Rendezvous with Dave Ulrich on Layoffs and Global Recession

Rendezvous with Father of Modern HR, Dave Ulrich on Layoffs and Global Recession

Dave Ulrich is the Rensis Likert Professor of Business at the Ross School, University of Michigan, and a partner at the RBL Group a consulting firm focused on helping organizations and leaders deliver value. 

The father of Modern HR, Dave has published over 30 books on leadership, organization, and human resources. These ideas have shaped how people and organizations deliver value to customers, investors, and communities. He has consulted and done research with over half of the Fortune 200 and worked in over 80 countries.  He has received numerous public recognitions and lifetime awards for his work. 

Q- Currently around 538,000 layoffs across 760 companies are announced globally. Is it recession looming up, how do you see the scenario as HR thought leaders?

As today’s global economy leans to recession, many organizations face cost pressures and respond by lowering labor cost with whatever term: layoff, downsize, rightsize, reduction in force, cutback, or furlough. An economic downturn may be an opportunity to make lingering and difficult strategic and staffing decisions.

Trees and shrubs need to be pruned to grow. Similar growth can come from managing people well even in difficult circumstances.  Managing downsizing due to recessions should be strategic and not standard. For example, instead of cutting 10 percent across all departments, one department may need a 20 percent cut, while another may only need 2 percent. Strategic reinvention during recession may also be an opportunity for accessing employee skills based on future business requirements. 

A firm moving to a more digital strategy may need to discover skills required to do so.  As we face ever-changing and uncertain business contexts, a recession may be an opportunity to create a mindset of continual renewal of employee skills and of commitment to employee performance.

Q- How do you see the impact of these layoffs on surviving employees and what is your advice for them?

Many companies have extensive services for those who are let go. But paying attention to those who stay is also, if not more, important. Share a commitment to them by letting them know they are valued by involving them in strategic realignment and work redesign. Some may face a survivor syndrome where they feel guilt or shame about having a job when their cohorts do not. Have open discussions to explore those feelings.

A major employee trend today is to personalize work. This means engaging with those who stay to find a personalized employee value proposition that works for each individual. This personalized deal comes from conversations about what the employer expects and the employee offers. Also, help those who stay navigate uncertainty by sharing information and future employment plans.

Q- How the organizations and HR leaders can redesign the compensation structures to avoid mass layoffs?

Reducing labor costs does not just mean downsizing. A recession may be an opportunity to signal a commitment to employees by taking a short-term pay cut (often senior leaders take a higher cut), working ten days and being paid for nine, encouraging early retirement, managing a buffer or contract workforce, job sharing, reducing overtime, allowing furloughs for education or personal development, exploring job transfers, and including employees in discussions on managing costs.

Q- How do you see Chat GPT and the future of jobs impacted?  Are companies started replacing workers with ChatGPT?

Companies have learned that when removing a percent of the workforce, a similar percent of the work needs to be removed. One company cut 25 percent of the workforce but kept the same work, which meant that those who stayed were obligated to work 25 percent more to keep their jobs thus burdening those who stayed. 

Engage those who stay by removing bureaucratic or low-value-added work (often in reports, approvals, meetings, policies, and practices).  OpenAI and other technology innovations may help remove administrative routine work and help employees focus on value-creating work.

Q- Any final comments?

We often learn how to deal with the four seasons by adapting what we learned from the past to the present (winter clothes, spring cleaning, summer vacation, fall harvest).

Economic or business cycles also exist with predictable stages: expansion, peak, contraction, and recession. Lessons from previous cycles can be adapted to the current stage.  Lessons from the past can be applied to the present.   

Here is overview of some of those lessons:

Overview of Seven Lessons for Managing People in Recession