Sunday, March 3, 2013

Ethical Issues Involving Layoffs and Alternative Options

Dan McCauley


Work force downsizing or layoffs occur for many different reasons. These layoffs and acts of downsizing happen in many different ways. Human resource departments go through many different ethically challenged routes to get where they need to be. First of all there are two different types of downsizing. One is reactive downsizing; this is a quick way for a company to react to something in the external environment in a deliberate and sometimes uncalculated manor. This type of downsizing is a quick fix and may cause problems down the road. The immediate reaction can sometimes come with disregard to the companies mission statement and overall values and goals (Parker, 1997). Reactive downsizing tends to cut down on the company’s overall morale and puts employees on edge. Not to mention it cuts down the talent pool that is a problem you may face down the road. That seems to be more unethical than the alternatives. The other type of downsizing is strategic downsizing; this occurs when a company gradually sees redundancies and starts to eliminate them slowly over time (Parker, 1997). Sometimes this type of downsizing is referred to as rightsizing. This process involves many steps. One is to identify the core that is needed to maintain business. Another is to find which jobs are redundant and can be consolidated. From there you must make sure that you protect the bottom line and corporate brand. The most important thing to remain successful is to keep in constant contact with the employees you keep and make sure they keep the course and maintain self-confidence (Parker, 1997). One of the ways that companies compensate these employees to make the transition easier is a severance package or benefits. These typically entails some sort clause that alleviates the company of any legal claims and may go as far as having a gag order or stipulation of a confidentiality agreement where the employees not legally allowed to discuss anything that happened while an employee. When the last stipulation is put into place you typically may wonder if that this person was let go for unethical reasons. There are some instances in where the company should downsize but find alternate ways of cutting costs while retaining employees. This is the most ethically sound way because you remain loyal to your employees and get within your budget. This sometime results in an increase in productivity and growth in the long run.


            You see that there is a right way or ethical way to do something and there is a not so ethical way of doing things. Now there are a few specific instances that I came across while researching that I found interesting. The first one was a non ethical downsizing that involved the state owned company Citizens Property Insurance Corporation. This was a minor downsizing that involved the company’s top investigators. These top watch dogs from this company were let go not because of the company profits slipping but because they saw and investigated things they were not supposed to. During their investigations they found a good amount of unethical behavior taking place; some even involved some of the company’s top executives. They had evidence of favoritism, improper compensations and other poorly handled investigations (Olorunnipa, 2012). All of the people who were involved in this investigation were “downsized” and part of their severance package included a gag order. This stopped all of the allegations being made by that department and now the evidence is gone and no one is being prosecuted or reprimanded. That is an example I found of unethical downsizing.
            The next article that I found was one that I thought was very progressive and ethical. This involves the Honda Motor Company during the early 90’s. The big three had just taken back a big portion of the market from Japanese motor companies. This indicated to Honda that the production would decrease because the demand was decreasing. The decrease in production and demand meant that profits would go down and that they would need fewer employees to produce what was necessary. Here is where Honda went outside of the box and found a win win ethical solution. Roger Lambert, a Honda spokesman, said, "when we decided we would have to reduce output, we didn't see this as a way to cut 200 workers, we saw it as 5 percent more time for training." That is exactly what they did. Honda offered more that 600 different courses that the employees could take to improve their knowledge and eventually help the company in the long run (Levin, 1993). Unlike the big three who have force employees to take vacations, which to me sounds unethical as well as the layoffs to cut cost in certain instances. This out of the box thinking makes sense to improve the company in the long run along with being ethically sound.
            Finally I found a statement that the Clinton administration released, telling a federal court that, “employers should be able to favor minorities when forced to choose between equally qualified black and white workers for layoffs (Mauro, 1994).” This statement was put out in 1994 but even though it was nearly twenty years ago it doesn’t seem ethical for layoffs. When layoffs occur the only ethical way to choose who is laid off when the position and pay are equal is off of past performance. This statement is saying that the minority should stay and be favored because they are a minority. This to me seems unethical and that it shouldn’t matter if some is a minority or the majority.


            From this you see different ethical and unethical ways layoffs occur. Hopefully if you are put in the position of making layoffs you think of these alternatives and preventative ways of doing that. You will also see that there are ethical reasons and unethical reasons to layoff people. Downsizing is never a good thing to go through but understanding the reasoning behind it and the ethics involved you can deal with it in a more insightful way.


Mauro, T. (1994, September 9). An edge for minorities in layoffs urged. Usa Today

Olorunnipa, T. (2012, November 17). Misconduct at citizens. Tampa Bay Times, pp. 1B.

Parker, S. K., Chmiel, N., & Wall, T. D. (1997). Work characteristics and employee well-being within a context of strategic downsizing. Journal of Occupational Health Psychology, 2(4), 289-303. doi:

Levin, D.P, Special to The New York Times. (1993, March 29). Back to school for honda workers. The New York Times, pp. 1.

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