More Layoffs from Management’s Mismanagement

By Scot Herrick | Job Performance

Apr 18

In the continuing layoff season — sorry, earnings season — on Wall Street, we see more evidence of companies using the solution of laying off workers to meet budgets.

Citigroup lays off 9,000

The “We know how to manage risk” financial companies have Citigroup laying off 9,000 additional workers after posting a $5.11 billion first-quarter loss. Also $16 billion in write-downs associated with the credit crisis.

Citigroup has a new CEO and it looks like some of the poor management of the past is now finding its way to the cubicle in a big way. The layoff announcement is in addition to the 4,500 people laid off at Citigroup in the last quarter.

We know how to manage risk indeed…

AT&T announces management layoffs

Meanwhile, AT&T announced the layoffs of 4,600 people through a regulatory filing. Most of these layoffs, 1.5% of the workforce, will be management level employees. This, while in the process of hiring “more workers to support growth areas.”

This is lazy work. Instead of seeing what is happening in the business and working to move people to right positions within the company, the company instead chooses to lay people off. These workers that are hired in growth areas won’t need managers? There won’t be any attrition among the managers?

There are a lot of creative ways of keeping effective employees with the company and still meet the needs of business. The financial companies really blew the risk associated with their products and they and their employees are paying a dear price for their miscalculations. At company survival time, huge layoffs need to happen for survival.

But AT&T is simply taking the easy way by not figuring out how to use their workforce in the right places to match their business needs.

Both stocks are up as I write this, of course. Wall Street rewards ineffective management when layoffs are announced — it is a sign the company is doing something to help earnings…

Sobering thoughts for the weekend.

  • gl hoffman says:

    Sad but true. They are rewarded but we all know that when this happens, it typically was NOT their fault…it is always the leaders’ fault.
    best, GL HOFFMAN, Minneapolis

  • Steve says:

    Scot,

    Keeping folks on, whether the cause of business is general internalize, is external, or as you have suggested in these examples can be laid at the feet of management incompetence, smacks of a form of corporate socialism that breaches the responsibility to the equity shareholders.

    The workplace blame is seldom modular enough to identify “blame” in isolation, and it is a simple fact that the results of a response to corporate change include those often much less responsible for the need to change in an unforeseen way.

    Lumbering equity shareholders with carrying the fallout, or forcing certain classes of organizations to “respond slowly” to rapid change is to greatly increase the risk to these investors.

    They rightfully will see the need to extract greater returns to offset the risk, which in the long run dilutes the potential resources the firm can reinvest into itself.

    We all mistake the size of the cardinal numbers of those to be let go as somehow “huge,” rather than reflecting by trimming a small percentage of overall workforce that a greater number of jobs are more secure, the responsibilities to equity investors met, and the continuation of firm better ensured.

    Cheers

    Steve

  • Steve says:

    Curious how much of “The Leader’s Fault” things really are?

    My personal theory is that organizations, like people, have a suppressed “Lemming Instinct” that occasionally plays out.

    In the case of so many large scale layoffs, it is the scale that brings natural business adjustments to our collective social attention.

    That the group, as a whole, all march down “the garden path” as a unit to low return business practices which require the staffing adjustment is overshadowed.

    As for “it is always the leaders’ fault” I do agree insomuch as we are all truly responsible to be our own primary leadership.

    Cheers!

    Steve

  • Steve says:

    “Both stocks are up as I write this, of course. Wall Street rewards ineffective management when layoffs are announced — it is a sign the company is doing something to help earnings…”

    I think this is misstated and should have read:

    “Both stocks are up as I write this, of course. Wall Street rewards effective management when socially difficult tasks, such as layoffs are met head on — it is a sign the management is doing something to help earnings and understands its responsibility to equity investors…”

    Thoughts?

    Cheers!

    Steve

  • Scot Herrick says:

    Hi Steve,

    Actually, I stated it perfectly: Wall Street rewards ineffective management when layoffs are announced.

    I am not making a representation that layoffs are unnecessary and can be avoided every time. My contention is that it is lazy management. Layoffs are an easy answer. Management doesn’t do the work necessary to hit budget numbers and changes in business. Layoffs, while still an emotional hit on employees and managers themselves, are easy.

    And make no mistake about it: we have personal leadership as individual contributors, but management makes the layoff decisions, not the individual contributors.

    And the larger the layoff, the more ineffective the management was at seeing the right picture early on and doing something about it.

    In the case of Citi above, the previous management just didn’t get how much trouble they were in and ignored problems so long that the only choice they have is the drastic actions, including layoffs, that they have taken.

    Rather than “corporate socialism that breaches the responsibility to the equity shareholders,” the layoffs should signal to equity shareholders that management has messed up such that they need to take drastic action of laying people off.

    I’m not of the mind that management in corporations shouldn’t lay people off; rather, the layoff is a good signal that management mismanaged something enough that layoffs became an option to right the course.

    Hope this helps the point of view!

  • […] to make in spite of the emotional aspects of laying off workers; layoffs are lazy management. The recent AT&T layoffs, in my opinion, is a lazy management answer to changes in […]

  • Steve says:

    Did not want to appear as baiting Scot, my apollogies.

    We will, however, have to agree to disagree on the use of layoffs as a management tool.

    For what it is worth I personally find laying people off a sad event and a personal self disappointment, even when for the soundest reasons.

    It is the human response, specially in light of the more passive role individual’s performance make during a layoff.

    Cheers,

    Steve

    • Scot Herrick says:

      @Steve
      Laying people off is extremely difficult. I have contented here on the site that ALL layoffs are management’s mismanagement if you simply trace back the decisions made to the layoff itself.

      Management today doesn’t try, I think, to figure out how to get what they need without the layoffs. Layoffs have become an “easy” decision to make. Not for the managers doing the laying off and the employees, but rather than trying to figure out the true objective of the work and then figuring out how to utilize employees in the right places to implement, it is easier to make the decision to lay people off.

      When Bear Stearns makes the mismanagement decision about sub-prime loans in their portfolio and are bought out for initially $2 a share, you know that the layoffs will come. That is clearly mismanagement.

      But laying off 100 people here, 200 there in a large corporation where the layoffs don’t make the news is mismanagement as well. They may be “legitimate” reasons, but I think the vast majority of time it is management not doing the hard work of figuring out how to integrate the whole.

  • matt richardson says:

    AT&T SUCKS.THEY ARE HIRING IN OTHER BUSINESS UNITS BUT GETTING RID OF THE UNITS THAT MADE THE COMPANY.AT&T YEAR TO DATE MADE 11.9 BILLION PROFIT.I GUESS THE BIG SHOTS NEED MORE CARS,HOMES,AND BOATS WHY THE REST OF US STARVE THANKS AT&T.

    • Scot says:

      Matt, all large companies operate this way. And AT&T, who I worked for through 18 years of downsizing, is no different. GE, just to name another, consistently made large profits — and laid off 10,000 people a year.

      That may be unfortunate, but it is reality and we have to deal with reality. So build your network, focus on building your job skills and your work performance and don’t trust your career to a company. Companies are not interested in your career, only in your ability to help them achieve goals.

      But, executive pay…yeah, I’m there with you on that one. Pretty disgusting…

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