Redundancy meetings can sometimes become a facade. Photo / Getty Images
OPINION
The latest employment data shows the worst pain is yet to come for New Zealand workers. Although businesses are already starting to feel the pinch, the unemployment rate has held steady at 3.4 per cent and widespread job cuts have not yet affected workers.
Don’t let this deceive you. Reserve Bank Governor Adrian Orr warned as early as October last year that beating inflation will ultimately mean higher unemployment. It’s a question of when, not if, those sharp increases in the official cash rate (OCR) start reverberating through the rest of the economy.
The approaching shadow of recession will also be a harbinger of the redundancies necessary to get the unemployment figure to a level the Reserve Bank is comfortable with. And across businesses, workers will start to receive the ominous message to attend a meeting with a support person of their choice.
Several years ago an ad agency executive poked fun at the pantomime of redundancy meetings by taking a clown as a support person, but perhaps a magician would have made a more appropriate attendee given the remarkable sleight of hand so often seen at these meetings.
No one is more adept at making any sense of accountability disappear than a middle manager “making really tough decisions” during a redundancy meeting. It generally starts with your frazzled team leader calling you into an obscure meeting room, where he will reassure you that it “definitely wasn’t” his call but the business has to make cuts.
He’ll invariably explain that this decision was foisted upon him by his manager and that he simply had no control over anything that happened. The great irony, of course, was that this was the same person who only a few weeks earlier would have delighted in taking accountability for work that had nothing to do with him.
If you were then bold enough to venture into the office of the slightly higher-ranking manager, upon whom this blame was foisted, you’d likely be met by palms lifted in innocent surrender.
“Look, it’s honestly not my call, it’s those damn bean counters,” the manager would pinkie-swear, before quietly ushering you away.
Of course, if you were stubborn enough to go to the finance team, you’d be told that the directive had come from the CEO. And if you dared to knock on the hallowed office door of the man or woman in charge, you’d be told that, despite making profits for years, the shareholders (or lead investors, depending on the makeup of the business) were piling on the pressure and that they had to respond.
As one prominent businessperson told me this week, it’s like facing a stairway of David Copperfields all trying to pull off the same trick.
The only consistent refrain you’ll hear through the course of all these meetings is that the “economy has really taken a turn for the worse”.
There is, of course, a hint of truth in all this. When the economy contracts, businesses are well within their rights to make cuts to defend short-term profits and they are under no obligation whatsoever to show loyalty to staff, upon whose backs the profits from earlier years were made.
But the sense of exasperation the employee might feel at the general unwillingness of managers throughout the hierarchy to take any accountability for the cuts is also legitimate.
Behavioural economists have identified this phenomenon of blaming external factors across so many facets of life that they’ve given it a name: the self-serving attribution bias.
This refers to the tendency of people to associate positive events with their own actions, while negative events are attributed to external factors.
Sports are a great example. When your club team loses a big match, it’s rarely because of your incompetence. It’s because the referee was blind, the coach didn’t set the team up right or the other team had ring-ins that allowed them to get the edge.
Driving is another example. In an international survey of 531 road users involved in traffic accidents, 75 per cent believed the accident was not their fault. It was always the other guy, the quality of the road or some other circumstances. This bias is so rampant that in 2014 the New Zealand Transport Agency released a harrowing ad encouraging drivers to slow down, not to highlight the danger they posed but to remind them that “other people make mistakes”.
The problem with managers blaming the economy for sacking staff is that it overlooks the decisions that were made to get the company into a position so vulnerable to slight economic shifts.
Since 1857, recessions have occurred on average about every three-and-a-quarter years. If businesses have to make a series of deep slashes when that recessionary period rolls in, it either means that they didn’t anticipate the possibility of something very likely happening or they simply focused on short-term objectives – both of which are fundamentally bad forms of management.
In a recent LinkedIn post, New York-based business consultant and author Tom Goodwin offered a brutal summation of leaders who decide to cut staff during a recessionary period in a bid to ensure favourable short-term results.
“Sometimes it seems that CEOs forget, generally speaking, you can’t cut your way to growth,” writes Goodwin.
“You can do it to bolster profitability for a quarter or two, but it’s the perfect way to shrink slowly.”
This thinking ties into the thoughts of FCB global chief executive Tyler Turnbull, who recently told the Herald that the decisions businesses make over the next 10 to 12 months will define their next decade. If you cut marketing budgets, staff and future-facing projects during a recession, you’ll be playing catch-up for years.
While it’s easy to look at the examples of Google, Facebook and Amazon slashing tens of thousands of jobs amid the current economic downturn, Goodwin notes these businesses have been expanding wildly, often in non-strategic ways, for years. They’re essentially cutting staff because not enough thought was put into how many people they were hiring when times were good.
Businesses that don’t fall into the multibillion-dollar tech category need to invest in new ideas, products and services if they’re legitimately interested in growing – and that also applies during a recession.
“You are not a bush. Pruning doesn’t work, or at least [not in] the millions of times it’s been tried,” Goodwin says.
“Unless it’s combined with a profound shift in strategy to being a different company (like IBM or Ford) or part of a mid-term plan to invest more in the future, it fails every time.”
In its most grotesque form, this plays out as businesses firing people during a downturn and then rehiring those same workers once the economy picks up again.
Goodwin ends by saying there is far too much short-term thinking in business, with chief executives “using blunt instruments to boost short-term metrics, linked to their bonuses, to hold onto roles they are losing grasp of”.
While this column has largely focused on employers, the self-serving bias also goes the other way. Workers who end up being made redundant during a recession are sometimes caught off-guard because they haven’t taken the time to consider how much value they’re offering to the organisation that pays their salary.
Amid the platitudes and constant stream of celebratory cakes that often pervade business, it’s rare to find moments of frank honesty where we’re told tough truths.
In my own career, I can recall only one moment when I saw such an event unfold. During a presentation of results for an earlier employer, one of the executives stood up to give his summary, which included five words that would become immortal for all those in attendance.
“No one is not irreplaceable,” he said, pausing after the phrase in acknowledgement of the moment it would take the attending staff to decipher that we were all replaceable.
It wasn’t what we wanted to hear but it was probably true – and recessions offer a good opportunity for particularly brutal employers to “trim the fat”, particularly in declining industries.
If you sometimes look around your office wondering whether anything you do serves the bottom line of your company, then don’t be surprised if your manager is thinking the same thing when margins start to feel the squeeze.
At least, no matter which way it goes, we can always blame those damn bean counters.
Meanwhile Wall Street went on a romp after Donald Trump's victory.