In The Layoff, the HBR case I have been blogging about, I come out pretty strongly against across-the-board 10% cuts focused on those ranked lowest, usually on the basis of the last performance evaluation. There are several reasons I believe this:
1. Performance evaluations in most organizations are done badly enough that the way the bottom 10% are selected is flawed, and indeed, most people in flawed systems know that -- and see them as unfair.
2. An across the board cut punishes the most efficient units most, the least efficient units least.
3. An across the board cut assumes that the best way to weather the bad times -- and then recover quickly when the good times return -- is to have an organization that is a perfect imitation of the one that you had before, but is just 10% smaller. This last one is especially troubling, as strategic adjustments are almost always needed to weather and recover from tough times.
I have been getting a bit of push back from people who are telling me that, although nothing is perfect (I agree with that), across the board cuts are most fair.
Let me know what you think. This decision is facing many bosses right now.