The Ugliest Part of Acquisitions - Managing Layoffs
Written By Tom Howard.
This is a tough article to write. Obviously, whenever you buy a company, you want to have it run as efficiently as possible. The profit incentive is a massive driver and makes the United States economy and almost any free market, capitalist economy very strong. It gets every business owner or aspiring entrepreneur spending countless hours thinking about how to be more efficient and build a better mouse trap for a lower cost.
People almost immediately accuse business owners of being greedy and they would be correct. Greed drives us all and, if unchecked, can make us all do very incredibly stupid things. The truth is that it’s not only business owners that have this issue. They are just the easy ones to point at and say that they are greedy when most employees will work harder at work if it means that they may get a pay increase or that they will make some overtime dollars or that they get a bonus or something. The key is to keep your charitable giving and kindness up in order to balance out your natural desire for progress and growth.
This greed that drives efficiency also does a lot of good. As companies get more efficient, they find new ways to cut costs and drive prices down in an effort to beat their competitors. This means lower costs for their customers. If Henry Ford had not figured out the assembly line in order to build cars exponentially faster than had ever been done before, most of us would still not be able to afford a car today. If drug companies did not have the monetary incentive to develop new products, many of the life saving drugs that we have now, simply wouldn’t exist. Even with all the issues we have with our medical system, and I am not saying that we don’t have them, the richest people in the world in 1900 had less access to medical care than the poorest people of today. It’s unpopular to say, but greed drove those advancements that allow us to enjoy the medical care we have today.
We, as business owners, need to drive our companies to be more efficient, to find new and more innovative ways of doing things which drive advancement in industries. Unfortunately, there will be times when this means that some jobs may be automated and workers will no longer be needed. If you don’t drive the advancement, someone else will and they will put you out of business and all of your employees will lose their jobs. There are plenty of jobs out there. When the computer came out with word processors, there was a huge group of people that pushed back because of all the secretaries that used typewriters that would lose their jobs. Looking back now, could you imagine what a travesty it would have been if society as a whole slowed down on developing computers to save jobs of those transcribers. Another question, do you know anyone out of a job still because they were a secretary during this time and their job was cut? Of course not. They got new training and moved to a job that utilized their new skill sets which is what happens every time innovation comes around. The market pushes them to more productive jobs that are usually more fulfilling for them anyway and in the end, the customers get a much better product or service.
When taking over a company, those employees, by choosing to remain working there, are entrusting you to make the best decisions for the company as a whole. Unfortunately, that usually means finding inefficiencies with processes that may result in layoffs. If Blockbuster had purchased netflix when it had the chance, there may still be a blockbuster today and it would all be online and many employees would have lost their jobs but many would still have them and would be still working there to this day.
Be compassionate, considerate and be kind. Hanging onto an employee and dragging out the process is not compassionate, considerate, nor kind. Be open with them and clear when you find that they will no longer be needed. Offer a severance package if applicable to help them get to their next job.
In many of the companies you buy, they may be having financial difficulties before you got there and that may be why they were for sale. In those cases, you must move quickly. There was a reason why those difficulties existed and you need to fix them immediately. As a business owner, it never got easy for me to lay someone off no matter how many times I have had to do it. But, here are some points that helped me.
1) When laying off an employee, never say things such as “This is hard for me to do but…” They are losing their job. Trust me, its much harder for them than for you and they don’t need to hear about how hard it is for you.
2) Rip the bandaid off. The faster you get to the point, the better.
3) Don’t set a date weeks out to do it. The longer you wait, the more risk there is that something will go wrong. Information could get leaked that a layoff is coming and people start getting scared. An employee that you are laying off may get injured at work when you should have had them laid off before it happened. An employee may sense that you are acting differently towards them because you know that you are going to lay them off and then the employee starts to feel uncomfortable.
4) Offer a severance where appropriate.
5) Always conduct this with a third party in the room.
6) Do NOT lay people off in stages. If you do this, everyone will be wondering “Am I next”. Do it all at once so that everyone that wasn’t laid off knows that they weren’t laid off and they can relax and focus on coming to work without the additional stress.
