I hate to go after Jeffrey Pfeffer. He has been a professor at Stanford for more than 30 years. He has written dozens of books. He is smarter than me. But he wrote a book called, “Hard Facts, Dangerous Half-Truths and Total Nonsense” and the article he wrote as the cover story of the most recent Newsweek, “Lay Off the Layoffs”, strikes me as a an article filled with half-truths or merely poorly foot-noted commentary and I have to call some of this out.
First, let me caveat this with a few things people should know. I am on the record as saying, “Laying off a few people sounds pretty good.” I have the bias of coming from the knowledge worker industry and was only part of a really, really big company (Booz Allen Hamilton, 50,000 employees) one time. And that company was a professional services company, where layoffs, in their most traditional context, don’t really count because staffing up and down to be in-line with supply and demand makes a lot more sense and is easier to do in the context of a professional services company than in a more traditional industry.
First paragraph: He implies that Southwest is now the most successful airline in the U.S. because they decided not to lay people off after 9/11. Doubt that was actually the case. I think the strategy Southwest pursued has allowed them to be successful, frequently at the expense of other players in the market. The result was their layoffs were in many respects as much an effect of their poor strategy as it was 9/11.
Wisely, Mr. Pfeffer points out on the next page that studies are hard to do because the companies that lay people off in an industry are rarely identical to the companies that don’t, but that doesn’t stop him from citing tons of studies that strike me as having a lot of causation-related problems. Just two paragraphs later, he cites research that says that companies that lay people off have lower stock prices than companies that don’t. Absent details about the research, this sounds like the Southwest example to me. Companies laying people off are companies headed in the wrong direction. He follows that up with a host of what sounds like, frankly, half-truths like companies that lay people off are less profitable.
He cites a situation where a friend of his who was good got laid off. Bummer. I mean that in all honesty. Yet, I find layoffs a great situation to get rid of the bottom few percent of the company. Sometimes you lose good people – look at AOL – but a small layoff can be great for losing the people that take the fun out of the workplace. Every layoff I have been a part of, the discussion was always, “Are we cutting fat, or are we cutting muscle?”
Circuit City is another example he uses: They “laid off their 3400 highest paid sales associates.”
“Fewer people with fewer skills in the Circuit City stores permitted competitors such as Best Buy to gain ground, and once the death spiral started, it was hard to stop.”
These events actually occurred in 2007 and at the time, almost no one thought that this was likely to right the ship. And why is that? Because Circuit City had started its death spiral nearly four years earlier, in 2003. This was simply the last gasp of the organization.
I love a good story as much as the next guy, but this charade of “the truth about layoffs” strikes me as wrong-headed. Given the author’s qualifications, I bet they trimmed about 10,000 words from this article for brevity.