‘Stealth’ Layoffs and Employee Morale
June 28th, 2008 at 4:40 pm (News Analysis, Managing People)

‘For Wall Street Workers, Ax Falls Quietly’
Last month, the New York Times reported about ’stealth’ layoffs in the financial services industry. The story refers to a trend of Wall Street firms downsizing their workforces by laying people off without formal announcements. It appears that, at these firms, managements rarely discuss layoffs in meetings or formal communications to preclude negative publicity. As a result, employees cannot easily identify what divisions are targeted for layoffs or whether they’ll stay or go.
Here are excerpts from the “For Wall Street Workers, Ax Falls Quietly” story.
- Some bosses hardly say a word after people are fired. At Citigroup, Goldman Sachs and Morgan Stanley, for example, the first clue that someone is gone can be e-mail messages that are returned to senders from a former colleague’s inactivated corporate address.
- Some Lehman Brothers investment bankers found out their jobs were in peril when they saw cardboard boxes and dumpster bins in the hallways in March.
- And when Bank of America dismissed some bankers recently, it told them that their annual bonuses had been almost wiped out and that their personal belongings would arrive in the mail.
- “Nobody knows who is coming in; nobody knows who is going out,” said JoAnne Kennedy, who was laid off by JPMorgan Chase this year. “They want to keep it all as quiet as possible.” In January, when Ms. Kennedy was temporarily out of the office at JPMorgan because of surgery, her boss called to say her job had been eliminated. She did not return to her office and ended up asking the bank to send her the photos of her son that she kept on her desk. [Note: Reorganized]
Impending Layoffs Initiate Distraction and Poor Employee Morale
After about five years of terrific across-the-industry performance and sky-high compensations, the financial services sector is presently reeling in a downturn—triggered by the sub-prime crisis, credit crunch and stunted returns in capital markets. Under present circumstances, Wall Street firms can justify downsizing their workforce. Still, the trend of ’stealth’ layoffs amounts to unfair treatment of employees. Ironically, it is likely that these very companies publicly pride themselves on the talent of their workforce and boast “our people are our most important assets” in annual reports.
The practice of ’stealth’ layoffs establishes an environment of mistrust and apprehension. Employees cannot focus on their work, speculate on ‘who is next,’ and prepare themselves for a potential dismissal. Employees may even hesitate to take vacations for fear of returning to a dismissal. The end result is poor morale and possible defections of talented people to competing firms.
[Image above: A portrait of Ben Bernanke, Chairman of the US Federal Reserve, with the caption ‘Big Ben, We’re Totally Screwed’ in reference to the sub-prime crisis. I photographed this portrait across from the New York Stock Exchange (NYSE) in November ‘07. The artist had placed this portrait on auction at eBay.]
Layoffs are Never Easy
Often, business decisions entail some pain. Layoffs are never easy—for executives of a large organization facing the need to downsize by thousands or for a manager trying to dismiss one of his/her employees. Habitually, managers dread the prospect of facing employees being dismissed. Formal top-to-bottom communication and candid conversations with affected employees are obligations of the management. Employees being dismissed rightfully deserve to hear a respectful and honest assessment of the reasons for layoffs. They merit an offer for support through the transition and in pursuing employment elsewhere. This is the essence of true corporate character.
Recommended Reading
- Case Study: RadioShack laying off 400 workers and informing them of the decision via email
- Case Study: Northwest Airlines advising likely-to-be-laid-off ground workers: “don’t be shy about pulling something you like out of the trash”
- New York Times story ‘For Wall Street Workers, Ax Falls Quietly’
***See other articles related to Respect, fair treatment, dismissals, layoffs, downsizing, employee morale, corporate culture, Wall Street

When we delegate tasks–that is [discuss] assignments in terms of processes or steps to take–we run the risk of people doing exactly what we say, but still not getting the job done as we hoped. But if we delegate desired outcomes–that is what we want to result from the assignment–it’s more likely that that’s what will be accomplished.
In our personal and professional lives, our reactions and follow-ups to errors and missteps reflect greatly on our character. Previous blog articles [
Take the example of yelling at your spouse when she was late to pick you up at the airport. The next day, you like to apologize for yelling at her. All you need is a simple, “I am sorry I yelled at you yesterday. I shouldn’t have.”
Suppose that you promised to watch a movie with your spouse on Valentine’s Day. However, your boss asked you to attend a late-evening teleconference with an important international client. You could not go home in good time for the movie. Your spouse is upset. All you need to say is, “I realize I am late for the movie. I regret I did not excuse myself from the meeting early. I am sorry. Shall we watch the movie on Friday evening?”
The last

Sandwich every bit of criticism between two heavy layers of praise. … A manager should be able to tell someone when something is wrong without bruising an ego in the process.
Consider the following case. Surya was the head of a committee that organized the annual family picnic at his company. The committee exceeded the picnic budget by 35%. Surya’s boss uses the sandwich technique to criticize him for his failure to control expenditure.
Suppose that Charlie led a brainstorming meeting for a new product. One of his new fresh-from-college employees proposed an idea that was not practicable. Charlie was annoyed with the idea and responded, “That is a stupid idea. You are thoughtless. You have been here for less than a week. I don’t think you are knowledgeable enough to contribute to our discussions here.”
Once managers learn and use the sandwich feedback technique a few times, employees recognize the praise-criticism-praise pattern. Employees realize that the managers offer criticism after initiating their conversations with praise. Subsequently they learn to discount this praise since such praise is just a lead-in to the criticism.
Frequently, from the mistakes explained above, the sandwich technique amounts to undercutting praise with criticism. A praise followed by criticism undermines the positive impact of praise and weakens the significance of the corrective feedback.
Feedback is a central component of the manager-employee relationship. Often, managers resent giving corrective (or negative) feedback. They assume employee defensiveness and fear that negative feedback will offend the employee and thus affect their rapport with the employee. Such managers are likely to withhold criticism. They fail to provide timely, relevant feedback in various circumstances—employee tardiness to inappropriate attire (especially if the employee is of the opposite gender.)
Suppose that Andy, a new employee at a financial services firm, attended a week-long, offsite training program in New York. Each night during his stay at a hotel in New York, Andy purchased on-demand movies in his room. He included the corresponding $65 charge in his expense report. Further, Andy dined at very pricey restaurants in New York.
Criticism: “Did you observe that the discussions were unsystematic? When you do not distribute an agenda prior to the meeting, the participants do not come prepared. During the meeting, they have to go back to their desks to collect information. Additionally, we tend to spend a lot of time digressing from the meeting objectives. How can you avoid this?” A discussion ensues.
When things don’t go according to plan, an apology provides the opportunity to offer the Customer an assurance that you care about their feelings. An apology lets you reach out to the Customers who are affected by acknowledging the disruption/inconvenience, offering your assistance, providing an explanation, and letting them know you’re working to prevent a repeat performance (if applicable).
Here is an example. Suppose you promised to watch a movie with your spouse on 
Type 4 is the toughest call of all: the manager who doesn’t share the values, but delivers the numbers. This type is the toughest to part with because organizations always want to deliver and to let someone go who gets the job done is yet another unnatural act. But we have to remove these Type 4s because they have the power, by themselves, to destroy the open, informal, trust-based culture we need to win today and tomorrow.
Organizations face the challenge of developing and sustaining a culture that is both values-centered and performance-driven. They begin by developing mission and value statements that, in due course, become little more than wall decorations because the organization’s leaders and managers fail to uphold these values.
In venting her grievances about Clark to the organization’s customers and peers, Sandy was perhaps trying to draw sympathy towards her helplessness—for not being able to change Clark’s behavior. On balance, she did not have a say in interviewing or selecting him.
Do not openly criticize or air grievances about your employee in public. In addition to creating employee frustration, you draw unnecessary attention to your own managerial failure.
