Owners eat last
Owners eat last
Running a business comes with responsibility.
Another day, another round of layoffs. Employee reactions aside (which are often sanitized in the name of “remaining professional” online), CEO announcements are sometimes truly astonishing.
Take this tweet for example:
The tweet is part of a thread that later states “I build in public and share everything that is happening in the company on Twitter.”
Now compare that to this LinkedIn post:
Two CEOs. Both reference “building in public.” Two very different responses to an economic downturn.
Two unique companies? Sure. Two unique sets of circumstances? Certainly. But these examples are meant to illustrate opposite ends of the spectrum when it comes to dealing with the rocky times of running a business.
It’s the difference between “This company exists to remain profitable” and “This company exists because of its people.”
I’m not writing this as an outsider. I was part of an executive team that made some drastic cuts — affecting people — during a rough patch. The CEO ultimately made the final decisions, but I was aware of the circumstances that led to those decisions, what decisions were made and why, and the impact on the people affected. It was ugly, awful, and to this day I’m angry about the situation. And I had to deliver the news to two of my direct reports.
Whatever decisions are made, the living, breathing people should come first.
Employees are reduced to a line item
In January, Microsoft announced layoffs affecting 10,000 employees or about 5% of its workforce. Later that same month, Microsoft made an additional investment of $10 billion into ChatGPT.
Were those layoffs necessary? That’s hard to swallow. Seems more like a numbers game.
And in many cases, it probably is. Companies are often beholden to their investors, who take a hard look at a company’s financials.
Some of this is due to the funky way that the United States treats employees on a company’s financial statements. A few highlights from this article, How Financial Accounting Screws Up HR
Employees are not an asset to the company; they add no value. By contrast, equipment can be an asset. Yet some employee costs (such as vacation time) are a liability.
Some key performance measurements are per employee (like revenue per employee). By reducing headcount, the metrics look better.
Companies have to report on total employees, but not total workers. The total cost of labor is hidden when companies use contractors instead of employees.
So larger companies, in particular, can make their numbers look better by making changes that impact their financials. There are few incentives on the books when it comes to retaining (or even upskilling) employees and many incentives to make cuts. And without recognizing employees as an asset, any raises also come at a cost, even if the employee becomes more valuable to the company.
But even the human cost of layoffs extends far beyond the money the company saves. Losing one’s job is linked to an increased risk of suicide and higher morbidity — lasting decades after being let go.
Leaders have a responsibility to employees
A business coach I know commented that she is struggling to get a CEO to see employees as more than a drain on his financials. The CEO had opted to grow from a solopreneur life to hiring.
Yet the minute someone goes from a business of one to a business with employees, the responsibilities change. It’s no longer only about what the CEO wants but it’s about what is best for the people who rely on this company for income.
I’ve been exposed to a few serial entrepreneurs. They’ve founded more than one company and once the business begins to take off, they step back and let someone else run it.
I spoke with a prospective client of one such company. The prospect was concerned that the CEO was no longer involved in the day-to-day. I assured the prospect that it didn’t matter; the company had active leadership.
And in some cases, maybe it doesn’t matter if the company is being well-run by competent managers.
But at the end of the day, a CEO that “moves on” to the next endeavor still has a responsibility to the company’s employees. I’ve witnessed CEOs that truly have lost interest in prior startups and moved on to the next shiny endeavor. The problem? They don’t care if the company flounders. Or fails.
We’re not talking about a school project. We’re talking about people whose entire lives could be upended by poor business decisions. The leadership team, CEO included, has to be invested in the people. They have to care about human outcomes as much as the overall business outcomes.
Because a business ultimately can’t exist without its people.
Owners have to care
I’ve written before that employees should look out for themselves. They should separate their sense of worth from their jobs, never give more than they’re being paid to contribute, and set boundaries. To say that “Employees don’t have to care but owners should care” may seem like a contradiction.
It’s not. There’s a power differential in play. Owners get the benefit of profits. They’re protected in their roles (unless the entire company fails).
It’s like the relationship between a parent and a child (and no, I don’t think a company is a family — that’s a gross manipulation to guilt employees into loyalty).
Parents are responsible for the well-being of their children, but children are not responsible for the well-being of their parents.
Parents need to act in the best interests of their children, but children don’t need to act in the best interests of their parents.
And parents often sacrifice to make sure that their children have what they need. Yet parents never sacrifice one child to save another child (or themselves).
Owners have made a choice when they bring on employees. They shouldn’t treat that decision lightly. They should always put the employees before themselves. That’s the inherent responsibility of being a business owner. Because people are more than a financial statement, a product, or a founder’s dreams of greatness.
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Further Reading:
No More Mr. Nice Boss | Time
Companies Can’t Ask You to Shut Up to Receive Severance, NLRB Rules | Vice
Fifteen Minutes in the Morning | me, newsletter
You can also follow me on LinkedIn for more insights about work, Threads where I’m a bit spicier, and my blog where I share tips for solopreneurs. Or, catch up on the personal side of my life here.
100%! Deciding to grow a company should always be a conscious choice, acknowledging that success or failure is not longer just about you. As a child of small business owners, I watched my parents skip salaries for months in order to keep their employees on board. The decision to grow a team should never be taken lightly.