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How To Handle A Layoff

Why do so many New Economy companies act as if breathing the very word "layoffs" will call seven plagues upon their houses? A primer in treating bad news with dignity.

February 28, 2001
By Gavin McCormick: More stories by this author:

It seems forever that layoffs have been buzzing about the lumbering technology economy, a stinging fly impossible to shoo. But only in the past three months -- when U.S. Internet firms dropped 35,000 workers, more than in all the preceding year -- have job cuts bit into the Net economy in large numbers.

Perhaps that's why so many New Economy companies, when forced to tell the world they're firing employees, still seem flummoxed, as if breathing the very word "layoffs" will call seven plagues upon their houses.

Having written many such stories by now, we've learned a bit along the way. So, as a service to executives and staffers required to present unpleasant news, here are a few mistakes to avoid and lessons to heed.

Rumor sites are here to stay -- learn to deal with them.

The Internet has spawned a number of sites that traffic (and revel) in rank rumor, including the iconic F***edCompany.com. No reputable news site will run stories based on their postings alone. But unfortunately for businesses, those postings are accurate often enough to make it worth reporters' time to check them.

Internet companies above all should understand how information flows have become nearly impossible to dam. It's no use complaining, as one executive did recently, about being placed in a "When did you stop beating your wife" scenario; the rumor's either true, partially true or false. (False rumors can ultimately redound to a company's credit.)

So check the rumor sites yourselves, and prepare for the inevitable phone calls.

Return phone calls.

Companies can run, but they can't hide for long. You're better off tackling your company's layoff round or imminent demise yourselves, rather than letting the story be told by anonymous ex-employees with axes to grind. (Two or three are usually sufficient, and, believe us, they e-mail.)

Side note: If you've fired your spokesperson, assign someone else to respond to the press.

Handle the news forthrightly.

Our favorite recent obfuscatory press release came from Cambridge, Mass., e-consultancy Mainspring . Weeks after a spokeswoman answered layoff questions with a "We don't respond to rumors" stonewall, the company buried the news in a financial statement. The salient excerpt, a quote from CEO John Connolly, is worth quoting at only a fraction of its ridiculous length:

"Consistent with our expectations, we've recently taken numerous steps to increase our operating efficiencies and drive toward profitability," Connolly continued. "We have re-evaluated our investments in (one of three divisions); ...and we've reduced our workforce to bring our total attrition rate in line with the turnover rates in traditional strategy consulting firms... Additionally, we've evaluated all other areas of our operating cost structure to bring these investments in line with the current demand environment."

That's a new one -- firing employees because too few were quitting. (In a conference call the company cited its "unusually low" turnover rate.) With no numbers cited in its press release, it required careful parsing of an analyst call filled with more excruciatingly phrased sentences than a Bill Clinton court appearance to discern that Mainspring had fired 15 percent of its staff, at least 50 people. (An exact number was never given.)

Ignore the fact that such puffery disrespects the human beings you've just fired. How is an investor supposed to trust her dollars to a company that won't even cop to the size of its staff except when forced by an SEC filing?

By all means sound the trumpets for your "good news"; but, for your company's sake, at least manage a dignified snare drum roll when declaring your bad.

Don't play games with the numbers.

Bluntly, we hate it when companies hide behind rough percentages rather than stating plainly the number of people fired. More often than not, this type of coyness (i.e., "let's just say under 25 percent") leads to numbers wrongly inflated by annoyed reporters forced to guess.

Even EMC, which won points for its frankness in explaining a recent layoff round ("Companies that hire aggressively and don't constantly trim end up with bureaucracy and bloat"), got caught in this game by saying layoffs totaled "less than 3 percent."

If someone can explain what's to be gained by this dodge, we're listening.

Within decency's limits, accentuate the positive.

Layoff news ranges from bad to devastating for those losing their jobs. No decent company will ignore or downplay their plight. That said, given today's hyperdriven capitalism, layoffs have become inevitable, and we acknowledge they can serve as a sign of corporate realism, if not health.

E Ink's treatment of its recent layoffs is a salutary example. It gave an exact number, regretted the "tough decision" and stressed the fact that those laid off were in a division the company had planned from the start to de-emphasize once it shifted to a new, more profitable product.

Granted, with solid financial backing, big partners and a nifty technology, E Ink has good news to accentuate. But bankruptcy or a failed business plan can also be presented with dignity.

Layoffs happen. Your business will benefit if you handle them with class.

Gavin McCormick will moderate boston.internet.com's next breakfast forum, "Full Court Press: Getting Ink in a Competitive Market," on March 20 at the Boston Marriott, Copley Place. For more information or to register, click here.






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