“Enjoying success requires the ability to adapt. Only by being open to change will you have a true opportunity to get the most from your talent.”
– Nolan Ryan

Smith Manufacturing is an 40-year-old manufacturing company that is deep into its second generation of ownership. They have a solid product, excellent service and a very loyal long-term workforce. Smith is known as a good place to work, which leads to good customer service, brand loyalty, customer retention, and good long-term profitability. In short, it is one of those quiet, well-run companies that doesn’t make big splashes, but just contributes quietly to their customers, their employees and their community.

However, this economic downturn has hit them hard and their revenues are down over thirty per cent across their entire product mix. While their cash reserves are quite strong in relation to their revenue and cost mix, they know it isn’t prudent to spend those reserves without a plan.

Although they have never had a layoff in the history of the company, reducing staff is inevitable now if they are to weather the downturn without decimating their cash reserves. Not only has it been heart wrenching for management to consider laying off employees who have been there for years, they also realize that layoffs will signal an irreversible change in the company culture. It has been embedded in their culture that they don’t have layoffs and that once you’re hired, you pretty much have a job for life. After many sleepless nights considering their options, management has come to understand that the old culture and values of loyalty and protectionism no longer work in quite the same way.

The decision to cut jobs is just the first in a series of painful choices facing Smith’s management team. Given that the slump is across the board, whom should they lay off? Should they let go the most junior people in favor of those with seniority? Or, as we have been suggesting, should they take the more challenging route and cut low-productivity employees in favor of those who are most productive and can contribute most to the company’s success? At the end of the day, the executive team has decided that they will retain people based on performance and ability to contribute. It’s a sad story in the short term, but a good story for the long-term survival of the company. If any company keeps people employed who are not or will not add value to the company, management is putting individual loyalty over loyalty to the company and the workforce as whole. While in the short term, loyalty to the individual is laudable, in the long term the company will either flounder or die. A sustainable company, in these times, must make increasingly difficult decisions.

For the benefit of readers who are currently employed, I’d like to tell you about some of the people who are losing their jobs at Smith. One employee has been there for more than twenty years. He is known to be grumpy and snarly and he demonstrates a feeling of entitlement, the assumption that he will always have a paycheck because he’s been there forever. Another employee, Sally, has been there for 15 years and she’s always saying she wants more money. She sees people getting promoted over her, but she won’t learn to use the computer or embrace other changes. She says she likes the old ways better, she prefers a pencil to a mouse and she’s simply unwilling to change her ways, despite several offers to send her to computer classes. Robert is a pretty good technician, but he tends to milk the system. He’s lazy, tries to get overtime when it’s not warranted, and basically takes the easy way out. He’s not unpleasant or disagreeable, he’s just lazy. All three of these employees have cost themselves their jobs and will soon be out on the street.

The times they are a-changin’ and companies that don’t change with them will not be here in a decade. Employees who do not work at increasing their value to their employers will not be employed in the near future. As the title of Marshall Goldsmith’s most recent book states, What Got You Here Won’t Get You There. If your organization is not changing as fast as your business, then you and your employees will not be around much longer.