As you read the rest of today’s business news, take a moment to check Fortune’s new article on Intuitive Research and Technology of Huntsville, Ala. It’s No. 1 on Great Place to Work’s ranking of the 25 Best Medium-Sized Workplaces, and it’s of particular interest now because in its 16 years of existence it has never laid anyone off. Elsewhere today you’ll read about layoffs at ESPN (350), Harley-Davidson (250), Tata Steel (1,200), 3M (1,500), Biogen (880), and elsewhere. Considering that business leaders are leading employees above all, layoff policy is crucially important, and how some companies manage to avoid layoffs, even in today’s brutally competitive environment, turns out to be instructive.
Intuitive is a government contractor in aerospace engineering and analytics, which makes its no-layoffs record especially remarkable. In that industry, companies staff up when they get a contract and lay off when the contract expires. But Intuitive, under co-founder, president, and chairman Harold Brewer, follows a fundamentally different path. It hires people even when it has no job openings, if it thinks they’re valuable, and then hangs onto them through the ups and downs of government contracting.
It isn’t as crazy as it sounds. In fact, taking extraordinary pains to avoid layoffs can be a highly effective leadership strategy that’s great for the business.
Consider: By keeping people on board when business turns down, a company has them on hand and ready to go when business turns back up. Some employers, like Toyota, use the slack time to give employees extra training, so they’re probably better prepared than employees of any competitor. Those employees are tremendously loyal to their employer; discretionary effort is increasingly a source of competitive advantage, so that’s worth a lot. And as turnover becomes a growing problem in many industries, such as retail, off-the-charts loyalty pays off big. The communities in which companies operate are also hugely grateful. Being embraced by communities and governments, rather than scorned by them, is an important advantage in good times and bad.
You could argue that no-layoff policies are a relic of a past age, no longer relevant in the gig economy, where companies can efficiently outsource jobs and crowdsource R&D, and where some workers don’t even want to be tethered to a single employer. But that argument overlooks a counter-trend: Human capital is the most valuable asset in any company, whether it’s Apple or Exxon, and getting, developing, and keeping the most talented people is the greatest source of competitive advantage. That’s why Intuitive hires good people whenever it finds them and doesn’t lay them off; that’s also why it gives employees unlimited tuition reimbursement.
I know the hard reality in some industries is that sometimes layoffs simply cannot be avoided. But when that seems to be the case, leaders might want to consider not just the cost savings of laying people off, but also the many advantages of keeping them on.
What We're Reading Today
Theranos CEO defends her technology
Elizabeth Holmes says the blood testing machine she developed has been approved for the herpes HSV-1 test. The company has voluntarily used other manufacturers' machines for many tests while it awaits FDA approval, she says. A report earlier this week in the Wall Street Journal questioned the accuracy of Holmes's machine, which cuts to the heart of Theranos's $9-billion valuation. Holmes and the company have began a blitz to defend the technology, even posting a point-by-point rebuttal to the article. Fortune
John Thain to retire as CIT Group CEO
Thain will step down next March as the small and midsize business lender transitions back to being a commercial bank. He will continue as chairman. Thain's success in growing CIT Group to the point where the Federal Reserve now deems it systematically important constitutes a comeback story of sorts. In the most acute phase of the 2008 financial crisis, Thain engineered the sale of Merrill Lynch, of which he was CEO, to Bank of America, in the process becoming a face of the downturn. Ellen R. Alemany will replace Thain atop CIT. CNBC
Fiat Chrysler workers appear ready to approve labor contract
United Auto Workers President Dennis Williams has apparently succeeded in his second attempt to get Fiat Chrysler employees to approve a deal. Nearly all large locals and many small ones have reported voting results in favor. It's welcome relief for Williams and FCA chief Sergio Marchionne because it avoids a strike, which nearly occurred before the deal was reached. Automotive News
Sexual allegations against Sacramento mayor return
Former NBA player and two-term mayor of Sacramento Kevin Johnson announced he would not seek a third term. The decision comes as claims that he sexually assaulted a 16-year-old 20 years ago resurfaced, including a videotape of the victim describing the incident to police. Johnson denies the allegations. For Johnson, who is married to well-known high-school superintendent Michelle Rhee, it will end his polarizing leadership of the city. NYT
Building a Better Leader
Want to communicate with employees better?
Practice humility. SmartBrief
Men want more attention
Nearly 50% say the media ignore their career issues. Only 39% of women agree that men's issues are overlooked. Fortune
Yoga, meditation cuts healthcare costs
Those who engaged in the stress-relieving practices spent 43% less on healthcare than those who didn't. Quartz
The Washington Files
Hillary Clinton to testify today
The presidential candidate and former Secretary of State will speak to the House of Representatives' Benghazi special committee today on the bombing at a U.S. mission in Libya that resulted in the deaths of the U.S. ambassador and others. The testimony could last 10 to 12 hours and may also cover Clinton's use of a personal email server while Secretary. The committee, headed by Republican Trey Gowdy, has come under criticism for pursuing political goals. NYT
Paul Ryan receives key support
A "supermajority" of the highly conservative Freedom Caucus of House Republicans says it would support Ryan's bid to become Speaker. Ryan had said he would run only if all three major Republican caucuses would support him unconditionally, and the Freedom Caucus's support was most in doubt. Washington Post
Joe Biden announces he will not run for President
Saying it's too late for him to build a winning campaign against Hillary Clinton's operation, Vice President Biden announced his decision in the White House Rose Garden with his wife, Jill, and President Obama by his side. His decision is a big relief for Clinton, all but ensuring the Democratic race will come down to her and Vermont Senator Bernie Sanders. NBC News
Fortune Reads and Videos
Warren Buffett has a bad week
He has lost $1.2 billion on paper as the stock prices of IBM, Walmart, and Wells Fargo have tumbled. Fortune
VW's newest diesel engines under investigation
The company's falsification of diesel engine emission test results may have been broader than originally thought. Fortune
Uber's tax shell game
Travis Kalanick has found a way to ensure that nearly all the company's non-U.S. income isn't taxed by the U.S. Fortune
You can now get craft beer in the form of...
...Ben & Jerry's ice cream. Fortune
Today's Quote
"I don’t think we should look at Republicans as our enemies. They are our opposition, they are not our enemies. And for the sake of the country, we have to work together...How can we move forward without being able to arrive at consensus? Four more years of this kind of pitched battle may be more than this country can take. We have to change it." - Vice President Joe Biden announcing he will not run for President in 2016. Time
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