By paulgillin | September 4, 2008 - 7:42 am - Posted in Business News, BusinessModel, Layoffs, NewMedia, Newspapers

Here’s a cost-saving idea: pay your best employees to leave the company. Sound dumb? More than 20 newspaper companies have done just that during the past year.

Buyouts are a popular alternative to layoffs because they’re voluntary and they avoid a lot of anguish. From a management perspective, though, buyouts are a terrible idea. They reward the employees who are the most ambitious and whose skills are the most marketable. The people who apply for buyouts tend to be the people who are confident they can find work elsewhere. In most cases, these are precisely the people a company should want to keep.

A layoff is a far more effective management tool than a buyout. It’s a way to slim down the organization from the excesses brought on by past prosperity. During good times, organizations tend to grow fat and inefficient. Growth masks a lot of problems and no one wants to cut staff when they don’t have to. As a result, organizations are inclined to hold on to marginal performers and sustain questionable jobs because the alternative is too painful. Nearly every company does this. It’s human nature to tolerate a certain level of inefficiency in order to avoid the emotional turmoil of depriving someone of his livelihood.

Invariably, a slowdown comes and companies have to cut back. This hurts, but it’s also an opportunity to make adjustments to the organizational structure to prepare for new growth. It’s a way to get rid of under-performing employees and unnecessary jobs while also redoubling the commitment to top performers. Good companies reward their best people even during difficult times. Across-the-board cutbacks make no sense because they penalize your best people. Why would you want to do that?

A buyout takes bad management to a new level. In effect, the company is saying, “You’ve taken initiative to develop skills that are in demand in our industry. We’ve paid you to do this. Now please go away. And take this bonus with you.”

Buyouts are very popular with ambitious employees who are seeking new opportunity. Who can blame them? Wouldn’t you rather get paid to look for a new job than do it in your spare time? People actually slept in the lobby of the San Diego Union-Tribune this week in order to take advantage of a limited buyout offer. Those are motivated folks. Could management possibly find a more productive way to harness that ambition?

Sorry if this sounds calculating and insensitive, but businesses aren’t charities. They need to run as efficiently as they can, particularly at a time like this. Buyouts are simply a way of dodging unpleasantness by paying good people to leave the company. They’re bad management.

Miscellany

They’re piling on the ailing San Francisco Chronicle. Clint Reilly digs up some past dirt about the early days of Hearst ownership. Of course, this happened eight years ago, so keep it in perspective. One passage did strike a chord, though: “I repeatedly witnessed bizarre behavior at newspapers that no other business would ever allow. Some reporters and columnists were frequently drunk or on drugs on the job. Such conduct was not simply tolerated, it was condoned. These third-rate Hunter Thompsons screwed up appointments and scrambled facts but were never called to account for their mistakes, incivility or disruptive behavior.” Sound familiar to anyone?


The Wall Street Journal is redoubling its commitment to print with plans to launch WSJ. magazine this weekend. The coming-out party gave new Journal managing editor Robert Thomson the chance to take a shot at the rival New York Times and to use the word “eschatological” in a sentence.


Here’s a little good news for magazine publishers: rich people are actually reading more magazines. Research by Ipsos Mendelsohn shows that folks making more than $100,000 a year said they read 15.3 publications on average compared to 15.1 in 2003. People who make more than $250,000 read an average of 24 print publications. Favorite titles: People, National Geographic, Sports Illustrated, Time, Newsweek and Southern Living. Four in five rich folks also shop at Wal-Mart.


Is the Raleigh News & Observer really seeking to cut 40% of its staff? That’s what this short item in Editor & Publisher appears to say. If so, this would be the paper’s third round of job cuts in the past year. Oh, and it’s a buyout.

Comments

comments

This entry was posted on Thursday, September 4th, 2008 at 7:42 am and is filed under Business News, BusinessModel, Layoffs, NewMedia, Newspapers. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Comments Off on Why Buyouts Suck

Comments

  1. September 4, 2008 @ 9:16 am



    […] this blog, but this post from Paul Gillin on Newspaper Death Watch doesn’t mince any words: “Why Buyouts Suck.” For […]

  2. September 4, 2008 @ 6:24 pm



    Favoring layoffs over buyouts make sense in theory, but with the newspaper industry in the state it’s in, what ambitious, effective employee isn’t going to be looking for other opportunities anyway?

    You say that good companies reward their best employees even during downturns, but there’s absolutely no reward to getting stranded and having to watch as management (or ownership) drains the lifeblood out of the enterprise you’ve devoted yourself to. Buyouts suck for management, sure, but management is often what got us into this fix in the first place. Maybe they’re the ones who deserve layoffs.

    Posted by Eric
  3. September 5, 2008 @ 7:48 am



    Can’t argue with you that management should take its share of the pain. However, rewarding your best people is good management practice, no matter how dire the circumstances. Not everyone sees themselves as stranded. It’s also possible to view downsizing as a chance to move ahead quickly and learn a lot of new and marketable stuff. Managers can’t stop people from leaving, but they can stop rewarding them for doing so.

    Posted by paulgillin
  4. September 5, 2008 @ 2:44 pm



    I think you’re off-base on buyouts hurting newspapers. Many of the over 50-crowd are protected in the good-ol-boys networks by their bosses, and many do nothing except cash a paycheck. Many haven’t updated their skills because the younger workers carry most of the workload while the older workers are protected. I’d say 80 percent of buyout takers won’t be missed. They are old-school complainers who think they are owed a living. I’ve worked at five newspapers in my 20 years and see the same workforce at every single one. There are many exceptions to this rule, older workers who are valuable and want to work. But they are in the minority, believe me. Many are lucky they get anything before getting kicked out. They should have been kicked out 10 years ago, or made to do the same workload as others.

    Posted by Newspaper Fan
  5. September 5, 2008 @ 3:10 pm



    I think early retirement programs, like the one just announced at The Oklahoman, are good for that very reason. I haven’t seen any reliable statistics, but my experience is that people who take buyouts tend to be the ones who think they can easily get another job. The problem you refer to is very real: overpaid people with outmoded skills sitting around drawing a paycheck are a burden on the organization. It’s in the company’s best interest to move them out. For all its pain and suffering, a layoff is the most efficient way to do that.

    Posted by Paul Gillin
  6. September 8, 2008 @ 6:03 pm



    One of the biggest problems with the older workers is they complain too much when asked to do a little more. It’s not like most can’t learn the new layout/design systems, they just chose not to because they think they are above it. It’s really that simple. The basic idea is “i’ve been doing this for 20 years and should not have to do anything different.” Unfortunately, many get away with this nonsense because the bosses are the same guys on the desk with them 10 years earlier.

    Posted by Newspaper Fan
  7. October 14, 2008 @ 4:00 pm



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  8. October 14, 2008 @ 8:05 pm



    […] Jason: My friend, Bonnie, just forwarded me an article from this blog. Considering the recent economic crisis and the local issues w/ Michigan newspapers is seems like a really interesting blog especially this entry. […]

  9. November 11, 2008 @ 11:05 am



    I’m a journalism professor at the University of Richmond. I’ve been commissioned by American Journalism Review to survey folks who left the newspaper business under circumstances other than voluntary — laid off, bought out, etc. I’m spreading the word about this survey in every way I can and if you guys could help me spread the word I’d be grateful. The link to the survey is on AJR’s homepage: http://www.ajr.org.

    If you’ve got any questions about this, feel free to contact me.

    Thanks.

    Robert Hodierne
    robert@hodierne.com
    804-484-4759

    Posted by Robert Hodierne