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Outplacement News: Layoffs Can Set Back Diversity Gains

Mid and larger sized organizations are now finding that one of the unintended consequences when they downsize their employees is that they can reverse their diversity gains.

The simple reason is that many of their diversity hires may be in vulnerable areas – lower seniority, staff positions, junior or mid-level responsibility. Consulting with an outplacement professional before making an downsizing decisions can help

We believe that organizations and their management want to do the right thing. They have invested in diversity programs and have made good faith efforts towards increasing the number of diversity candidates that they hire.

We see this scenario playing out quite often today. 

Business conditions necessitate a workforce reduction.

The management will then do an objective analysis to determine what roles and departments will be impacted based on their importance to the overall value creation of the organization.

What then happens is that staff functions – human resources, public relations, legal, marketing services – get disproportionately impacted.

Dr. Alexandra Kalev, an associate professor of sociology at Tel Aviv University, wrote the following about this in her excellent Harvard Business Review article: How “Neutral” Layoffs Disproportionately Affect Women and Minorities

In an effort to be transparent and fair to employees, organizations use formal rules to decide who stays and who goes during layoffs.

But my analysis shows that because companies rely heavily on position and tenure to make those calls, they wipe out most or all of the gains they’ve made in diversity. The reason is simple: Companies in cutting mode see the roles that women and minorities tend to have as expendable.

For the most part, if they’ve made it into management they’re either junior to mid level, recently appointed, or working in areas such as human resources, legal departments, and public relations — functions that are beneficial but aren’t usually perceived as core to the business.

When women and minorities are in line positions, they often work on small, nonessential product lines that can be jettisoned fairly easily.

We believe, and Dr. Kavel also asserts, that senior management responsible for the downsizing decision are not deliberately trying to negatively impact their diversity employees.

They are making decisions based on numbers and other “objective” criteria that support that that their decisions are objectively reached to create the minimal amount of negative impact on the organization.

Dr. Kavel writes:

Senior executives often fail to see the connection here. When conducting in-depth interviews, my research team asked more than 40 executives in the food manufacturing, electronics, health care, and business services industries whether diversity factors into their organizations’ layoff decisions.

They typically said things such as “Not that I am aware of,” “It was more around the job function,” and “Our layoff criteria are strictly based on colorblind stuff…always based on what is your job title.” In their minds, downsizing is about erasing parts of the organizational chart, not about gender or race.

But these things are related. As part of a study of over 800 U.S. companies (see “Why Diversity Programs Fail,” my recent HBR article with Harvard sociology professor Frank Dobbin), I found that when organizations cut positions rather than evaluate individual workers, they end up with an immediate 9%–22% drop in the proportion of white and Hispanic women and black, Hispanic, and Asian men on their management teams.

When companies take a “last hired, first fired” approach to layoffs, they lose nearly 19% of their share of white women in management and 14% of their share of Asian men.

Making matters worse, these approaches to layoffs have become increasingly prevalent. In my analysis, two-thirds of the companies that underwent major downsizings used position or tenure to make their cuts; it helps depersonalize a painful process and make it more efficient. But that method gets rid of strong employees, often people the company worked hard to recruit in the first place.

Management teams can avoid these negatives consequences from downsizing by adverse-impact analysis where they balance the objective business needs with their diversity objectives.

This will help them arrive at a more balanced decision. Outplacement consultants, working with the team in the planning stages, can provide an objective outside opinion and analysis.

To illustrate how this can be done, Dr. Kalev described the following examples:

As an executive at a large health care company told us, “When there are reductions, we look at the business need relative to the business case. And then we run numbers to find out what we’ve got from the minority perspective….As long as that looks OK, we go forward.”

Another executive in a large high-tech firm recalled, “We were pretty careful to do adverse impact studies with every layoff. For example, when I was eliminating 26 engineering positions, I thought, OK; let me make sure that I am not just automatically wiping out every female we hired in the last five years.”