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Blog: Global Work Watch September 2008 Archive
 

September 15th, 2008

SuccessFactors, Inventor of the Blame-Shifting Layoff?

When software company SuccessFactors terminated dozens of employees earlier this year, was it the beginning of a new and troubling form of layoffs? One that adds insult to injury at a time of job loss?

SuccessFactors lowered its headcount from 736 at the end of 2007 to 694 at the end of March. The drop was a bit puzzling, because SuccessFactors has been one of the fastest-growing software firms around, selling tools that help manage employee performance reviews and other human resources tasks. Revenue nearly doubled last year, to $63.4 million.

The headcount issue prompted a question by a financial analyst during an earnings call earlier this year. SuccessFactors founder and chief executive Lars Dalgaard explained the situation as axing employees who didn’t belong.

“So we hired a lot of people in [the first quarter], but we just fired more,” Dalgaard said on the call. “We’ve been on a very aggressive hiring spree for a long time, and we’ve used our own products to find out the people that weren’t going to be part of the future.”

When I asked a company spokesman about the headcount change, he offered this explanation: “We get rid of low performers and/or cut our losses if some initiative is not working out, and that’s what happened.”

Pressed once more on the topic, the company said this in a statement: “The headcount reduction was not a layoff. We eliminated low performers and we eliminated a group associated with a vertical focused area that did not produce results (we will not provide specific, further info). This is consistent with our pay for performance philosophy and aggressively managing our business for performance.”

The common-sense definition of a layoff is when an organization makes a business decision to cut jobs. That is, the move largely involves factors—such as an economic slump or a quest to beef up profit margins—beyond the skills and performance of individual employees.

SuccessFactors’ move, then, fits within this layoff definition. The company terminated workers in conjunction with the chopping of a type of business group.

It’s disturbing that SuccessFactors denies it laid off workers. I don’t say this because I suspect any lawbreaking—it doesn’t seem SuccessFactors’ action triggers the notoriously weak protections the federal layoff notification statute, the WARN Act.

Nor is SuccessFactors the first firm to avoid the term “layoffs.” Euphemisms like “right-sizing” and “re-engineering” have been around for years now.

But even when businesses use such phrases for layoffs, there is at least a tacit acknowledgement that workers losing jobs are not fully responsible for their misfortune. Forces beyond their control contributed to or caused the pink slips.

By contrast, SuccessFactors seems to have deflected responsibility from the business—with its unsuccessful initiative—to the individual employees cut loose.

Such blame shifting is sure to worsen the psychological toll layoffs already take. In his 2006 book, The Disposable American, New York Times reporter Louis Uchitelle found that layoffs damage U.S. workers’ self-esteem.

Even though layoffs have historically avoided heaping guilt on individual employees, those workers nonetheless have lost jobs in a society offering a skimpy safety net. This threatens people’s identities as providers in a culture that looks critically on losers of any kind.

There’s also reason to believe SuccessFactors’ headcount trim marks the dawn of a new era of blame-shifting layoffs.

The very tools that SuccessFactors and its rivals sell promise to give companies unprecedented abilities to monitor and compare the performance of employees. Having emerged as a major presence within the past five years or so, these talent management applications make it easier to create companywide databases of employee assessments, smoothing the way to axing the lowest performers whenever a business decides it needs to pare back payroll.

Vendors of the software, in fact, have pitched their products as enabling firms to make smarter decisions about who stays and who goes in downsizings.

In some circumstances, such data-driven layoffs could be healthy for companies and for workers who may be a better fit elsewhere.

But then why not acknowledge that a “layoff” is at hand? That larger forces are at work?

One reason SuccessFactors and other firms may be loath to use the “L” word is that downsizing is no longer seen as the slam-dunk, smart move that it has been for much of the past three decades. Observers, including Uchitelle, have pointed out the ways layoffs can backfire for businesses, through such factors as reduced trust and collegial behavior.

It would be ironic if SuccessFactors’ CEO ends up known as the father of a new, pernicious kind of layoff. The Denmark-born Dalgaard stands out for an intriguing blend of American capitalism and Danish humaneness. And he has outlined high ideals in his company philosophy, including this:

“No jerks! Our organization will consist only of people that absolutely love what we do, with a white hot passion,” he wrote. “We will have utmost respect for the individual in a collaborative, egalitarian, and meritocratic environment—no blind copying, no politics, no parochialism, no silos, no games, no cynicism, no arrogance—just being good!”

But isn’t obscuring your company’s responsibility at the expense of your workers the kind of thing a jerky boss would do?



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