Susan Marvin wrote an insightful column that the StarTribune published in yesterday’s paper. Marvin and her three brothers run Marvin Windows, a privately-held window and door manufacturer in a small town in northern Minnesota. Their grandfather started the company in 1912.

Marvin begins by noting that, last year, her company cut the weekly hours of more than 1,000 workers from 40 to 32.  Upon hearing the news, the workers cheered. They had feared layoffs during the housing downturn. The Marvin family decided that was not the best option. (“Do layoffs really help the bottom line?” StarTribune, April 2, 2010)

The Baldrige Criteria ask how your organization prepares for situations like this, although few leaders had expected a recession as deep and long as this has been. Such preparation includes determining the impact of decisions on all stakeholders, on the quality of your products and services, and on your culture.

Too many leaders ignore these factors and focus on just one: Laying people off cuts costs. When you grow, you add people. When revenues fall, you lay people off. From a financial standpoint, the logic makes perfect sense. As an added benefit, you can rid your organization of some of the “dead wood” that often accumulates over time.

The Marvins disagree with this approach. Susan Marvin points to a study by Jeffrey Pfeffer, a professor at Stanford University. According to Pfeffer’s research, layoffs lead to lower worker productivity, lower company profits, damaged employee morale, loss of institutional knowledge, and increased rates of alcoholism, drug abuse, mental-health problems, and other issues.

So the choice leaders have to make is whether those problems cost more or less than the cost of retaining employees and not laying them off. Too many choose layoffs without thinking about the ramifications and that’s a failure of leadership, an admission that they don’t care about their employees, their customers, or their communities.

“My late father, Bill Marvin, embraced the notion of stakeholders,” Susan Marvin writes. “He believed that the success of a company was inseparable from the success of the stakeholders who were crucial to the company’s viability—in particular, employees, customers, and communities.”

That’s a long-term, systemic view that more leaders need to embrace.

To read more about effective leadership, click on these articles:

• Undercover and Out of Touch
• Management’s Five Deadly Diseases
• The Priorities of Leadership
• Why Organizations Fail
• A Leader’s Job

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