One employer's alternative to layoffs

We’ve written a lot about layoffs lately: "Of layoffs and leaks," "Layoffs: Do you want the good news first?" "The pink-slip blues," and "Monday, Bloody Monday." But here’s one company that took a daring and innovative approach: instead of laying people off at Boston’s Beth Israel Deaconess Medical Center, CEO Paul Levy gathered employees in an auditorium and asked for their help. The extraordinary meeting was chronicled in Kevin Cullen’s Boston Globe column, “A head with a heart”:

"I want to run an idea by you that I think is important, and I'd like to get your reaction to it," Levy began. "I'd like to do what we can to protect the lower-wage earners — the transporters, the housekeepers, the food service people. A lot of these people work really hard, and I don't want to put an additional burden on them.

"Now, if we protect these workers, it means the rest of us will have to make a bigger sacrifice," he continued. "It means that others will have to give up more of their salary or benefits."

He had barely gotten the words out of his mouth when Sherman Auditorium erupted in applause. Thunderous, heartfelt, sustained applause.

Cullen goes on to report that the workers began flooding Levy’s inbox with suggestions on how to avoid mass layoffs:

The consensus was that the workers don't want anyone to get laid off and are willing to give up pay and benefits to make sure no one does. A nurse said her floor voted unanimously to forgo a 3 percent raise. A guy in finance who got laid off from his last job at a hospital in Rhode Island suggested working one less day a week. Another nurse said she was willing to give up some vacation and sick time. A respiratory therapist suggested eliminating bonuses.

Maybe it will work, and maybe it won’t. But Levy and Beth Israel deserve credit for considering alternatives before dropping the layoff hammer.

By the way, Paul — who's no stranger to innovation — was recently listed as a CEO who twitters (@paulflevy), and he writes an excellent blog called “Running a hospital.” He (reluctantly) posts about some of the feedback he’s received since Kevin’s column appeared ("Pay it forward").

Good work, Paul.

[Full disclosure: My firm has done a small amount of work for Beth Israel, but I have never met Paul.]

Comments

[Victorio]

Thanks for the excellent article Jay. It's good to see positive employee relations at work (especially on a Monday morning!).

This speaks to a comment I left on the HR Capitalist website not long ago (http://burnurl.com/5aW7tz). Basically, I spoke of the need for labor and business to collaborate on common issues instead of fighting over the same old stuff.

Kudos to Paul Levy for taking this important first step. I wish him and the entire Beth Israel Deaconess Medical Center staff the best of luck.

[Nathan]

When the economy recovers, workers will see greater mobility than they do now in this fearful climate. Some firms will have workforces that are bruised and battered from weathering the recession and are eager to seek greener pastures.

On the other hand, CEOs who use the downturn to bring companies closer together and give employees voices in their own destinies are using the recession as an opportunity to make their companies stronger.

I hope more stories of creative cost-cutting come out of the woodwork.

[Glenn]

Employers actually gain a lot more by reducing an employee's pay by 10% instead of a layoff's 100%.

The employer/employee relationship deteriorated ever since downsizing was introduced. Certain realities may be hard to measure dollarwise, yet they impact the bottom line nonetheless. The effect on morale is incalculable.

Yet if that's too touchy-feely, then consider the impact on skills availability. After RIF's, employees don't have as many chances to build up skills employers can use to further their business. Time passes by, then employers complain nobody is qualified to do what they need. If someone is, they then appear too expensive. If the employers would adopt a little long-term thinking, they'd see by keeping employees at a lesser rate during bad times, they'd grow the very talent they say they need. (Imagine that, at a fraction of the emotional and financial cost!)

[Joe Marinelli]

There is a downside to "all for one and one for all". It takes more in the form of wage reductions to equal the dollars associated with head count reductions. Payroll processing, benefits, etc. all remain unchanged when wage reductions vs. headcount reductions are used. Also, and this is key...Wage reductions are forever. I still favor the one for all strategy due to the temporary benefits of higher morale but when inflation starts to rear its head lower pay will become a major issue, and morale will tank.

[Just another HR lady]

Times like these bring out the best in a good leader, and being courageous enough to speak openly and honestly about the hard issues is a sign of a good leader. Asking the employees to come together to develop solutions for a company that is struggling seems like a no-brainer, but so many leadership teams fail to do so. I'm not sure if it will work or not for this organization, but kudos to Paul Levy on his approach, he sounds like someone I would want to work with.

[Mary Ann]

We've been doing a lot of RIFs lately, as well as hours/benefits/salary reductions and traditional layoffs. I think this article really speaks to the importance of communicating the reality to all employees and making them feel that they are in some way empowered during such these difficult times.