The Ethics of Layoffs

Dr. John Throop - The Summit Group

In these challenging economic times, layoffs are an all-too-common strategy to engage in cost control and business realignment. Executives and managers sometimes feel as if they have few other options. Others see the process as a convenient way to remove surplus employees and get out of certain lines of business. But layoffs can have a serious impact on morale for the remaining employees and the idled workforce. There are also ethical implications in the layoff decision that reflect, at the core, corporate culture and values.

It is important to remember that Illinois is an at-will employment state. All employees hold their jobs at the will of the employer, wherever the buck may stop for specific decisions. Even employees under a union or other contract can be laid off, though with more stringent requirements placed on the employer to make the cuts in an equitable fashion.

Having said that, when an executive makes the decision, there is a values issue at the core. As we know, a business has four sources of capital: financial capital, material capital, technological capital and human capital. When laying off employees, it is useful to determine which motivation is in control. If human capital is the primary driver in a business, then one will do everything possible to retain the knowledge, skills and history of the employees to help face the challenges ahead. So the ethical stance is to value employee importance and commitment to position the business for survival and growth in economic recovery.

The unethical force in business, especially in the financial services industry during the last decade, has been greed. Many of us wanted to make the most money possible so that we could spend it on consumer comforts rather than invest it in the future or present needs of our communities. Most of us did not employ the Bernie Madoff or Rod Blagojevich approach to helping oneself at the trough, yet we often made poor ethical choices based on the power of money. Perhaps the Good Book is right: the choice often is between God and Mammon.

So an ethical challenge in front of managers and workers alike these days is sacrifice. We can strive to put money further down the priority list, and find ways to engage entrepreneurship and innovation. Those businesses that are “going green” are making good ethical choices to call on the ingenuity of employees as a way of adding value and, ultimately, adding jobs in the midst of a downturn.

The drive behind the stimulus package is ethical: add value and keep people employed so they can support their families and give back to the community. I believe strongly in free markets and in capital development. I also believe in the social contract between employers and employees. Government must be accountable and beneficial to its people. The stimulus package is designed to promote employment, defer layoffs and capitalize on the knowledge and innovation of the American worker. It is unethical to cover all social costs—but it is equally unethical to let the market run rampant and throw millions of people out of work with no thought to their value—or their voice.

So before making additional layoffs, we need to ask: what is this employee really worth to our enterprise—and what can we do to support his or her work so that they can add value to the work, and we can add value to the employee’s life at work and at home? iBi

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Comments

I was laid off at a community college.  It was posted for eveyone to see on a projector screen at a Union meeting.  It was called a projected layoff.  Everyone saw our names whether they were involved or not.  I feel it was unethical, unprofessional, disrespectful and unconstituional to be laid off like that.  Now before June 1st we all have to walk around with people looking at us with pity, gathering in closed discussion and humiliating us with their looks.  I wish we could sue them for how they let the whole college know we were being let go.

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