge of a management revolution that will transform society as much as the industrial revolution and that will put an end to the command-and-control hierarchical structure that has characterized the 20th century workplace. 

It will become common practice for companies to share information freely amongst all employees, and decision-making responsibilities will migrate towards the team members closest to the customers.

This shift of power and influence from top executives to the customer-facing employees carries both opportunities as well as risks for companies.  The people closest to customers obviously receive a more accurate picture of customers’ problems and are potentially better equipped to develop and deliver solutions to meet customers’ needs. 

The main challenges that executive managers will encounter will be to ensure that all employees have the ability, the freedom, and the motivation to do their jobs properly.  The best way to engage employees is to democratize management practices by making information accessible to all team members, decentralizing the decision-making abilities, and sharing financial incentives with the entire workforce in a more equitable manner.