Years ago, I stumbled across some startling research by economists in England and Australia: It takes longer to adapt to the pain of unemployment than to losing a loved one.
The notion completely violated my intuition, at first. Then I considered how very personal getting fired is — it’s often taken as a referendum on your character, your competence — and what kind of crisis of meaning it can create (What am I here for?), and how thoroughly depleting debt and chronic economic insecurity can be. It really wasn’t so strange at all.
It’s time to talk about layoffs. They wound people not just economically, but emotionally and spiritually, and it looks like we’re due for another round. Bloomberg Economics predicted as much in early June, and last week, we began to see it, with entities as diverse as BP, the University of Denver and the city of Peoria shedding employees.
Thursday, the Labor Department reported that more than 1.5 million Americans had filed new state unemployment claims. A grim Friday report from the Federal Reserve to Congress noted, “The path ahead is extraordinarily uncertain.”
One of the many unwelcome lessons we’ve already learned during this recession is just how terrible companies are at firing people. Last month, WW International, the company formerly known as Weight Watchers, laid off employees in an arpeggio of simultaneous Zoom calls lasting just three minutes each.
A few weeks before that, Bird, the Santa Monica, California-based scooter rental company, lured 406 employees to a mysterious Zoom “webinar” only to have them stare at a slide that read “COVID-19” while a disembodied female voice told them their services were no longer required. “It felt like a Black Mirror episode,” said a former employee. (If only. At least there would have been the possibility of a star turn by Jon Hamm.)
Letting people go is not a natural instinct, even if you are a sadist. Our own president, who achieved household fame as the guy who fired people on TV, is a boneless chicken about it in real life, deputizing the unpleasant task to underlings or doing the deed by letter, even by tweet.
But there is a right way and a wrong way to pink-slip someone, and every boss in America should be trained in the art of having this difficult conversation. As Joel Brockner, a professor of organizational behavior at Columbia Business School, explained to me, layoffs take a less extreme toll if there is “procedural fairness” associated with them — if employees are given reasonable advance notice, for instance, and the resources to ask follow-up questions and find new job leads. Artless layoffs, he added, don’t just devastate those who’ve been let go, but the survivors left behind.
“It can be devastating to productivity, devastating to morale,” he told me. The more fair layoffs are, he has found, the happier and more committed the remaining workers are six months later.
And this, perhaps, is where the logic of these pandemic layoffs must itself be called into question. That’s what I discovered after speaking to Wayne Cascio, a management professor at the University of Colorado, Denver. He and two colleagues recently completed a study of every publicly traded company on the New York Stock Exchange from 1980 to 2016. The companies that delayed layoffs as long as they could — whether by cutting salaries, furloughing employees, or even running in the red — saw higher stock returns, two years later, than comparable companies that fired people from the start.
Businesses currently mulling layoffs should remember this.
Sometimes layoffs can’t be helped, obviously: A restaurant closes; its staff must go. But if a business or institution endures, there’s a whole body of literature suggesting that layoffs don’t ultimately help the bottom line once the economy heats back up. Experienced and dedicated people are hard to replace.
Recently, I called James Guthrie, an author of one of the most accessible and often-cited papers that argued as much. (It’s called “Dumb and Dumber.”) He is an associate dean at the school of business at the University of Kansas — which, like many universities in the United States, is struggling to stay afloat. Yet I discovered it wasn’t economic efficiencies that interested him most at this moment. It was fairness. Now, he told me, is the time for every organization to express its values.
“If we at the university had to resort to layoffs, we’d be laying off some of the most vulnerable staff — who happen to be the lowest-paid employees: the custodians, the maintenance crew, the receptionists,” he told me. He finds the thought quite troubling. He has started arguing for pay cuts and furloughs of the better-heeled faculty and administrators instead. “It’s both more effective,” he said, “and more just.”
A number of cautionary tales are going to emerge during this annus horribilis. But if we want to survive this recession with our dignity and our sanity intact, it is clear we should keep two things in mind: How people are laid off matters. And layoffs should be a last resort. They are often the lazy way out.
Jennifer Senior@c.2020 The New York Times Company