Cafe Classic: Pay Attitudes of Managers Are Shaped by Layoff Experiences

Editor’s Note:  If you’ve spent any time in the rewards field at all, you realize that each manager has their own unique point of view regarding compensation, born of their own experiences on the giving as well as the receiving end of pay decisions.  One of the most significant shapers of pay attitude for managers, argues Jim Brennan in this Classic post, can be the experience of going through a layoff.

Recently I spoke to an executive getting ready to lay off a few people.  His unhappy demeanor brought home to me once again the burden of management responsibility, where you get the dubious privilege of dashing the spirits of a good person whose only fault was to be the next in line to be let go when financial results require a reduction in fixed payroll.

On the same day, yesterday, I also responded to a questioner asking what the normal bonus would be for all the employees who helped complete a project. It suddenly occurred to me that one of the big differences between those who throw money around as though they owned the Treasury’s printing presses and those who flinch at unnecessary give-aways is their layoff experience. Once you have laid off an innocent party for reasons beyond anyone’s control, you discover a new reluctance to be profligate with always-scarce payroll dollars.  Money becomes more precious when you recognize the downside horrors that occur when you run short, are forced to reduce headcount and must let people go.

Firing a bad performer is relatively easy and occasionally painless; but casting a productive worker out into the great unknown will give you sleepless nights. The silent look of shock and pain in their eyes stays with you forever.

So, to all you compensation professionals and total reward managers out there, do everyone a favor and do your best to avoid such nightmares. Think ahead.  Be conservative, be sensitive to consequences and offer all possible aid to those who suffer.  Aspire to be an effective supervisor.  Remember that the Latin roots of word “supervisor” denote an overseer, one with a duty of care towards their workers who looks ahead beyond the instant gratification moments to the long-term effects of current actions.  That can be a heavy obligation when you must be the agent of management bearing bad news.  Those who are not supervisors or managers should realize the burdens that come with greater responsibilities.

Granted, being the one who decides is far better than being the one waiting to be decimated.  Nevertheless, the power to lay someone off does not come without a price.  The authority to declare people redundant is not accompanied by a sense of infallibility nor does it insulate your emotions from the effects your choices have on your hapless subjects.  No normal human being wants to be the agent who destroys a family.

If experiences shape behaviors, then personally handling layoffs has to be one of the most significant experiences in a management career.  No longer can you look at a total rewards issue and conclude, “It’s only money.”  You realize that excessively profligate spending habits may eventually create traumatic problems that will cost jobs, sidetrack careers and devastate lives.

There are reasons to save a little pity for those who must unwillingly impose those sufferings.  The discomfort of the experience may go a long way towards explaining why some managers seem much tighter about spending than others.  If you have also found this to be true, it may suggest an important line of questioning for future selection decisions.

E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience in most industries.  After corporate HR posts and consulting CEO roles, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness in reasonable executive compensation court cases, Jim also serves on the Advisory Board of the Compensation and Benefits Review.

This post originally appeared on Compensation Cafe
Author: Ann Bares