This Harvard Business Review case study details the plight of Astrigo facing financial crisis and possible layoffs. I enjoyed Jurgen Dormann’s commentary following the case, particularly his critique of the executive team. The CFO and the head of legal ride up to their luncheon in a cherry-wood paneled elevator, joking amiably with one another before dining in a private room. They then begin to discuss the best way to cut costs through layoffs without even a hint of irony. That they manage to finish the meal without choking on their own hypocrisy would seem to be a minor miracle. I also agree with Bob Sutton’s point that layoffs may not cut costs as much as assumed. Oftentimes the wrong people get laid off in the wrong way, causing long-term damage to morale. Then there is the expense of getting good people back on the bus when the economic climate changes.
In this case the CEO, Robin, needs to adhere to first principles before all else. He has a conflicting mandate from the tradition of his father: fiscal conservatism and taking care of the team. But these do not have to be mutually exclusive, even in tough times. Robin needs an executive team that sees layoffs as a last resort, not a first reaction. All other extraneous expenses need to be cut first, including executive perks. Pay cuts across the board should be implemented before anyone is laid off. That is Fred Smith at FedEx did. He cut all managerial compensation including his own in 2008 before he laid anybody off. Layoffs are easier to swallow by those who remain if it is clear that management put their best good-faith effort to avoid them. The executive team must first start leading for the good of the whole and see their own culpability in largesse.
