In response to Is Laying People off Really Anti-Lean? [the broken link was removed]:

Let’s say you, a Lean enthusiast, are named CEO of a mid sized manufacturing company. Let’s also assume your market has turned down and the constraint is clearly the market. Let’s also assume you need to improve operating income above all else. The final assumption is the company you inherited is not even good at mass production. They just stink at everything. If you come into this situation and realize that you can implement some basic lean and six sigma principles and only need half the workforce to meet customer demand what do you do?

Layoffs are a failure of management. If the company has not been executing a long term strategy to respect people and manage the system to continually improve, manage for the long term, working with suppliers… it might be they have created an impossibly failed organization that cannot succeed in its current form. And so yes it might be possible that layoffs are required.

It is very easy to jump to layoffs as the “answer” though. While it is possible to construct a situation in which they make sense that such a hypothetical situation it rarely is the case that an organization is committed to lean and then makes layoffs. Instead they just think the same old way and mention the word lean since they see others doing it and layoff sounds like it is lean to someone that doesn’t know the first thing about lean thinking.

I would not see, “a focus on improving operating income above all else” as a lean way of thinking. Improving that is one focus among many that are needed to achieve long term success.

Does that mean a organization doing a great job of managing in a truly lean way may not find itself in a position where layoffs are necessary? No. Failing to predict and execute may have consequences and those may include layoffs. In your example things are confused a bit by separating the responsibility of getting into the mess from what to do next. Definitely, riding out a few poor quarters would be preferable. I have absolutely no question about that.



At exactly what point some layoffs are necessary and how much other stakeholders are squeezed to avoid layoffs is not simple to answer (just as employees are squeezed to avoid suffering by other stakeholders). I think to have any pretense of lean thinking while resorting layoffs management must say what specific failures lead to the situation and what has been done to fix the system so such failures will not re-occur. Those explanations should seem to be among the best applications of 5 why, root cause analysis, systems thinking, planning… that you have seen. Layoffs should be seen as about the most compelling evidence of failed management. Therefore explanations attempting to justify the layoffs have as high a barrier to overcome as any proposed improvement to the organization/system.

Some mealy mouthed vague thoughts about the market changing, competition, wall street demands, “realities” don’t come close to cutting it. Management is not just responsible to manage well given no change in the world over time. Management must create and develop an organization that succeeds over time in a world that will undoubtedly be undergoing dramatic changes. Claiming some “outside” shocks as evidence of something outside of their control is very faulty thinking. I don’t know what outside shocks organizations will face but it is management job to develop an organization that is robust and resilient. How the organization senses changes (not just in today or in the next 6 months but significant long term trends as well…) in the marketplace and reacts needs to part of any plan. It is rare when an explanation of how that will be improved would not be a significant part of the case why layoffs are justified now.

The only real option I see is to view employees essentially as expendable variable expenses. Those costs are reduced through layoffs when necessary. That way of thinking I think is common in many organizations and MBA programs. In fact, that thinking pervades to the extent that I would say such thinking is the accepted conventional wisdom. Hopefully that will change. And for a company that practices what I think of as lean thinking it must change.

Since I believe management is much more responsible for the type of decisions that can lead to a failed organization (one that cannot succeed as it is currently structured) I would expect most of the explanation to be what went wrong with management decision making and execution and how those failures are being addressed.

The change in thinking is profound (from seeing employees as extremely important stakeholders instead of variable costs). The senior management leaders need to feel the weight of responsibility to all the stakeholders. Layoffs should feel awful for any lean manager. That is hard to measure but how a true lean leader would feel. And I don’t see evidence of that from most who proudly declare to wall street they will now save the day by laying people off. They then make the rounds of interviews declaring how positively wall street has reacted to their leadership. If they don’t repeat in each interview that management failed and therefore layoff were necessary and we are taking these steps 1,2,3,4… to as best we can make sure the failures of management do not have such a result in the future, I will have trouble believing they truly value lean thinking.