Failings of layoff frenzy prod companies to take aim on poor performers But corporate America is burdened by bad reputation as a judge of talent


As evidence mounts that many mass layoffs of the early 1990s backfired, more and more companies are approaching new layoffs with a revised strategy: removing the poorest performers.

They've resolved not to lose so many good workers to indiscriminate pink slips or broad early retirement offers -- moves that reduced productivity, hurt customer service and deepened losses. This time, they say, the layoffs will be different.

This time, it's personal.

"We have learned you don't do it by instinct, by section or by groups," said Al Kamhi, a spokesman for Bethesda-based Martin Marietta Corp. "We try to separate the wheat from the chaff."

But victims of the new style of layoffs, as well as many independent researchers, say that corporate America's emphasis on selectivity is too often a cruel joke.

Large corporate bureaucracies are notoriously bad at judging workers' performance. Those tapped in the latest round of cuts are often the politically powerless rather than the least productive, says University of Wisconsin professor Kenneth P. De Meuse, who has studied corporate reductions.

So, the companies' insistence that layoffs are based on merit is especially painful to those who lose their jobs. "It grabs at your self-esteem more now than before," Dr. De Meuse said. "You have to say, 'It is me.' You can't dismiss it" as fate.

Just ask Joe Hurst of Eldersburg.

After more than nine years of winning merit raises and surviving layoffs at Westinghouse Electric Co.'s factory in Linthicum, he was called in to his boss' office and given an "absolutely devastating" performance evaluation -- only the second evaluation he had received in his tenure there.

A week later, he was laid off.

And despite his conviction that the review was a sham, he suffered through depression and self-doubt. He remembers walking into job interviews and wondering if the inter

viewer thought: "There goes a loser."

The reasons for the new emphasis on selectivity are clear.

Several studies released this summer show that the layoffs of the late 1980s and early 1990s failed in achieving executives' goals.

In an American Management Association survey of members who had made reductions between 1988 and 1992, nearly two-thirds saw no productivity increase.

And in a study of large companies, Dr. De Meuse found that while nearly every company's profits fell from 1989 to 1991, companies that had layoffs saw profits plummet far more than those that hadn't.

Those studies accurately reflect a time of corporate chaos, say workers who lived through the cuts.

One former USF&G; Corp. manager, who helped with two rounds of layoffs since early 1991 -- before losing her job in the third round -- saw co-workers turn into "scared rabbits."

After the first round of layoffs, productivity fell sharply, recalls the manager, who asked not to be named because she is looking for work.

Workers often spent good chunks of each day on the phone, finding out who had lost jobs and checking out the latest rumors.

Meanwhile, managers -- forced to cut workers but facing an increased workload -- often hired back the people they had just laid off, she says. "I know one woman who was laid off, brought back as a consultant, laid off again, brought back as a full-time worker and laid off again."

Meanwhile, the insurer's losses mounted. USF&G; reported losing $213 million in 1991 and another $20 million last year.

USF&G; says it took time to recover from the shock of slashing its

work force, which has fallen by 5,000 since Norman P. Blake took over in late 1990. But the cost reductions were crucial to the insurer's recent return to profitability, says spokeswoman Kerrie Burch DeLuca.

The company reported a $20 million profit and a 34 percent increase in productivity in its most recent quarterly financial report, she says. "Our cost savings goals absolutely have been achieved. . . . Productivity has demonstrably improved" as a result of the cuts.

Many companies, of course, still follow the old rules in layoffs. F.W. Woolworth is laying off all the clerks at the stores it is closing; many of USAir Group's recent cuts will be made according to seniority rankings.

But where unions or widespread closures aren't involved, executives insist they are getting better at culling out unproductive workers.

For example, a 1993 survey by the Wyatt Co., a management consulting firm, found that six of 10 executives believed recent -- layoffs had achieved cost-cutting goals. Responding to the same question two years ago, fewer than half of the executives said layoffs in the late 1980s had sufficiently reduced costs.

The key: doing a better job of evaluating worker performance.

Some companies have begun to realize that relying on a single manager's evaluation leaves too much of the individual's fate -- and the company's resources -- to personality and politics, says management consultant Craig Dreilinger.

Dr. Dreilinger, a principal of the Bethesda-based Dreiford Group consultancy, helps companies figure out what questions to ask about performance, and whom to ask. Some companies are experimenting with evaluations done by five subordinates and five "customers" in and outside of the company, he says.

For example, Martin Marietta, which will close its Glen Burnie factory in the coming months, is confident that it can pinpoint layoffs so the most productive workers remain. The reason: Its Baltimore-area operations last year started a new evaluation system in which teams of workers are rated by peers and customers.

Such rankings are being used in an increasingly sophisticated culling process, says Bill Morin, principal in the management consulting firm of Drake, Beam Morin. He's helping a growing number of companies "encourage" certain workers to take early retirement offers, for example.

Many companies found that the most productive workers were the first to take early retirement offers -- they knew they could get other jobs, he says.

So now, when companies use buyouts to cut staff, they try to "direct" certain workers to the benefit packages, without violating laws that require such offers to be voluntary and nondiscriminatory. It's called "a walk around the block," or a "tapping process."

Executives may take one worker aside and praise the generosity of the buyout offer, saying something like: "I don't know what the future holds." Mr. Morin advises managers to take more valued workers aside and say something like: "You have a great ca

reer here."

Despite his advice, Mr. Morin says most companies don't do a good job of selecting workers for layoffs. "The greedy and emotional aspects of downsizing still prevail. . . . Most companies downsizing do 'knee-jerk' cuts," he said.

Even the most recent surveys, such as this summer's Wyatt report, show that most major layoffs don't boost productivity.

That's because too many companies lay off workers without reducing work, and use a pretense of selectivity, say people like Mr. Hurst, who worked in Westinghouse's logistics department.

After the February 1991 layoff, Mr. Hurst recalls, his office seemed to be in shock. Westinghouse's electronics division had never had such a mass layoff. And workers who lost jobs were angry and puzzled at why they were the unlucky ones.

As remaining workers rushed around to handle the extra work, hundreds of laid off workers joined a suit alleging the company unfairly targeted older workers.

"It was like jumping on a train while it was going," he recalled of Westinghouse's operations in 1991. He remembers spending long hours searching through his missing co-workers' idiosyncratic files and researching information that they would have known off the top of their heads.

"Productivity went way down," he said.

Then, in late November, the company launched a mass performance evaluation, and his boss criticized him heavily. A week later, the company announced performance-based layoffs, and Mr. Hurst lost his job.

"They learned from the first time" that they needed some sort of paper trail, Mr. Hurst charged.

Because of the litigation, Westinghouse declined to comment on its layoff policies. In a printed statement responding to questions, the company said, "We believe that the process we utilized to determine which individuals were to be laid off was fair and equitable and within the constraints of all applicable federal, state and local laws and regulations."

Maybe so.

But Mr. Hurst says that the second round of layoff victims seemed more traumatizing. "I know people who . . . lost their houses and got divorced."

Although he has recovered from his depression and has found a job as a logistics specialist at Electronic Data Systems Corp., he is still nagged occasionally by self-doubt.

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