Quote: are you against layoffs

February 2nd, 2019

“Let me review what we have agreed on. We agreed that we should,

  1. ‘Make money now as well as in the future,’

  2. ‘Provide a secure and satisfying environment for employees now as well as in the future,’ and

  3. ‘Provide satisfaction to the market now as well as in the future.’

The first one represents the traditional view of people who own companies. The second is the traditional view of the unions, the employees’ representatives. And the third expresses the message that all new management methods are zealously advocating. We, as top managers, must make sure that our companies provide all of them.”




"You see, I believe that as long as you haven’t established a decisive competitive edge in many segments of the market, you should feel exposed.”


“Because the competitors will catch up,” I explain. “There is no absolute competitive edge, it’s just a window of opportunity, which will be closed.”

“So what you’re saying is that we must always be on the move,” Jim concludes.

“Of course.”

“When can we afford to relax?” Brandon asks jokingly.

“When we retire,” is Granby’s answer.

I hope much before that. There are ways to identify windows that will take a long time for the competitor to close. But if I mention it they will hold me here until morning. Better to not mention it.

Instead I say, “Having a decisive, competitive edge in many segments of the market is far from being enough.”

“What more do you want?” Brandon is surprised. “Alex, Alex, do you ever say ‘enough’?”

“Yes, when all necessary conditions are met.”

“And you think that bringing a company to a position where it has a decisive competitive edge in a segmented market is not sufficient to be considered fulfillment of a CEO’s duties?” Jim waits tentatively for my reaction.

“How can it be?” I’m amazed at them. “We agreed that the market cannot be accurately forecasted. You know better than I do that markets oscillate. Today it’s booming, tomorrow a recession.”

“You have to make enough money in good times to carry you through bad times,” Granby confirms.

But that’s not the point. I have to be more explicit. “What are you going to do when the market drops below your capacity? Fire your people, or let them twiddle their thumbs?”

It’s Granby again, “In bad times you have to tighten the belt.”

I know that’s what he believes in. I went through what he calls tightening the belt.


“Did you already forget the second entity?” I hear myself say. “ ‘Provide a secure and satisfying environment to employees.’ ”

They don’t say a word. What are they thinking about? Why are they looking at me like that?

“Alex,” Jim is careful choosing his words, “are you against layoffs, no matter what the profit of the company is?”


It’s funny. They probably think that they just uncovered a radical in disguise.

They don’t smile. They look at each other in silence. The atmosphere becomes heavier and heavier.

Jim says, “I don’t think that this is realistic.”

Granby says, “It’s dangerous.”

That gets to me. Why can’t they see the obvious? Just because it puts more responsibility on their shoulders? Let them think whatever they want. I’m sick and tired of top people who refuse to acknowledge the responsibility that they actually carry. Refuse to acknowledge it at the expense of the people around them.

Give me all the authority, none of the responsibility, that’s probably their motto.


<discussion with wife>

“So then Brandon asked if I am against laying off no matter what the situation. What a question! Of course when you have maneuvered your company into a cash crunch, you must lay off. Otherwise everybody will lose his

“Sorry, but I don’t understand. If that’s what you think, why did you put them off when Jim asked if you are against laying off when the company is not profitable?”

“Because I am. Not having cash and not having profits are two different things. Listen, Julie. Seven, six, even five years ago, UniCo was firing like crazy. The company was not profitable enough, but at the same time it had hefty cash reserves. There was no reason to lay off. That was the easy way for top managers to try to improve their bottom line. Cut cost rather than finding ways to better satisfy the market. Of course it didn’t help. We laid off and we continued to lose money, so we laid off again. It’s a vicious cycle. That’s what I’m against.


“A company succeeds in developing for itself a dominant competitive edge, or as you call it, is the best in its field. Everybody is working, the company makes a lot of money, everybody is happy. Now the market goes down, the demand drops. As a result you have more people than you need. What do you do? That was the question.”

“I understand. What can you do?”

“My answer is that if you are operating under a good strategy, it will never happen.”


“It’s only that people are so used to blaming external circumstances that at the moment cannot be changed, rather than blaming themselves for not preparing in advance. It’s like the cricket blaming the winter, while the ant is fed and warm.”

“Bringing it to a childish level doesn’t help me,” she laughs. “How can you prevent the market from dropping.”

“I cannot. But with a correct strategy, I can prevent the market of my company from dropping to the extent that there is not sufficient work for all of my employees.”

“How can you achieve this miracle?”

“Simple. By creating enough flexibility. One precaution is to make sure that every employee is serving not just one segment of the market, but many segments. Do you agree that if I plan my actions carefully it’s possible? For example, I can be careful to develop new products that require almost the same type of resources I already have.”

“I think it’s possible.” [...]

“By the way, this is the opposite of what most companies are doing. To accomplish flexibility of the work force, you have to segment your market and not your work force. Do you know what they usually do? Even when the market naturally segments for them, a new market opens up, the idiots immediately open a new plant. They segment the resources. The exact opposite of what should be done under a sensible strategy.”


I told them that there are two more things that a good strategy must be based on. One is that even in a market segment where we have a dominant competitive edge, we should not take the entire segment.”


“The other thing is that the company must be careful to enter into segments for which the probability of many of them dropping during the same time period is very small. This last concept has far-reaching ramifications.”

“The conclusion is obvious. If a company does everything that we said, then when a lucrative segment is up, the company shifts their focus away from some less lucrative segments. They can do it because their resources are flexible. When a market segment goes down, the company shifts focus to other segments. Segments that they didn’t bother to fully exploit before.”

“You see, the result for that company is that there is very rarely the need to lay off people. And all the three entities—the goal and the necessary conditions—are simultaneously satisfied.”


(src: Book: It's not Luck - Eliyahu M Goldratt)