HBR Case: The Layoff by Bronwyn Fryer

April 12, 2010

This is certainly a pretty good case study that I enjoyed reading it which outlines some common managerial dilemmas that companies could potentially face at some point of their career: for instance Astrigo Holdings, yet the case study offers concrete solutions from experts which we can benefit from if we ever see ourselves into difficult decisions such as The Layoff case study.

Although this HBR case study was merely fictional, it provided a pretty good insight into the struggles faced at all multiple departments of the Astrigo Holdings’ company when the layoffs started to be eminent.

This case study starts off with Morris Meyers who is the CFO and Lisa Warren who is the head of legal. They both realize that if Astrigo is to remain competitive, 10% of its workforce must be cut. So they both face a dilemma: who goes and who stays, and so they suggest several policies or systems to solve the conflict:

  • First in, first out policy: to get rid of the “deadwood” as these folks are so close to retirement that they no longer have anything to contribute to the company, and offer them not expensive retirement packages because they have done so well with the company that they must have a good stash, Morris points out. That is unethical as these folks “deadwood” are the ones who built the company to its current position so they should be compensated for all the hard work they put into Astrigo.  
  • Rank and yank system: Lisa comes out with the idea about cutting the bottom 10% based on performance evaluations. This is the worse idea as we have discussed throughout the entire class that performance evaluations systems just don’t work because companies do them badly, “ratings often vary wildly depending on the effort put into the process, whether the evaluator likes or dislikes the person evaluated, and whether the manager is tough or lenient” Sutton points out.
  • Last in, first out: Marzita Vasquez who is the head of HR and Bob Slater who is the executive director of strategy give their approach about adopting the simplest layoff policy possible, and that is last in, first out; “that way, you don’t have to pay a lot of severance” I cannot believe this absurd idea coming from Bob, as it reflects a complete detachment from their perception of their workforce. Even worse, Bob exhibits a single-loop learning personality trait when he says: “ Marzita, let’s just focus on what we need to do to cut costs right now, and we can worry about tomorrow tomorrow”. Bob’s idea is totally unfounded and off base, while one of the main functions of an executive director of strategy is to keep an eye on the long term because tomorrow will come!!
  • The best plan of action to me is the one Sushil Bathia presents. It consists of implementing a 5% pay cut across board for everyone in the company to take as this will show generosity as an organization and will enhance morale. Better yet, this strategy will alleviate the tension that layoffs seem to cause among new and old employees and will also set up the company for long term success as it will help Astrigo get back the commitment, trust, and respect from both its workforce and customers which will lead to productivity and productivity equals profit.

While none of the policies discussed is ideal, the latter option seems to be more feasible as it could give Astrigo the time to figure out the root causes that led to the decline and develop some strategies to counteract the layoffs problem.

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