By December 12, 2008 17 Comments Read More →

To Layoff or Not To Layoff — That Really is a Question

It seems like all we’re hearing now is layoffs, layoffs, layoffs. In this article it was reported that Danaher, considered by many to be the best Lean company outside of Toyota (with their famed Danaher Business System) is laying off employees.

Danaher Corp (DHR, Fortune 500)., a manufacturer based in Washington, said late Monday that it was “eliminating” about 1,700 jobs and 13 facilities in the fourth quarter, to save about $100 million in 2009. The company blamed the “current economic backdrop.” Danaher makes tools, sensors and medical equipment.

In many Lean implementations (including mine in hospitals), we insist on “no layoffs due to Lean” and management makes that pledge. If employee input is critical to Lean improvements, layoffs will understandably kill most of the enthusiasm for Lean. We try to think of employees as partners in providing value and improving quality, not “heads” to be cut (I hate it when employees are referred to as “heads” or “bodies”).

Now Danaher may have falling sales. You could say that’s different than efficiency improvements coming from Lean/DBS efforts. If sales have dropped, you don’t need as much staff. But what about Toyota? Their sales have fallen as much as anybody’s and they’re keeping on their full time employees (4500 employees being trained instead of fired). Toyota does let go temps, but they know they’re there to handle upward variation in demand, as this Toyota contract worker pointed out in a blog post comment:

Firstly, contract workers are told up front that they are there to help with the ups and downs of market conditions. Yes, everyday I am worried about my job security and my family especially in times like these but what they do “promise” is that all permanent status team members are signed on “for life”. This promise has been made very clear to those workers in San Antonio who are no longer building the Tundra…all permanent employees are still working. Our sales have dropped over 35% on some models…I am still working and getting paid.

I don’t know if Danaher has let go temps or full-time workers. They let go 1700, Toyota is training and investing in 4500, waiting for sales to come back up. So we’re seeing a difference in TPS vs DBS? Does anyone else have more details on Danaher?

There *are* companies that are following the Toyota lead (including hospitals). This article (Even in recession, some employers stick to no-layoff policy) highlights organizations that work and manage the company to avoid layoffs altogether.

These cited companies include those with formal or informal policies about no layoffs:

  • Southwest Airlines (LUV)
  • Hypertherm
  • Lincoln Electric (LECO)
  • Nucor (NUE)
  • FedEx (FDX)
  • Aflac (AFL)
  • Toyota (TM)
  • Erie Insurance (ERIE)
  • ThedaCare

Let’s start with one of our favorite Lean hospitals, ThedaCare:

Dean Gruner, CEO of ThedaCare, a Wisconsin-based health care system provider, instituted a no-layoff policy 18 years ago. To slash expenses in lean years, the company slows the hiring process and redeploys workers to other areas. “We can manage our staffing levels by being thoughtful about our turnover rate and redesigning the work that we do,” Gruner said.

What are some other companies and employees saying?

“I have never in my 13 years [at the company] felt that my job is in jeopardy due to the economy,” said Jill Kronman, a flight attendant for Southwest Airlines.That’s because Southwest is committed to avoiding layoffs at all costs – and they’re not alone.

And:

“We have a no-layoff practice that we have been able to follow going back to 1966,” said Gregg Lucas, a spokesman for Nucor. “That no-layoff practice continues even today in the current challenging economic environment.”

And:

“We don’t technically have a policy, but we’ve been in business since 1925 and never had a layoff,” said Vanessa Paris, a spokeswoman for Erie Insurance.

“We’ve never had layoffs and we do not anticipate having layoffs,” echoed Laura Kane, a spokeswoman for Aflac.

How nice it must be to work for companies like these. And these aren’t charities. They’re taking a long-term view that employees and company can partner for success.

Many companies are struggling, but layoffs aren’t the only option for cost cutting. And many workers are willing to make sacrifices to improve the company’s bottom line if it means keeping their jobs.

Amen to that. That’s a message that we should hear more of. And we’re hearing it from President-Elect Obama even:

In a recent interview with Tom Brokaw, President-elect Barack Obama urged business owners to “figure out ways in which workers maybe have to take a haircut, but they can still keep their jobs, they can still keep their health care and they can still stay in their homes.”

So since these no-layoff companies aren’t giving employees welfare, what are they doing to strengthen themselves for the next upturn?

Some companies like Toyota keep workers busy during downturns with training sessions or classes. Hypertherm reallocates employees to departments where there is a greater demand for labor. Others choose alternative cost-cutting methods like hiring freezes or shorter work weeks.

Some companies like Toyota keep workers busy during downturns with training sessions or classes. Hypertherm reallocates employees to departments where there is a greater demand for labor. Others choose alternative cost-cutting methods like hiring freezes or shorter work weeks.

I wish more leaders got creative and found ways other than starting the “death spiral” of layoffs and shrinking themselves into oblivion.

Do you know of other “no layoff” companies? Do you work for one? What do you have to add?


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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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17 Comments on "To Layoff or Not To Layoff — That Really is a Question"

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  1. Anonymous says:

    The companies on that list will not need “bailed out” I’m sure.

  2. Anonymous says:

    Sir, I'm curious, how many P&L's have you managed?

    I get frustrated by how simple people (especially consultants who like to roll in and out of situations) make things sound.

    Also, Toyota does lay off people and in many cases these temp workers are nothing more than human kanban. That sounds like the opposite of respect for the person if you ask me.

    Oh, and they also have people dropping dead from over work so don't pretend they are infallible and companies like Danaher are Satan reincarnated.

  3. Mark Graban says:

    Anon — quick answer to your post: zero

    All of the other companies DO have P&L leaders who are saying that a "no layoffs" policy can lead to very successful results if you work at it. I'm saying "hooray for them."

    If you read my entire post, you'll have noticed that I did say that Toyota lays of temp workers and no, I didn't say Danaher was Satan.

    I'm just pointing out they don't have that same "zero layoffs" policy apparently. That's their choice. Danaher is a great company with great results. I'm just asking questions about their approach since they're so often held up against Toyota.

    As for Toyota "working employees to death," if you study that, it's a Japan problem, not a Toyota problem. Toyota isn't working people to death in Kentucky or California. That's a unique aspect of Japanese work culture and it plagues many companies there.

    If you read the rest of the Toyota contract worker comment I linked to he/she says they're treated with the same respect as full-time employees. That's their opinion.

    Anyway, thanks for reading. I guess you think layoffs are cool.

  4. Anonymous says:

    Oh yeah, they’re cool.

    This must be why I haven’t slept more than 3 hours a night the past several months worried sick about my people and how I can fight for their jobs.

    So, do me a favor, don’t ridicule or judge me or companies like Danaher until you actually walk a day in our shoes managing an actual profit and loss statement.

    I hope you sleep well tonight. I doubt I will.

  5. Mark Graban says:

    Anon – I’m glad you’re fighting for your employees. I’m sorry this is a stressful time. But I think your stress is causing you to read too much into my words. I’m not mocking or judging or belittling anybody.

  6. Neutron Jerk says:

    Let me get a word in here, as my user name mocks a “great CEO:” who fired people all the time.

    I think what most companies miss is that if you have a “no layoffs” principle, you run everything accordingly. You make sure you don’t grow too fast. You make sure you don’t overhire. You make sure you learn how to take out costs in ways other than layoffs.

    You don’t wake up at the last minute and say “oh shit, I want to avoid layoffs.” At that point, it’s too late. It has to be in the DNA of your company. If it’s not, just go ahead and do the layoffs, tell yourself it’s just part of your job (ala Neutron Jack Welch) and get on with it. Go back to sleep.

  7. Andy Wagner says:

    I’ve been with my company since 2002, the first two years as a contractor, then as a direct hire. There was a major downturn in our industry back in ’02, so they laid people off in quick order. Mostly younger people who had just finished training and getting qualified to operate independently. (Lucky for me, I was brought in as a temp when they were hungry to replace the expensive permanent folks they let go). By 2004 they were hiring anybody they could find, to meet the needs of the upturn. In ’05-’06 we probably had enough “bodies” but we sure as heck could have used the experience of those folks let go. There were plenty of old reliables to do the training, plenty of young talent, but few mainstream “doers.” As a result most of our cost reduction programs suffered. Now of course, we’re on the verge of the next cycle. It’ll be interesting to see who’s left on the other side. Are we going to cut off our nose despite our face again?

  8. Anonymous says:

    No lay off policies are excellent for companies who are built on the foundation of Just that. If it is not – one cannot follow it.

    Any public company is spending the money of its investors to pay their people, produce product and secure and maintain customers. I owned my own company and I lost of money running it with my partner. It is not a good feeling to lose your money trying to build a business. So, its the same deal with investors. As an employee one of my primary job is to strive to make more money to the investor. And some times when your revenues are dwindling the number of choices available are few. You are forced to take measures like – lay offs.
    And I dont think there is any difference in laying off a temporary team member Vs a permanent team member. Some one losses his/her job, some family is invariable going to have to suffer.

  9. Bob Graban says:

    Your blog said “I don’t know if Danaher has let go temps or full-time workers. They let go 1700, Toyota is training and investing in 4500, waiting for sales to come back up.”

    When Toyota pays people not to work, it’s called “investing”; when GM, Ford and Chrysler do that, it’s called the jobs bank.

    What if sales don’t come back up anytime soon?

  10. Mark Graban says:

    Sitting in the cafeteria and reading the paper (or not having to come to work at all) is not “investing in people.”

    That’s different than Toyota training people how to use paint guns and teaching them TPS principles for their future work.

  11. Mark Graban says:

    From Fox News:

    “The program, called “Jobs Banks,” has been around for 24 years. Some of the employees at jobs banks choose to do community service, but others do crossword puzzles and watch TV all day — or just stare at a wall. “

    LINK

  12. Anonymous says:

    I do not endorse this behavior… I wonder if we’ll see more of this:

    After Indian factory workers killed their CEO, a laid-off employee killed the CEO in San Franciso… they had a Christmas/Holiday party right after the layoffs. This was just in the news Dec 15.

    The news also says there will be riots if the auto industry is bailed out (what about MY job???).

    I’m really worried that the economic distress will lead to more violence as people get frustrated and lash out.

    Was there lots of violence during the Great Depression like this? Who knows the history of that???

  13. Bob Graban says:

    The jobs bank program was negotiated with a union per their special interests. But the point is, Toyota’s “investment”, like the jobs bank is paying people not to work (in the physics / practical sense, work has to produce motion / useful output to be defined as work).

    It seems almost perverse that the negotiated incentives would lead people to stare at a wall to get paid instead of doing something useful and productive. I do remember some millwrights at GM (very nice guys except when it came to union business) who would sit around all day, talk and drink coffee. If you wanted something moved, they would play the extortion game and demand overtime on Saturday and Sunday for it to get done. So they wasted away many precious, finitely numbered days of their lives, having little time off on weekends in order to make money which they didn’t have time to spend and enjoy.

    Wouldn’t it have been so much better to increase productivity and gain the long-term financial rewards that come with that?

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