BY BRONWYN FRYER COMMENTARY BY LAURENCE J. STYBEL AND MARYANNE PEABODY, JÜRGEN DORMANN, AND ROBERT I. SUTTON
If Astrigo Holdings is to remain competitive, 10% of its workforce must be cut. Who goes, and who stays?
“WHY AREN’T LAYOFFS
taught as a subject at business school?” Robin Astrigo asked himself. “Boards expect executives to do them well, but nobody knowshow.” He leaned his forehead against the cold window and stared out at the building across the street. The wind was whipping tiny, icy ﬂakes sideways through Chicago’s alleys of skyscrapers. Robin couldn’t see through the dark glass windows of the offices of the big consulting ﬁrm opposite him, but he wondered whether the atmosphere in there was freezing too. The analyst call that morning had beenexcruciating. Astrigo Holdings had missed its earnings estimate by 20 cents a share. Proﬁts had dropped by double digits, regardless of efforts to slash inventory and expenses. Despite aggressive promotions and price cuts, the Astrigo homeimprovement stores were losing sales to cheaper retailers with far worse customer service. “Brace yourself,” the head of investor relations had warned him afterthe call was over. “The headlines tomorrow are going to be brutal.” Robin thought of his deceased father. “Pop” Astrigo had started out as a hardscrabble midwestern lumberyard owner. A ﬁscal conservative, he steadfastly believed that a strong cash position was crucial to the company’s health. But he also
taught his son that to keep its reputation for great customerservice, the company had to treat employees well. Robin had run the ﬁrm capably since his father’s death in 1996. He always insisted on keeping several million dollars in the bank just in case the company needed to make critical acquisitions. Though the recession was hitting the ﬁrm hard, Robin didn’t want to risk Astrigo’s future health by burning that cash now. Robin bit the roughened skin around histhumb. He had to rein in costs further, and fast. An aggressive reduction in head count looked like the only course of action. Pop Astrigo had been forced to let people go in past recessions but had loathed taking such an action. A large layoff would be crushing for the families of the affected employees – and for all the towns where Astrigo stores had long been a central ﬁxture. “Sorry, Pop,”Robin thought. He wondered what the board would think. If he didn’t do this right, his own job could well be on the line. He sat down at his desk and pecked out an e-mail to his executive committee: “Mandatory meeting, 4 PM sharp.”
HBR’s cases, which are ﬁctional, present common managerial dilemmas and offer concrete solutions from experts.
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HBR Case Study The Layoff
an enormous “Pont Trois First In, First Out, Offer your solution Investments” logo, that had or Rank-and-Yank? to the dilemma in this ﬁctional case recently emptied its corri“Did you see this?” Morris study at layoffs. dors in a massive downsizing. Meyers asked Lisa Warren, hbr.org. Closer by stood a gigantic pulling the morning Tribune unﬁnished building, amofrom his overcoat pocket tionless construction crane and pointing at the headline. tilting mournfully toward it. The real es“‘More Shrinkage in the Clothing Busitate developer erecting the building had ness.’” He paused, then laughed – a big, gone broke, abandoning the project. bursting Texas laugh. “Who writes this “The construction crane,” Morris obstuff ?” he said. served drily, “used to bethis town’s ofLisa rolled her eyes as they waited for ﬁcial bird.” the elevator. “You’re such a sucker for a Turning back to Lisa, he laid out the bad pun, Morris,” she said. ﬁnancial picture. Based on his analysis, Inside the cherry-wood-paneled ela 10% workforce reduction would generevator, Lisa pulled off her wool cap and shook out her hair as they zipped up ate enough savings to keep proﬁts...