How to Take Advantage of Layoffs: In discussing how to survive layoffs, we noted that employment in the financial services industry is highly cyclical. Accordingly, anyone working in this industry always should prepare for the contingency of significant force reductions and job cuts, either in their present firm or, as is more likely, across the entire financial services sector. The usual premise is either that you seek to hold onto your current position, or that you want to remain employed at your current firm, with no reduction of rank and pay. Less remarked upon is how you can take advantage of layoffs, and use them in your career management strategy.
Case Studies: I profited from layoffs three times in my career. In each case, two essential elements were in place. First, there already was a desire on the part of the employee to change employers and career paths. Second, the layoff came with a generous severance payment. In effect, the current employer was paying the departing employee a bonus to leave his job for a more desirable situation elsewhere. This was a win-win.
The first case was in 1985, when AT&T was undergoing one of many waves of massive force reductions that would continue to the present. I was interviewing at Touche Ross when AT&T announced that the layoffs would begin with a voluntary phase, offering cash payments for those who agreed to resign. If the voluntary phase did not reduce headcount sufficiently, those terminated involuntarily would receive lesser severance payments. The timing of the move to Touche Ross was thus especially advantageous, as it coincided with an opportunity also to receive a severance payment from AT&T.
The second case came in 1987, while I was a management consultant at Touche Ross. This firm had an interesting culture that actually encouraged high employee turnover, partly as a means to stay fresh, dynamic and aggressive as an organization, at least in theory. The policy officially was called "up or out." In other words, after a few years at any given level of the organization, you were expected either to be promoted up to the next, or to be dismissed. The ultimate prize was partnership. If, at any time in your career at Touche, the partners ever seriously questioned the possibility of your eventually joining their ranks, you would be "counseled out," or laid off. Consultants might be "counseled out" at any time of the year, but during the annual period in which promotions, raises and bonuses were determined, there was always a flurry of such dismissals. In a sense, Touche had a built-in period of annual layoffs, but to make room for new blood rather than to reduce staff.
I was dissatisfied with many aspects of the job at Touche Ross, and this became apparent to the partners my office. Accordingly, they voted to "counsel me out" during the annual period of major personnel decisions in the summer of 1987. The bright side of this event came in three ways. First, there would be a severance package containing several months of salary, plus pay for unused vacation time. Second, rather than being forced immediately out onto the street, I would have virtually unlimited time to search for a new job while retaining my desk and phone at Touche, retaining the appearance of being still employed there. Third, the firm would actively assist me in finding a new position, using the copious contacts that it had built up both as an organization and through its individual employees.
A Touche colleague put me in contact with a headhunter who had very close ties to the corporate CFO (Chief Financial Officer) and the corporate controller at Merrill Lynch. Their chief priority was staffing a department responsible for transfer pricing and internal profit analysis, areas in which this writer had valuable academic credentials and work experience. However, the big stock market crash of October 1987 came shortly before my start date at Merrill Lynch. The offer was not rescinded, but soon after my start date planning was underway for the first large-scale layoffs in the firm’s history. I survived, but several colleagues in my new department did not.
Following nearly 14 years at Merrill Lynch, in a variety of roles, I was ready for another change in career direction by 2001. After posting record profits (up to that time) in 2000, and seeing its stock price hit an all-time high in January of 2001, Merrill Lynch was experiencing rapidly deteriorating financial results, and starting planning for massive job cuts by May. I used that as an opportunity to volunteer for a severance package, which offered close to a year’s pay plus other benefits. This layoff scenario offered both impetus and financial incentive to make a change that I already had been preparing for and pondering for several years.
Considerations: A key consideration in deciding whether to accept a severance package (sometimes also called a buyout) is your assessment of what will happen if you choose to decline the offer and keep your current job. Is it likely that there will be subsequent rounds of involuntary layoffs, on less generous terms? Is the firm eliminating functions, or simply reducing headcount? If the latter, will you likely see your responsibilities and hours increase, without an increase in compensation? Additionally, if the force reduction is designed to reduce one or more management levels, will your future prospects for promotion be harmed?
Conclusion: For those contemplating changing employers or setting new directions in life, layoffs actually can be advantageous, especially if they come with generous severance benefits. In addition to the personal case studies related above, I can offer similar ones involving other people. The key, however, is that before taking a severance package and leaving your current employer, you should have a firm commitment to be hired elsewhere, or to embark upon your next role. Even then, be cognizant of the risk that the new job offer might be withdrawn after you have irrevocably resigned your current position. Additionally, once you have joined your new employer, your lack of seniority may place you at particular risk if layoffs hit there, especially if you do not have an employment contract.
