No one likes to receive bad news, and few like to give it. In
what is heralded as one of the biggest human resources blunders of
2006, one company found a way around the discomfort of firing
someone face-to-face. A total of 400 employees at the Fort Worth,
Texas, headquarters of RadioShack Corporation (NYSE: RSH) got the
ultimate e-mail message early one Tuesday morning. The message
simply said, “The work force reduction notification is currently in
progress. Unfortunately, your position is one that has been
eliminated.” Company officials argued that using electronic
notification was faster and allowed more privacy than breaking the
news in person, and additionally, those employees who were laid off
received generous severance packages. Organizational consultant Ken
Siegel disagrees, proclaiming, “The bottom line is this: To almost
everyone who observes or reads this, it represents a stupefying new
low in the annals of management practice.” It’s unclear what, if
any, the long-term effect will be for RadioShack.
Figure \(\PageIndex{1}\): Wikimedia Commons – public
domain.
It isn’t just RadioShack that finds it challenging to deal with
letting employees go. Terminating employees can be a painful job
for many managers. The communication that takes place requires
careful preparation and substantial levels of skill. BusinessWeek ethics columnist Bruce Weinstein
suggests that anyone who is involved with communicating with
downsized employees has an ethical responsibility to do it
correctly, which includes doing it in person, doing it privately,
giving the person your full attention, being honest but sensitive,
and not rushing the person. Some organizations outsource the job of
letting someone go to “terminators” who handle this difficult task
for them. In fact, Up in the Air, the
2009 movie starring George Clooney that was nominated for six
Oscars, chronicles changes at a workforce reduction firm and
highlights many of these issues.
Downsizing has been referred to using many euphemisms (language
that softens the sound of the word) for termination. Here are just
a few ways to say you’re about to lose your job without saying
you’ve been fired:
Career alternative enhancement program
Career-change opportunity
Dehiring staff
Derecruiting resources
Downsizing employment
Employee reduction activities
Implementing a skills mix adjustment
Negative employee retention
Optimizing outplacement potential
Rectification of a workforce imbalance
Redundancy elimination
Right-sizing employment
Vocation relocation policy
Regardless of how it’s done or what it’s called, is downsizing
effective for organizations? Jeffrey Pfeffer, a faculty member at
Stanford and best-selling author, argues no:
“Contrary to popular belief, companies that announce layoffs do
not enjoy higher stock prices than peers—either immediately or over
time. A study of 141 layoff announcements between 1979 and 1997
found negative stock returns to companies announcing layoffs, with
larger and permanent layoffs leading to greater negative effects.
An examination of 1,445 downsizing announcements between 1990 and
1998 also reported that downsizing had a negative effect on
stock-market returns, and the negative effects were larger the
greater the extent of the downsizing. Yet another study comparing
300 layoff announcements in the United States and 73 in Japan found
that in both countries, there were negative abnormal shareholder
returns following the announcement.”
He further notes that evidence doesn’t support the idea that
layoffs increase individual company productivity either: “A study
of productivity changes between 1977 and 1987 in more than 140,000
U.S. companies using Census of Manufacturers data found that
companies that enjoyed the greatest increases in productivity were
just as likely to have added workers as they were to have
downsized.”
Based on information from Joyce, A. (2006, September 10). Fired
via e-mail, and other tales of poor exits. Washington Post, p. F1. Retrieved July 1, 2008,
from www.washingtonpost.com/wp-dyn...090900103.html; Hollon, J.
(2006, September 11). You’ve been deleted: Firing by e-mail.
Workforce Management, p. 42; Pfeffer, J.
(2010, February 5). The case against layoffs. Newsweek. Retrieved April 5, 2010, from www.newsweek.com/id/233131; Weinstein, B. (2008,
September 12). Downsizing 101: Charged with giving the bad news?
Here are your ethical responsibilities. BusinessWeek. Retrieved April 5, 2010, from
http://www.businessweek.com/managing/content/sep2008/ca20080912_135498.htm?campaign_id=rss_null.
Discussion Questions
What communication barriers did RadioShack likely experience as
a result of terminating employees via mass e-mail?
What do you think RadioShack’s underlying motivation was in
using this form of communication?
What suggestions for the future would you give RadioShack when
faced with the need to dismiss a large number of employees?
How has technology enhanced our ability to communicate
effectively? In what ways has it hindered our ability to
communicate effectively?
What ethical challenges and concerns do you think individuals
involved in downsizing have?