The Ethics of Downsizing

The ethics of downsizingPosted by Jesse Nunes at 10:25 AM

It's a scary time out there. Millions of Americans are worried about the financial crisis, and with each day that passes it seems another major bank or company either bites the dust or gets swallowed up by a bigger entity -- or the government.

With companies large and small facing a credit crisis that severely limits their ability to borrow, downsizing is a real threat for many US workers. (Check out today's story in the Globe on how the crisis is affecting small business in Mass.) Even those who thought their jobs were secure are probably playing the painful mental exercise of imagining what they'd do if they lost their job.

Getting laid off is not any easy thing to endure. In BusinessWeek, "Ethics Guy" Bruce Weinstein writes that "getting fired is the eighth most stressful life experience, behind the death of a spouse (No. 1) or going to jail (No. 4), but ahead of the death of a close friend (No. 17), foreclosure on a mortgage or loan (No. 21), or in-law troubles (No. 24)."

And while doing the ethical thing may not be the first thing on your mind when you lose your job, Weinstein writes that it's critical – for both your mental well-being and future job prospects – that you handle getting laid off correctly. In a two-part series in BusinessWeek, Weinstein offers tips for those who are on both sides of the downsizing issue -- employers and workers. Here are samples of some of his advice for workers:

1. Get angry ... later. It's easy to react with hostility when you're told that your position is being eliminated. Don't... It's only human to be terribly upset or even filled with rage, but acting on those feelings may violate the do-no-harm principle. Less obvious but also important to think about is the damage you would do to a valued relationship that you may not be able to undo. You won't regret holding back, but you will regret losing your cool.

2. Don't take it personally. We'd like to be able to control our lives and shape our destiny through the sheer force of will, but sometimes things happen to us that have absolutely nothing to do with what we've done or who we are. This is one of those times.

3. Get a recommendation. One of the best ways for a potential employer to find out how valuable you are is to hear from your current boss, but you may have to be the one to make this happen. Get a recommendation in writing as soon as possible. Volunteer to write it yourself. If a letter is out of the question or doesn't arrive in a timely fashion, ask your boss to send you a short e-mail; even a one- or two-line testimonial will do. Get your boss's permission to put his or her direct phone number on your résumé and give out at job interviews.

4. Be a self-promoter. We're raised to believe that it's wrong to toot your own horn, but if ever there were a time to put that belief aside, it's now... One of our greatest challenges is striking the right balance between self-absorption and devotion to others. Still, there is not only no harm in standing up for yourself; it is unethical not to do so.

5. Grief is good. Grief is a natural and healthy response to losing something or someone of value in your life, and taking your grief seriously is another important way to treat yourself with kindness. It is a sign of strength, not weakness, to seek counseling in the wake of being downsized. If you sustained an injury to your back, you would have no qualms about getting physical therapy. Why shouldn't you seek the appropriate remedy when your world is turned upside down? Many of us still attach a stigma to psychotherapy—wrongly so.

6. Accentuate the positive. Is it possible that one of the worst things that could happen to you might turn out to be the best? Take a look at Harvey Mackay's We Got Fired!: ... And It's the Best Thing That Ever Happened to Us (Ballantine Books, 2004). Michael Bloomberg, Muhammad Ali, Billie Jean King, Home Depot founder Bernie Marcus, Lee Iacocca, and Robert Redford are just a few of the wildly successful people who explain how losing a job led to something much better.

(Read the complete articles on BusinessWeek's website: Part 1 and Part 2)
Of course, following such a plan is easier said than done when your way of life is at stake. As the Job Doc pointed out in a recent column, it is hard for some to move on when they lose their jobs.
Many Boston.com readers chimed in on a discussion thread on the topic of being 'wronged on the job', and it is clear that, even many years after being slighted, many still hold ill feelings toward their former employers.
How would you deal with a layoff? Have you been through this before? What steps have you taken to prepare for the worst?

What Peter Drucker would have said

The Financial Crisis: What Drucker Would Have Said.... by Rick Wartzman

Peter Drucker didn't have a whole lot of nice things to say about those on Wall Street, at one point likening them to "Balkan peasants stealing each other's sheep."Given the magnitude of the latest crisis to grip Fannie Mae, Freddie Mac, American International Group, Lehman Brothers, and their friends, one can only imagine what kind of acid analogy he might have used today.Or perhaps he would have simply said, "I told you so." After all, so much of the trouble that has befallen these giants of the investment banking, mortgage, and insurance sectors—and that threatens to "undermine the financial security of all," as President George W. Bush put it—comes from a foolish disregard for the kinds of fundamental lessons that Drucker taught about risk, reach, and responsibility.

Some prefer to complicate things. Indeed, there is a temptation, in certain quarters, to fuzzy up what has happened here—to mask the basic management failures that are at the root of this disaster by pointing to the intricacies of credit-default swaps, "naked shorts," and other arcana. Luck Doesn't Last But as Drucker knew so well, none of this is really very complex: If you make enough dangerous bets—and amassing your fortune on a foundation of laughably loose lending standards and mountains of debt is nothing if not dangerous—you're eventually going to run out of luck."No matter how clever the gambler," Drucker asserted, "the laws of probability guarantee that he will lose all that he has gained, and then a good deal more."

He wrote these words in the 1990s, as a different group of once-illustrious institutions—Barings, Bankers Trust, Yamaichi Securities—were felled by their recklessness.Drucker noted that top management professed to be shocked by some of the activities that had taken place at these firms, and it won't be surprising if we hear similar talk this time around—especially if people wind up going to jail. It was reported that the FBI has opened more than two dozen probes into possible fraud connected to the financial meltdown, including investigations at Fannie Mae, Freddie Mac, AIG, and Lehman. But Drucker didn't buy that senior executives were blind to their employees' egregious behavior a decade ago, and he wouldn't buy it now. "In the first place," he wrote, "there is a limit to coincidences. Such widespread breakdowns cannot be blamed on 'exceptions.' They denote systems failure.""Too Big to HideBesides, Drucker added, "in every single one of these 'scandals,' top management seems to have carefully looked the other way as long as trading produced profits (or at least pretended to produce them). Until the losses had become so big that they could no longer be hidden, the gambling trader was a hero and showered with money."Of course, the pressure to produce these profits—and, in turn, prop up a company's share price—has become unrelenting.

It used to be, veteran financial journalist Bob Reed remarked recently, "the stock price was an important component of something more grand: how well the company was managed, product quality, innovations, customer satisfaction—you know, the business." But over time, those pursuits have become largely overshadowed by just one: maximizing shareholder value.To Drucker, this mentality was anachronistic.

"One thing is clear to anyone with the slightest knowledge of political or economic history: The present-day assertion of 'absolute shareholder sovereignty'…is the last hurrah of 19th century, basically preindustrial capitalism," he wrote in a 1988 article. "It violates many people's sense of justice."Perhaps even more important, Drucker said, this lack of balance is unsettling in a world in which large institutions have such an enormous effect on so much"on the portfolios of shareholders, yes, but also on the lives of millions of other people, as we're seeing right now.Long-Term ThinkingIn this day and age, "modern enterprise, especially large enterprise, can do its economic job—including making profits for the shareholders—only if it is being managed for the long run," Drucker wrote. "Altogether far too much in society—jobs, careers, communities—depends on the economic fortunes of large enterprises to subordinate them completely to the interests of any one group, including shareholders."

All of which leads, in the end, to the biggest thing missing today on Wall Street and in much of Corporate America: an ethic of responsibility.Drucker believed strongly that every business must contribute to the general health of society. This means doing "good works" where appropriate. But above all, it means ensuring that the business itself is well-managed and built to last."The institution's performance of its specific mission is…society's first need and interest," Drucker wrote in his 1973 book Management: Tasks, Responsibilities, Practices. "A bankrupt business is not a desirable employer and is unlikely to be a good neighbor in a community. Nor will it create the capital for tomorrow's jobs and the opportunities for tomorrow's workers."I often tell people that there are a million reasons to read and reread what Peter Drucker had to say. This week, it's more like 700 billion.

Rick Wartzman is the director of the Drucker Institute at Claremont Graduate University and an Irvine senior fellow at the New America Foundation.
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