Articles | Ethics & Compliance | LRN

Put Your People First

Written by E&C Expert | Aug 11, 2020 4:00:00 AM

While no company has been able to avoid the effects of the global COVID-19 pandemic, new research analysis suggests the best-managed organizations largely have retained their employees and avoided layoffs.

The findings, based on an analysis of the Management Top 250 ranking by the Drucker Institute and The Wall Street Journal, seem to indicate the most effectively managed firms put a higher value on their people.

WSJ found 8% of the top 100 companies in the Management Top 250 announced some kind of job action such as furloughs and firings between March 1 and mid-July. By comparison, 15.6% of the S&P 500 either furloughed employees or let some go.

Why is this? While financial strength is one of the top reasons for resilience during a crisis, WSJ's analysis found the most effectively managed companies hold off on eliminating people. This allows employees to focus on customers and innovation, in turn fortifying the company’s financial strength, and giving it a better chance to keep jobs intact during a crisis or downturn, becoming a “virtuous cycle.”

A recent article in Harvard Business Review backs up these findings. A strong balance sheet isn’t the only thing separating the top companies from the struggling ones, the authors wrote. "The real difference is the way the no-layoff contingent views its employees: as trusted partners rather than as easily disposable assets," they wrote. "Even now, in the middle of the crisis, a company that seeks out ideas rather than handing out pink slips may find that it doesn’t need to let people go after all."

Leaders at these companies "treat their employees like trusted partners, not like hired hands. They share information. They foster participative management," the article stated. "In a crisis, they turn to their employees for innovative ways to survive. Layoffs are a last resort, not a first."

The article points to Gravity Payments as an example. In 2015, the company’s chief executive, Dan Price, raised the minimum salary for all employees to $70,000. The company thrived afterward; according to the BBC, the value of payments that the company processes went from $3.8 billion per year to $10.2 billion by early 2020.

The pandemic led to a 50% loss in revenue, causing the company to face bankruptcy within months. Price then met with all of the company’s employees and discussed ideas, in small groups, to deal with the financial situation. Soon all of the employees agreed to a pay cut, with higher-paid employees taking the largest deduction.

Verizon Communications, according to the WSJ article, has avoided layoffs despite a pandemic-related drop in its core wireless business. The company decided to invest in skills training for 20,000 employees that would otherwise be idle and possibly face termination.

Of course, it’s possible even some of the most effectively managed companies will need to let some employees go as the pandemic continues to disrupt the economy. There’s at least one lesson from all of this that leaders and companies should take to heart: Put your people first.