The Era of Layoff Malpractice

Article by Patrick J. McKenna. Photo by Just Now Images / Dreamstime.com.

Layoffs, downsizings, de-equitizations, terminations - no matter what they are labeled, they are a traumatic experience for all involved and appear to be here to stay. According to a survey of 2100 employers, worldwide, 58 percent report that they are still planning layoffs and will be cutting even more jobs in the last half of 2009.

In the wake of any layoff, strong emotions are a given. You can quickly find yourself faced with both lawyers and employees who are confused, anxious, depressed and oftentimes bitter. During the past few months I've been counseling a number of law firms faced with having to make drastic cuts and concerned with how to execute any layoffs with dignity.

That may seem like it should be the natural way to approach such critical situations, but as these cuts have been made over the past eight months, there is ample evidence that many premiere firms did not handle their economic retrenchment with much finesse. As one lawyer recently recounted:

An internal memo dispatched at the law firm yesterday afternoon announced that about 200 lawyers would be laid off. The firm chairman commented to the media that "lawyers will know shortly if they are among those being cut." Another lawyer from the firm commented that "everyone is cowering in fear" since the announcement.

In dire economic times, employees may understand that people may need to be laid off, but not this way. This insensitivity has now provoked a backlash and little sympathy for firm's economic woes.

Everyone must believe that your firm's management is compassionate and willing to balance short-term bottom-line necessities with the welfare of everyone, and yet in some instances this can be an extremely difficult position to communicate. One associate, on a public website, recently had this appeal to the equity partners following a second layoff announcement at his firm:

Surely it is about time equity partners started to bear the brunt. If you can't get the work in through the door - fall on your own swords - it is you who should be blamed, not the employees.

Another lawyer, at a different firm, had this to say:

It seems that in the real world businesses shed jobs when they make losses or there is a very severe drop in profits. What is remarkable in the la-la land of law is that law firms stick the knife into staff when these firms are still making healthy profits. What is clear, is that partners consider that their drawings should be recession proof.

And don't do what one Wall Street firm did. In October, two people at that firm went to lunch. They came back at 1:30 p.m. One was able to get through with his pass key, the other was not. The first one then let the second one in. However the guard stopped the second one, saying his employment had been terminated and he needed to go to Room 103 and report to HR.

All of these quotes are strong evidence that too many firms have engaged in what I will call "layoff malpractice."  Specifically, here are six of the more common mistakes that I've seen firms making:

1. Ignore the realities.

After weekly, sometimes even daily announcements about layoffs, many firms chose to ignore all of the indicators that suggested that they needed to lay off some of their people until it was too late to properly plan for the reductions.

These firms consequently took action that was executed with a brisk, seemingly ruthless efficiency that left those that were laid off outraged and resentful, and those that survived feeling vulnerable and de-motivated.

2. Contribute to a cover-up.

Then there were those firms who masked their layoffs as simply performance review corrections. This covert activity produced a work environment with severely impaired morale, risk adverse employees, and excessive blaming.

3. Provide no forewarning.

As a result of either fear or guilt, some firms have chosen to give their people little notice of any upcoming layoffs. This lack of advanced notice only served to provoke a deep mistrust of firm management.

When professionals and staff eventually learned about what was being discussed behind closed doors, without their knowledge and devoid of input, they saw a blatant disrespect for their value, thereby destroying any sense of future trust.

4. Lack compassion.

Everything you do in a layoff is done with everyone observing everything that happens very closely. How your firm treats its laid-off talent is viewed vicariously as how it may eventually treat those remaining.

When information is withheld from partners, or employees are treated like children, and people's dignity is not respected, those with exceptional talent, who are among the most mobile, may very well be tempted by headhunter's calls to examine their options and choose a more humane place to call home.

5. Couch the bad news with good news.

Many informational releases about layoffs are then followed by news announcing the opening of a new office, minor reductions in partner profits, or optimistic predictions for the firm's future. Couching good news with bad simply raises the question of whether these layoffs were really necessary. Bad news should be conveyed in a way that is factual, frank and avoids hype.

6. Act as if nothing happened.

Recovering from a downsizing requires a brief period of grieving and an open forum in which professionals and staff may speak freely about what has transpired. To act as if nothing significant has happened and expect that people will just get-over-it and move on appears callous, feeds employees' sense of helplessness, and causes people to wonder what else management has been hiding.

In the midst of all of this I hear similar questions from managing partners as they face a number of difficult choices:

• If you announce that you are likely going to have yet another layoff or de-equitize more partners, will some key players fear the worst and make plans to abandon ship?

• Is a deep cut the best approach, or is a slow, more careful process less destructive to the long-term health of the firm and people's morale?

• How do you balance what's strategically important for the long-term health of the firm with the urgencies of the present?

Meanwhile, those layoffs that have happened over the past year present less hope and more complications for those lawyers and staff cut loose by their firms. With past layoffs, there was always the feeling that people being let go could quickly get positions with other, perhaps smaller, firms. That sense of comfort does not exist today.

For most of us layoffs are not in our control, and whenever someone else is holding the strings, it becomes highly stressful. Past experiences strongly suggest that following a layoff you may expect to see changes in some people's personality, such as outgoing people now being silent. The quality of the client work may not be as good, and absenteeism could rise. There is also likely a rise in anxiety and pressure, the beginning of depression in the case of some and even the unfortunate instance of suicide or attempted suicide (as has already been reported within the profession).

My friend and former BigLaw office managing partner, Ed Reeser, told me that from his experience, layoffs are the hardest type of termination:

It is hard because YOU and your leadership team have failed. Plain and simple. Leadership is supposed to anticipate, position and manage a firm to success in good times and bad. (Is there a book out there that says leaders are not supposed to be accountable for failures of policies, strategies and directions that they have authored and implemented - or failed to author or implement - and we just missed it?)

Sometimes you can steer the ship skillfully and avoid the rocks. Sometimes you get tossed about and bump into a few. Other times, and we are seeing a lot of this now, the boat gets grounded big time on a shoal, and even flounders. Leaders are supposed to look ahead, understand the business, position and structure the entity for survival, and make things happen for the benefit of all. If they cannot, better get somebody else on the bridge.

This one is just a raw necessity termination because the firm has 100 mouths and can only feed 90. Nobody on the team is someone we want to let go. Call it like it is, apologize, and do everything you can to help.

In the next article, we'll discuss the steps law firms can take to do a better job implementing layoffs.

About the author: An internationally recognized authority, Patrick J. McKenna (http://www.patrickmckenna.com) has worked with the top management of premier law firms in over a dozen countries to discuss, challenge and escalate their thinking on how to manage and compete effectively. His book (co-authored with David Maister), First Among Equals (The Free Press) topped business bestseller lists and has been translated into nine languages. He current co-leads a bi-annual one-day, intensive program entitled, First 100 Days: A Master Class For The New Managing Partner, held at the University of Chicago.