This is what transactional psychological contracts are all about
Henry Blodget’s excellent piece on short-term greed got me thinking about a very basic question: do companies owe their employees loyalty when the economy gets tough?
For some time, I’ve been appalled that major companies are simultaneously laying off employees and reporting record profits. The picture differs depending on where you live and work, but that’s a fairly common trend.
What do these large dollar numbers have in common: $6.5 billion, $5.5 billion, $4.2 billion, and $1.9 billion? They represent the latest quarterly net profits made by too-big-to-fail banks—in order, JPMorgan Chase, Wells Fargo, Citigroup, and Goldman Sachs.
Now imagine that your company has been growing quickly, and that the culture of the company is to expect employees to step up when challenges and opportunities emerge. If there is an important pitch coming up, you are expected to stay late or work over the weekend. If there is an important order to fill, you are expected to work until the order gets filled.
You work hard. You step up. You are a hard-working and loyal employee. You recruit your friends to come work at your company; you put your personal reputation on the line.
Then the economy hits a rough patch. The company lets you go; two months later, they announce record profits.
Is that the right way to do business?
I understand that companies are not charities, and that they can’t exist forever paying out more in wages than they earn in revenues.
But it strikes me as horribly short-sighted for a company to simultaneously report record profits and fire loyal employees. But some will argue that companies are here to make money for their investors, and that such moves are entirely warranted.
That’s why I’m calling on companies that employ this strategy to make it obvious. I suggest they band together under the banner, “Profits before People”. In fact, to make this easier, I’ve created a few simple ads they could run to attract more investors.
I’m not trying to be cute or clever. If this is an intelligent and proper strategy, why shouldn’t companies formally declare that they follow it?