Layoffs, pay cuts, and organizational reordering have become widespread realities in the downturn. In this video interview, management professor and author Robert Sutton offers his advice on how to be a good boss in today’s difficult climate. Watch the interview or read the transcript below.
The Quarterly: We’re here today with Bob Sutton from the Stanford Graduate School of Engineering, noted author and specialist on management and organizations. You did an article recently for the Harvard Business Review, “How to be a good boss in a bad economy.” Frame the challenge for us.
Robert Sutton: First of all, the article started because it seemed like every executive I know at almost every level was involved in layoffs, pay cuts, the threat of it. So, I was hearing from people everywhere. But the reason it matters and why it’s hard to be a good boss in tough times starts with a [principle] I call the “toxic tandem,” which I’ve stolen from a lot of good social psychologists who do experiments.
And it’s a combination of two things about power that are very well documented. One is that when people are in positions of power, for better or worse, they often become sort of oblivious to the needs and actions of the people who have less power than them. You can produce this in all sorts of ways—it’s very easy to produce in the laboratory. And the other part of the toxic tandem is sometimes called hypervigilance.
Management expert Robert Sutton shares lessons on handling layoffs and teams in crisis.
The Quarterly: So the spotlight raises on you if you’re the boss in tough times.
Robert Sutton: The spotlight raises on you. They’re looking at you really closely. So if you think about the toxic tandem, you’ve got the boss, oblivious, and then the subordinates, even more and more worried. People tend to devote a lot more energy to their boss—or to their board, even, if they’re CEOs—to figure out what is going on. And they don’t engage as much with the people who are under threat.
And then the other thing about the toxic tandem that bosses really have to keep in mind is that there is a lot of research that shows that when people are looking at the boss and worried about what the boss is doing, they tend to assume the worst. So little, tiny signals get magnified.
I don’t think this made it in the article—it’s on my blog because it came afterwards. I presented the ideas to a group of executives. And this guy walks up to me and he starts describing his executive vice president and how one of the secretaries walked up to him and said, “When are the layoffs going be?” And he says, “What?” And then she went to explain. She said, “Well, it’s an ‘interesting shoes’ day for you.”
What this guy has a reputation of doing is he can’t look people in the eye when he’s upset about stuff, so he would always be looking at his shoes. They were saying, “The boss is having ‘interesting shoes’ day.” So from just the fact the guy walked around not looking anybody in the eye, she went straight up to him. So that to me is a pretty good sign he was oblivious to that, right?
The Quarterly: So the point here is that when times are tough, that has its own dynamic. But the thing you have to understand as a boss is that they are looking at you. They may have ignored you in good times, they may have paid attention when they needed to, but you’re suddenly under the spotlight in a way you haven’t been. So what do you do? What do you do to do it right?
Robert Sutton: Well, first of all, one thing I always like to emphasize is that I’m a management theorist. And it’s a lot easier to talk about management than to actually do it. So, you know, for readers of the McKinsey Quarterly and other—
The Quarterly: That’s your disclaimer, right?
Robert Sutton: But it’s not just a disclaimer. It’s one of the reasons I talk about management rather than actually do it. I see how hard this is on my various friends who are CEOs and how it just rips their guts out and how much they worry about it. But there is sort of a little recipe that actually goes back to some research I started with my now, I think, 92-year-old mentor, Robert Kahn, in graduate school. The recipe is prediction, understanding, control, and compassion.
The idea of prediction is that if some sort of stress is coming through, it does much less damage to people when they know when they are safe versus when they are threatened. Martin Seligman is the psychologist most heavily associated with this. But a good example of this, and this comes from one of the CEOs I know—the head of a nonprofit. He was describing to me that they knew donations were falling, grants were falling, and their stock portfolio was falling. Things did not look good. And all those things were sort of intertwined and part of the economy.
But his people were very nervous. So what he said to them was, “I promise you there will be no layoffs or pay cuts for 90 days; nothing is going to happen, so you’re safe until then,” so people wouldn’t come to work every day waiting for the other shoe to fall. So that is the kind of thing that gives people some bit of psychological safety. And also they know when to mobilize to worry about their lives.
The Quarterly: So don’t overpromise, but at least if you can give a certain window of stability, give it to them—right?
Robert Sutton: Yeah, and I’ve heard a number of CEOs in other places say that sort of thing. So the next thing is understanding. It’s very well documented that, independently of how stressful things are, human beings need to know why things happen. They need some sort of explanation. And there is sort of a challenge there, because if you give them too complicated an explanation, then they just get befuddled and freak out. There is an art to being able to give an explanation that’s complicated but not too complicated, so they can follow it. Part of getting rid of the fear is having people understand it.
So that’s understanding. The next one is control—if you can give people some control over the way it happens. A good example of this, which I talk about in the article, is some years back—this was when A. G. Lafley came on in about 2000 as CEO of Procter & Gamble, but they still had John Pepper as the chair—and John Pepper described how they learned a lot about closing plants. Procter & Gamble used to sort of sneak out in the middle of the night. But they learned that when they announce it in advance, tell them why, give people all sorts of exit options and places they can have control, and show compassion that—and Procter & Gamble has very good metrics—they would keep more good employees, they would get better press in the community. And the other thing, which was quite important to them, is that sales of the product in the local community would not go down so much.
And to me, the even simpler idea—as one of my friends, Michael Dearing, who used to be an eBay executive, always says—is that there is a difference between what you do and how you do it. It’s really quite clear that the worst situation, even if they are announced in advance, is when people go through multiple rounds of layoffs. The best people start leaving. The people who stay work less hard, they have mental health problems.
So to the extent that you can—and of course, in this current environment, predicting what’s going to happen is very difficult—but to the extent that you can not put people through multiple rounds of layoffs, you are going to be better off as a boss and also as an employee in all sorts of ways.
The Quarterly: Let me ask you about the “don’t”s. Don’t, you know, look at your shoes if you are normally an avoider of people when there are bad things coming. But what are some broader don’ts?
Robert Sutton: I think there is a really important subtlety that one of the managers I’ve talked to—who has worked at probably six or seven firms where she’s been involved in layoffs—has really emphasized, which is the rhythms and time span of emotion. And there are two parts of this. The first part is that when you, as a boss or decision maker, are going through this process of trying to decide whether or not to do layoffs, you go through all sorts of emotion. First you get angry, then depressed. But by the time you present it to your employees, it is old news to you and it is new to them. So you sort of have to back off.
There is another thing I was going to emphasize—and this is about taking a longer-term time perspective. The story in the article actually comes from Randy Komisar, and it’s about when he worked for a guy named Bill Campbell, who is famous in Silicon Valley for being a coach. Actually, it has been profiled in the McKinsey Quarterly before. Bill was famous for being this real warm, supportive guy. But [Campbell and Komisar] were involved in a startup that was once high flying and eventually sort of wound down. Bill treated everybody so well in the process—both emotionally and then he also went out on quite a limb to try to get people jobs and to sell the company in such a way to save them jobs—that even though the company was just basically winding down, none of the top management team left. And they are all very loyal to him.
That is sort of an extreme case, but I think it is important to remember that it’s a long life, and there are some times when companies aren’t going to make it. There are some times when you, yourself as a boss, are going to lose your job. People will look back and remember how you dealt with it. And you’ve also got to deal with your own conscience in the process. I think that’s a very important thing [to remember] because everybody sort of focuses on the short-term productivity.
The Quarterly: One last question: how do you deal with the folks who don’t get laid off?
Robert Sutton: When they see that it’s fair, they are more likely to stay loyal, suffer less psychological damage, and also feel more guilty and work even harder to help you. There is actually this sort of weird, sneaky part of it, which is that if the survivors are treated well, they kind of feel guilty because of that “there but for grace of God go I” sort of phenomenon. In fact, most of all the stuff I said about prediction, understanding, control, and compassion—whether people lose their jobs or not—has an effect on the whole system.