HBR: The Layoff

This is an interesting case study about the behind the scenes of layoffs in Astrigo holdings. Several strategies were analyzed: first in first out, rank and yank, last in first out or lose a unit. In the first in first out scenario, Astrigo will lose people with institutional knowledge. Also there is a possibility of lawsuits against Astrigo based on age discrimination. In the rank and Yank scenario, supervisors may get rid of people of office politics victims. Also this is a lengthy and expensive procedure. Last in First out is the most convenient method for the administrators. Also Astrigo will not be burdened with huge severance pay. But Astrigo will lose newly hired highly qualified and energetic people. Also, it is unfair to layoff a new hire who chose to work for Astrigo when she had other offers from competitors.

Different divisions of the company want to have their interest taken into account in the process. Finance wants to control the cost. Legal want to lower the risks. HR hopes to ease the administration. CEO is concerned with the values. Bob Sutton advises that Astrigo should not prolong the layoff process for months. It should be done in one shot and rest of the employees should be assured that there will not be any layoffs. This process will help keep the moral from falling down to earth.

It is unfortunate that Astrigo holdings chose layoffs as their first option during the economic downturn. 5% across the board pay cut and more cut for the six figure earning people are some of the options that should be considered. Also it is important to note the Astrigo should keep the company as a non-volatile place. The increasing number of retiring baby boomers, who have a lot of wealth, do not want to invest on a volatile company. Layoffs certainly increase the volatility. Bob Sutton points out that it took almost 18 months to realize the savings of layoffs during the 2001 economic slowdown. Also when calculating the savings most companies failed to account for the cost of recruiting, hiring and training new employees when good time returns.

Jugren Dormann smashes that Astrigo has more than cost problem. The company appeared to have strategy, management and cultural problems. While rumors fly and moral sinks, two of the top managers are off having an expensive lunch in a private dining club with their families. This reminds me time when the GM and Chrysler auto companies’ executives flew in private jets to Washington DC to beg bailout from taxpayers for their companies.

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