Strategy for a Layoff Strategy

On February 12, 2018, Klaus Kneale, the “layoff tracker” for Forbes.com authored You’re Probably Doing Your Layoffs All Wrong,- a short but important opinion piece given the current economy. While it does not rocket science, Kneale reminds us that implementing layoffs based largely on seniority, salary level, LIFO (‘last in, first out”) or other “fair” or “depersonalized” approaches are likely to be safe but not necessarily strategic. For instance, he observes that seemingly even-handed “strategies,” like offering early retirement to more highly paid senior employees, may benefit the bottom line in the short run but could irreparably harm the organization. This is because (1) individuals taking voluntary separations may be those with the most confidence about landing on their own two feet – i.e. those with the most talent and creativity. This potential organizational injury is compounded by (2) leaving a lesser talented pool of staff to run the organization in the darkest of times. According to Klaus, “across-the-board actions–layoffs, pay cuts or hiring and overtime freezes–that tell employees that performance doesn’t matter, that the best and worst staffers will be treated exactly the same.” This hardly encourages highly productive and talented employees to stick around. There is more provocative analysis like this, so read the article for detail and examples.

Health care has been relatively immune to large-scale layoffs while the likes of Caterpillar, Citibank, GM, and others have been shedding thousands at a clip. Perhaps we are benefiting from the recent years spent adapting to tightening reimbursement – in part by right-sizing staff. But given the horrifically uncertain economy ahead we’d better be ready for something to happen to our industry too. Recovery is not just around the corner and if nothing else, the increasing number of unemployed will eventually translate into increasing numbers of uninsured that we are legally and ethically obligated to treat – thereby draining our finances while stressing our human resources. And when the time comes, while our layoff numbers may not match the corporate diuresis, they will fall upon already lean and overextended human resource pools.

So doesn’t it make sense to plan for this contingency with the same vigor that we plan for community disasters or multiple births or codes? How will we prioritize cuts to be made? How will we balance fairness and labor contract obligations with the need to retain the talent we will require not only to run the organization currently but to rebuild it when the economy recovers? One big difference in this planning is that it’s hard to have “disaster drills” for layoffs – how do we even plan and create scenarios without also creating anxiety and potentially spurring departures before the problem presents? I don’t know the answer but perhaps, quietly and strategically, senior healthcare leaders need to be thinking about this more formally. Reading Klaus’s article, and similar reports of the nonhealthcare layoff experience that precedes us may represent the best “evidence-based” guidance available.