The Idea Driven Blog

Layoffs and Employee Ideas

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Perhaps the biggest fear expressed by employees when they hear that their company is planning a high-performing idea system, is that it will cause them or their colleagues to be laid off. Their fear is not unreasonable – we see it realized all the time.

For me, the most shocking instance remains the first time it happened to me. I was asked to help a local company of about 600 people that was in serious trouble. A quick tour of the production floor revealed the operation was very inefficient. The one short-term asset the company had was an 18 month backlog – its products were unique enough, and the company still had enough of a brand that customers were willing to wait.

So we set about improving the company’s productivity. Talking with front-line employees, it was obvious that they had many good improvement ideas. So we crashed into place an informal idea system – we had no time to launch a real one. And the employees gave in lots of ideas to save time and money, reduce errors, and improve lead-times and delivery.

Within 8 weeks this company had doubled its productivity. We had a small goodbye party with a group of middle and upper managers.

But I will never forget the call I got the next day from the CEO. “I just wanted to thank you again, and tell you something I wasn’t able to say in front of the group yesterday. You will read it in the newspapers. Today, we were able to lay off 78 people.”

Contrast this with the behavior of Toyota, when it became the manager in its joint venture with GM in the NUMMI plant in Fremont, California. When this plant had been closed a few years earlier, it had been one of GM’s worst plants. Toyota rehired more than 95 percent of the “troubled” workforce, but made them a promise in their union contract. No one will ever be laid off because of productivity improvements, and before any layoffs occur, management will take a twenty-five percent pay cut.

Within a few years, NUMMI had become one of the most productive plants in the GM system, and was getting some 15 ideas per employee.

It seems so simple: Why would people give in ideas, or even just cooperate with management-driven improvement initiatives, if management plans to cash in on the improvements by eliminating their jobs?

You can perhaps get a short burst of productivity improvement, but your idea initiative won’t be sustainable unless you do what Toyota and NUMMI did, and make it clear to employees that continuous improvement will help them too. 

Alan Robinson
Alan Robinson
Alan received his Ph.D. in applied mathematics from the Johns Hopkins University and a B.A./M.A. in mathematics from the University of Cambridge in Great Britain. He is a professor at the Isenberg School of Management of the University of Massachusetts – Amherst, and has advised more than 200 organizations in 25 countries on how to improve their idea performance.

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