Sunday, December 18, 2011

The Titanic Had A Band

So Wizards of the Coast had holiday layoffs again. It is not a regular occurrence, though regular enough to merit mention here. (And by regular occurrence I mean they don't have layoffs every year at Christmas time, but they do manage to squeeze in a layoff or two every year or so, and do it between Thanksgiving and Christmas more often than not).

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Some friends were let go. You may have heard of them, if you pay attention to that sort of thing.

But the question that was put to me was - how does this always happen at Christmas? (Or rather, how does it happen frequently enough at Christmas that a company now has Christmas layoffs as part of its brand image)? And for that, we should look to see how corporations work. This is not to vilify or apologize - we've seen enough of both on the 'net when this subject comes up, but to try to explain.

It starts with the budgets. Each department or suborganization in a corporation lays out its budget - how much it plans to be bringing in, and how much it pays for it. This goes into a major discussion, where people (usually not the same people as provide the initial numbers) finish out their final budget, which percolates back out to the other areas. The just who said they need X dollars don't always get X dollars. In fact, they get X minus Y dollars and a note that they have to produce more with less in order to keep the company healthy.

And part of it is that the corporation demands continued growth and profit. It can defer some of its growth for long-term development, or keep on an unsuccessful project that someone really likes, but really it boils down to guaranteed growth. And if you attain that growth, then they need to increase that rate of growth. And lord help you if you have a very good year - that very good year becomes the baseline for further calculations. In short, it is a vicious cycle.

So they pass out the budgets for next year and now the departments have to plan. Yeah, some of that planning involves going back and telling the guys with the budgets that this makes no sense and sometimes that works. More often it involves figuring out what goes overboard in order to jack up profitability.

Sometimes it is a new process that saves times or lowers cost of materials. Sometimes it is a new market that has been opened. Sometimes it is that "big hit" that suddenly arrives and surprises everyone (businesses actually don't like the "big hit" - it really screws up their planning. If they say you are going to lose 3 million this year and you instead MAKE 3 million, you make them look like idiots, and you will be punished accordingly).

But much of the time, it comes down to manpower reduction. Layoffs. And if you're talking about a creative industry with a in-house creative staff (a rarity, by the way), that will involve removing some of the same talent that has gotten you there in the first place.

In particular the old guys. Now, you will see early layoffs when companies get into this downward spiral where they lay the new guys off, the equivalent of eating the seed corn, But when you can lay one guy off instead of two, its a better idea. And ditching a veteran frees up more investment.

And for the long-term employed, here's the warning sign. After a slew of good reviews and standard raises, you get a warning flag. Nothing major, but a mild disapproval in your performance. Congratulations, you've gotten as much salary as they want to give you, and you have pitched over into a new box - candidates for dismissal. It is not even a case of what have you done for us recently; It is just looking at your cost as a healthy target to make the division more profitable.

And here's the thing about corporate life - the guys who set the budgets don't hate you (heck, they probably don't even know you) - they are just laying out the numbers. And the guy you're working for doesn't hate you (well, maybe he does - if you left him stranded by not refilling the coffee machine). No, he's just bound by making the best of a horrible set of choices. Someone has to go, and you're suddenly not an asset, you're an expense.

And this is one of the things about corporations you may have noticed. The blame is spread about. Nobody has to take the fall. Heck, your immediate boss may like you and think you're contributing, and STILL have to lay you off. Its just the numbers.

As a digression, one of the things I really love about losing your job in today's America is that "Your position has been eliminated". This is the corporate version of "Its not you, it's me." It's not like you haven't been doing your job or your didn't refill the coffee maker, it's just we showed up one morning, and your position? It's gone! Vanished! Gone in the night! And we don't hate you. We hate your job. You probably hate your job too. See? We're on the same side!

OK, fine, but why Christmas? Because corporations also drag their feet. Inertia is a powerful thing, particularly when you have do something rotten like deciding who gets shown the door. So things go through a lot more processes than they intend. So if your budgetary process starts in June with the end of Fiscal in December, and you try to find some way to make the numbers work without canning someone, you wait for it. Maybe things will work out. And when they don't you have to make the tough decisions late in the year. Multiply that desire and hope against all the layers involved in the task of removing people and you can see why it happens so late in the year. Merry Christmas.

What it all boils down to is a mistake at the very start of the process. The budgets have to work and the bottom line has to be determined. And all this has to make the shareholders happy. For the most part, these shareholders are faceless (and in the case of investment portfolios, inhuman) entities that supposedly only care about maximizing their investments. Actually, when you talk to THEM they never told anyone to fire anyone, either. They just want to get their money's worth.

So what needs to change (and I have seen it happen in places) is to not think about shareholders but about STAKEholders. These are the people with a stake in the company, which includes the monetary stake of investors the effort of employees, and the interests of consumers.In the hobby game market, you may not have a SHARE of WotC, but a fan of the games, you have a STAKE in WotC. You want to see it succeed. Oddly, so do the shareholders, management, and employees (See! We're on the same side!")

Now the whole argument of stakeholders versus shareholders is not a panacea. Instead it is a guarantee of ongoing discussion as all the contributors vie for the returns that they seek (investors want value, the employees want security, and the consumers want product, but this are very broad statements). It is going to be more of a rugby scrum than a stately procession, which bothers the hell out anyone who likes an organizational tree. But I think it produces a better result.

I have sympathy for those who were let go. For older creatives, this leave-taking comes with compensation, and enough time to figure out the next move (You have a new job - that job is finding a new job). In our field, you also get the joy of reading your own eulogies - people who have beating on you in the forums for years will suddenly pronounce you a genius. You get to walk around for a few weeks saying things like "Apres moi, le deluge", and "The living will envy the dead". And you get to engage in a bit of gallows humor (the title of this article is the answer to an old joke: What is the difference between TSR and the Titanic?).

But it really doesn't make up for the sudden lack of security, the absence of a long-term paycheck and health care. And as long as the dedication of any company is ultimately to its shareholders and its bottom line, its employees and other stakeholders who are left out of that calculation should treat it with the suspicion and wariness that its deserves.

More later,