While most businesses will claim, “people are their greatest and most important asset,” few businesses behave in a manner that’s aligned with those words. In general, the first thing that a business does when it fails to hit its earnings goals is to fire employees.
One would hope that a values-based business would behave differently. Two of the things I have always focused on when trying to determine just how responsible a business really is, is how do they treat employees when business is bad, and what their turnover rate is as compared to their peers.
At Seventh Generation, we almost never let staff go as a result of poor financial results. We held true to the maxim that when financial performance is bad, it’s the responsibility of senior management – NOT the rest of the team. Thus, if we had to save money, everyone should share the pain, and those that made the most money should be the ones to give the most back. At times, when business was terrible, our senior management team took a 50% pay cut, while those earning the least might have experienced a salary reduction of 5–10%. In most cases, no one was let go. The belief that drove our decisions is that were all in this together.
Another wonderful example of this management strategy is the Mondragon Corporation. Mondragon, founded in 1956, now employs more than 85,000 people in more than 100 different businesses. They have managed, over the past 50 years, to almost never terminate any employees as a result of a bad economy or disappointing financial performance.
Why do this? What’s the benefit to the business, the brand and the culture?
I’d argue– given that almost all research on the question of what makes a company truly responsible has the same answer: how a company treats its employees – that companys that dispose of employees when times are tough will never be considered responsible. Firing staff destroys the productivity of the survivors, creates tension with senior management, and makes it very clear what corporate values truly matter the most.
Are there exceptions? Of course, but let’s start by making sure that we eliminate private jets, excessive management compensation, bloated expense accounts, overpriced lawyers, accountants and bankers, and the real estate costs of private offices that could house entire families before we fire workers.