Sandra Sucher (photo by Evgenia Eliseeva; Getty Images)

Sandra Sucher (photo by Evgenia Eliseeva; Getty Images)

After studying mass layoffs for a decade, Professor Sandra Sucher has seen the detrimental effects and advises against this now-common tactic for workforce management. Instead, she recommends alternatives that can result in stronger companies in the long run and reduce the damage layoffs do to workers and communities. “Typical layoffs harm employees, communities, and companies,” Sucher says.

Mass layoffs were uncommon prior to the late 1970s, explains Sucher, professor of management practice and Joseph L. Rice III Faculty Fellow. It wasn’t until the idea of “lean” corporations came into vogue that companies began to treat employees as just another resource to be allocated as needed. In the decades since, layoffs have become normalized. “Often, they are the first action a company takes in the face of a short-term decline in revenues,” Sucher notes. Business owners who take a different tack—such as Malden Mills CEO Aaron Feuerstein, who chose to continue paying his employees while the company rebuilt after a devastating 1995 fire—have long been anomalies.

Sucher’s research into these outliers began in the late 2000s, after teaching the Malden Mills case in the MBA required course Leadership and Corporate Accountability. Most in the class believed Feuerstein had made a grave mistake; the decision had cost him his job, and in 2001 the company declared bankruptcy. But two students, Elana Silver Green (MBA 2010) and David Rosales (MBA 2010), later approached Sucher to express concern for the 3,000 people their classmates were eager to lay off during the case discussion.

“These two students felt there were choices that companies could make that would be less destructive to all parties.” With the students’ assistance, Sucher wrote two background notes on best practices for layoffs. They also produced a series of video interviews with laid-off employees to capture firsthand perspectives on the impact of these difficult business decisions.

Since then Sucher has written numerous cases on other companies that have forged a new path for workforce management, such as Honeywell, which chose to institute furloughs during the 2008 recession instead of layoffs, and Nokia, which built its Bridge program to help 18,000 employees in 13 different countries transition into new jobs, offering support to those interested in starting businesses, pursuing educational opportunities, and securing new jobs within or outside Nokia. “It was actually very inexpensive,” says Sucher of Nokia’s efforts. The company had previously shut down a plant in Germany, abruptly laying off 2,300 employees and costing the jobs of another 2,000 temporary, contract suppliers’ workers. That action cost the company 700 million euros in sales and 100 million euros in profit in the German market—and at 80,000 euros per employee was nearly 30 times as expensive as the 2,800 euros cost of the Bridge program—and affected its hard-built reputation.

In addition to reputational consequences, there are negative financial ramifications resulting from handling a layoff badly, Sucher notes. “Companies that use layoffs actually have lower levels of profits, on average, for about three years than companies that don’t use layoffs.” And, even more importantly, there are financial and reputational benefits that come with managing a workforce thoughtfully. “You have a workforce that is knowledgeable, that understands you are committed to them, and that is able to continue to innovate and produce high-quality products and services,” she says.

Sucher has found that companies that endeavor to prevent or alleviate the pain of layoffs share a wider worldview. “The companies that do these things well care not just about their employees, but also about their good relationships with all of their stakeholders, whether it’s their employees, their shareholders, their customers, or society,” Sucher observes. These companies want to be trusted, an idea that is the center of Sucher’s current research and an upcoming book. “We live in a time when products and services want your trust,” Sucher says. “Trust in companies is built from the inside out. It’s very, very hard to be a trusted company if your employees don’t trust you.”

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