And this, perhaps, is where the logic of these pandemic layoffs must itself be called into question. That’s what I discovered after speaking to Wayne Cascio, a management professor at the University of Colorado, Denver. He and two colleagues recently completed a study of every publicly traded company on the New York Stock Exchange from 1980 to 2016. The companies that delayed layoffs as long as they could — whether by cutting salaries, furloughing employees, or even running in the red — saw higher stock returns, two years later, than comparable companies that fired people from the start.
Businesses currently mulling layoffs should remember this.
Sometimes layoffs can’t be helped, obviously: A restaurant closes; its staff must go. But if a business or institution endures, there’s a whole body of literature suggesting that layoffs don’t ultimately help the bottom line once the economy heats back up. Experienced and dedicated humans are hard to replace.
Recently, I called James Guthrie, a co-author of one of the most accessible and often-cited papers that argued as much. (It’s called “Dumb and Dumber.”) He’s an associate dean at the school of business at the University of Kansas — which, like many universities in the United States, is struggling to stay afloat. Yet I discovered it wasn’t economic efficiencies that interested him most at this moment. It was fairness. Now, he told me, is the time for every organization to express its values.
“If we at the university had to resort to layoffs, we’d be laying off some of the most vulnerable staff — who happen to be the lowest-paid employees: the custodians, the maintenance crew, the receptionists,” he told me. He finds the thought quite troubling. He’s started arguing for pay cuts and furloughs of the better-heeled faculty and administrators instead. “It’s both more effective,” he said, “and more just.”
A number of cautionary tales are going to emerge during this annus horribilis. But if we want to survive this recession with our dignity and our sanity intact, it’s clear we should keep two things in mind: How people are laid off matters. And layoffs should be a last resort. They’re often the lazy way out.
The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: email@example.com.