New Thinking About Layoffs and RIFs

OK, I’ll come clean.  It really isn’t “new” thinking.  I got it from The New Economics written by W, Edwards Deming.  In the United States, the dividend is the last thing cut (typically).  We will lay off people before cutting the dividend.  In Japan, the worker is the last to take the hit and rarely do they cut positions.  Consider what Deming outlined in the steps Japanese companies take (from The New Economics):

  1. Cut the dividend.  Maybe cut it out.
  2. Reduce the salaries and bonuses of top management.
  3. Further reduction for top management.
  4. Last of all, the rank and file are asked to help out.  People that do not need to work may take a furlough.  People that can take an early retirement may do so, now.
  5. Finally, if necessary, a cut in pay for those that stay, but no one loses a job.

Wow, quite a difference than the thinking in the US.  First sign of trouble with most US companies and the heads start rolling.  Can this be good for our overall economy or the state of our nation.  All those folks that complain about the inefficiency of the government we keep forcing people to use the government for unemployment checks, food stamps, medicaid, etc.  And by the way, more houses get foreclosed on and lessen our property values.

Toyota continues to stave off layoffs.  Who will be better off when the economy comes back?  The company that laid off a bunch of people and have to rehire and train or the company that hung on to workers?  Seems like a simulation game I played while getting my MBA.

I hear conversations from executives saying that we only laid-off the “dead wood” so this gave us a chance to clean house.  So, in the words of W. Edwards Deming, “Did you hire the wrong people or just kill’em?”  Meaning what part of your system hired the wrong people or is your system so poorly put together that no one could survive it.  Regardless, maybe executives should find a better leadership strategy.  With all the waste I see in organizations maybe a better idea for business cost reduction is finding better ways to manage and design the work.

Leave me a comment. . . I can take it!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at or LinkedIn at

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