Two Masters

crossroads

After I sold my business in 2006, I stayed on with the parent company for 10 years in a variety of C-level capacities. In 2012, my parent company undertook a private equity-funded merger with a firm of similar size. As is so often the case, the success of the deal hinged on hitting certain financial projections for the combined entity. Free cash flow is critical to all these transactions—usually to pay off the debt incurred in financing the deal and to avoid tripping bank “covenants” that require specific cash flow relative to long-term debt. High finance at its best. Privately held businesses don’t always have as much free cash flow as new owners would like, so mergers and acquisitions professionals scour the company income statements for “synergies,” known also as cost savings. That’s where things get interesting.

A few days before Christmas in 2012, I got a call from the president of our parent company. He explained that our pending merger required eliminating a certain number of positions from our company. As I recall, the number was six, which wasn’t a bad percentage given our total staffing of about 150. What stopped me in my tracks was that four of the six positions were from the Saratoga Springs office where we employed fewer than 30 people. Not only did I feel my staff had been targeted disproportionately, but I was alarmed to learn that the four employees must be “off the payroll” before Christmas. Unsettled by this development, I debated with my boss until it became clear the layoffs were a fait accompli. He was no more capable of changing the plan than I was.

Now, I understood how these transactions go, so I wasn’t surprised that synergies must be secured before closing, but being asked to let go four people in a small, tightly-knit office—just days before the holiday break—felt needlessly harsh. Two signals were clear to me from this request. First, the Saratoga Springs office was seen as less valuable in terms of talent and long-term company strategy. And second, the new regime was all business. Given this development, I faced some tough decisions on how to proceed. The emotional option was to resign in a huff over this abrupt departure from our company’s vaunted core values. The blandly corporate option would be to initiate the standard series of events that go with layoffs: During the work day, call the affected employees into a conference room where an HR executive had termination papers and severance checks at the ready, and let them have the bad news. Then they would do the walk of shame back to their desks, pack their belongings in Hammermill paper boxes, and head for the exits. All for their peers to behold, all of it a rupture in an established core ideology they believed protected them—not from layoffs but from callousness.

My resigning wouldn’t do any good, of course, except create more free cash flow and make me look like a hysteric. Those four jobs would still be eliminated, and my staff would be leaderless during a difficult transition. I decided, instead, to do as I had been asked, but with as much decency as possible. Most of all, I wanted to avoid embarrassment for the four staffers, which meant eschewing any scenario that took place within sight of their peers. Our office was all open space and glass-walled conference rooms, so privacy was nearly impossible. After anguishing over a solution, I settled on the following: That evening I would call each of the staffers at home and tell them the news. I would explain the financial reasons behind the decision and assure them it had nothing to do with their job performance. Then we would agree on a time after hours for them to discreetly retrieve their belongings. The following morning, I would gather the remaining staff together and explain what had transpired, providing what perspective and guidance I could. I understood, as I knew my staff would, that our office was likely targeted for elimination before too long, but that was a longer-term consideration. For now, we had to focus on all the shock and disruption associated with losing 15 percent of our colleagues.

Events unfolded pretty much as you would expect. The four employees were devastated, angry, resentful. They were shocked to be let go just before the holidays and questioned why they were singled out. In the end, they all accepted the news with dignity. The next morning, my staff registered similar shock. Why had their office been targeted, they asked? What did this mean for their jobs? Were their colleagues provided severance? Who was going to take on all the work done by their exiting peers? All fair and rational questions. I stood in front of them like a tennis player with a ball machine, swatting at the barrage of questions. I tried to be candid and compassionate without contradicting the new owners’ rationale. Standing up there, I must have looked like Sarah Huckabee Sanders trying to make sense of Trump’s latest move. I felt like a hypocrite, like I was damaging the personal leadership brand I had so carefully constructed based on trust and transparency. But I was also a paid leader in this firm; and as long as I drew a paycheck, I had to find a way to reconcile my responsibility to the corporation with my personal and professional scruples.

How well I delivered on that objective would depend, I imagine, on whom you asked. There were a lot of stakeholders in that process, all with profoundly divergent interests. When I assess my role in the matter, I give myself mixed reviews. Specifically, was there a better way to let those people go than to call them at home? Was I showing compassion by not having them come to the office? Or was I dodging an uncomfortable scene for my own sake? Should I have fought harder to keep those employees—or to defer the layoffs until after the holidays? Then there are the questions from the corporate side of my identity: Was I too candid with my staff when I explained the layoffs? Should I have stuck more closely to the party line? Was I tough enough? These, of course, are the queries that haunt managers in times of crisis. And they’re nearly impossible to answer in any definitive way. That’s the nature of leadership and, well, business.

What emerges from this saga, and from many others in my career, however, is the requirement for every leader to honor two masters: one’s own values system and the organization that employs him or her. As leaders, we are justifiably called on to make difficult decisions, to piss people off, to deliver on financial or operational goals at the expense of employee morale. As individuals, on the other hand, we must follow our respective moral compasses. Most of the time, serving both masters requires only minor tactical adjustments. Occasionally, however, the two become mutually exclusive, and that’s when individual morality, by necessity, must prevail. It wasn’t always clear to me when I got the balance right. Sometimes I blew it completely. Other times I finessed things pretty well. What I know without a doubt, though, is that good leaders care passionately about maintaining the balance—and that their staff see those efforts every day. No one gets it right all the time, but you can never stop trying.

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