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Mitchell Langbert
Teaching Employees How to Fish

Outplacement strategies for the real world.

March 19, 2009
by Mitchell Langbert, PhD

For the past year economic headlines have gone from bad to worse. The Bureau of Labor Statistics found that there was one percent deflation in December 2008 and that the unemployment rate had reached 7.6 percent in January 2009. Although eight percent unemployment rates were prevalent in the early 1980s and before, they haven't been around since the early 1990s. Employers and employees face the worst wave of layoffs in nearly two decades.

In the immediate post-war period the economy was booming. In the 1940s and '50s some of the major industrial firms and unions instituted Supplemental Unemployment Benefit (SUB) plans. SUB plans subsidized laid-off workers' unemployment insurance benefits with a weekly cash payment. The plans were so good that auto workers in that period actually preferred to get laid off, and lay offs were allocated on a seniority basis. The ensuing decline in the U.S. manufacturing base has made such plans rare.

According to the Society for Human Resource Management (SHRM) and the Right Management consulting firm, 74 percent of HR managers say that their firms provide severance pay. But U.S. employees earn less severance pay than employees in other countries. Few American employees are entitled to more than three weeks of pay, and many rank-and-file employees are entitled to less than two weeks. In a depressed economy, job searches can take several months, so employees face significant exposure. Many employees are badly prepared.

Employers' Role in Layoffs

Severance is not, of course, the only benefit provided to laid-off employees. SHRM says that 44 percent of firms provide health benefits, 38 percent outplacement, 28 percent career counseling and 18 percent provide networking resources.

I would argue that the softer benefits — especially job search, networking and outsourcing advice — are more important than severance dollars in helping employees. These can be provided more cheaply in-house and provide more bang for the buck than SUB, severance or other benefits.

My point that education is more important than direct dollars is based on the saying of an ancient Chinese philosopher, Lao Tzu: "Give a man a fish and you feed him for a day; teach him to fish and you feed him for a lifetime." It is beneficial to both employers and employees to encourage the development of skills by which employees who are laid off can cushion the blow and recover easily.

Firms benefit from teaching laid-off employees how to fish for at least three reasons:

  1. a proactive outsourcing policy improves the firm's reputation;
  2. the morale of surviving employees is improved; and
  3. providing a good plan is the right thing to do.

Researchers have long noticed that survivors of layoffs become demoralized. In a recent study in the Journal of Global Business, Kenneth Levitt and his associates found that surviving employees in a large insurance company felt a lack of team purpose and so reduced their effort level, experienced high-stress levels and distrusted the company. Similar findings go back 20 years to Joel Brockner's and his associates' studies of the layoffs on survivors of large-scale layoffs in the 1980s.

HR experts advocate that laid-off employees negotiate the best possible severance package; make time for job search; develop and work on targets for finding the optimal job; and not let layoffs affect their self-esteem. This advice leaves gaps. Crucially, employees lack resources to tide them over and do not know how to optimally look for a job.

Improving outcomes with respect to these two factors can reduce the stress associated with layoffs. Employers should consider imparting skills to their employees with respect to personal saving and with respect to informational interviewing and related job-search skills. The first skill, personal saving, ought to be done from the first day of employment. The second can be done inexpensively through an in-house outplacement system.

According to a 2002 article in the Federal Reserve Bank of San Francisco's Economic Letter, the U.S. saving rate averaged eight percent from 1980 through 1994 but thereafter fell to about one percent. In contrast, saving rates in Japan and Europe have been in the 12 percent to15 percent range. This may have been due to the wealth effect of a rising stock market in the 1990s, and it is true that the personal saving rate of 2.9 percent in the fourth quarter of 2008 was the highest since 2002. But 2.9 percent is dismal when compared to the French and Japanese.

In their famous book, Millionaire Next Door, authors Thomas Stanley and William Danko found that millionaires are most of all characterized by thrift, or what economists call future time preference. An employee with savings of $200,000 or more in the bank might be frustrated by a layoff, but need not experience depression. Such an individual will have the resources to search for an optimal job and will have resilient self esteem. Employers can assist in encouraging saving not only through the 401(k) plan but also through payroll deduction and education about the importance of saving. The notion of saving for a rainy day is old-fashioned, but few Americans have followed through on the wisdom of their great-grandparents. Many may now regret it. Much as wellness training has helped improve health outcomes, savings and thrift training is now needed to improve personal financial outcomes. Personal finance is a likely candidate for in-house training seminars. These can be integrated with investment education concerning 401(k) investment that has been of interest since the Enron scandal.

Benefits of Informational Interviewing

Job-search technique is even more important than personal finance and saving. Many employees found their first job through a college recruitment office. As a result, they never developed job search skills. Informational interviewing needs to supplement the clichéd job search methods of bulk resume mailing, answering newspaper ads, Internet job sites and recruitment fairs. The idea of informational interviewing has been around at least since the early 1970s, when Richard Nelson Bolles first published his classic book What Color Is Your Parachute? Since then, many outsourcing firms have perfected the idea and applied it to experienced professional workers as well as recent graduates.

The idea of informational interviewing is to NOT look for a job, but rather work on developing relationships that can lead to an optimal career. This is done by contacting managers in firms of particular interest to the potential employee and arranging for a meeting to learn about the firm, its strategies and the available careers (see related story in this issue). The potential employee engages in intelligence gathering. This has several beneficent effects. First, the employee learns about what is available; what the cultures of the various firms in which he or she is interested are like; and what the personalities of potential colleagues are like. Second, the potential employer can meet a potential employee without the pressure of a job interview. This can be done even though no job is available. The result is a more relaxed and frank assessment of the employee's skills and compatibility. Thus, both employee and employer learn about each other. As the potential employee goes through a systematic informational interviewing process, he or she gains considerable intelligence about state-of-the-art developments in the field. This makes them more marketable. As well, if subtle persuasion and sales skills are imparted to the laid-off employee, it is not rare to gain offers directly from the informational interview.

Conclusion

Layoffs are sometimes necessary and are always going to trouble the individuals who have been laid off, the survivors and the employer. Teaching employees to fish, that is, to acquire the resources necessary to regain a job optimally and comfortably, will dramatically improve the effects of an economic downturn. Such an approach need not be expensive to the firm.

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Mitchell Langbert, PhD, is an Associate Professor, Brooklyn College. Widely published on the subject of human resource management, Langbert has consulted and served as an expert witness.