Hypothesis: The least capable are at the greatest advantage. The above average performers are at the greatest disadvantage.
When companies start to lay-off people, a curious phenomenon occurs. After 25 years of observation it is increasingly clear that those laid off first seem to end up thriving, while those further up the performance ladder end up faring the worst. Follow me:
Proof: As companies become concerned about their futures and layoffs begin the first round of layoffs typically claims the bottom 10-15% of performers; the low-hanging fruit. This typically occurs when employment markets are relatively fluid and times are not yet tough. These employees generally find something to do in their chosen fields.
The next round comes as the outlook dims and companies reduce the size of businesses that are less profitable than desired or unprofitable. Employees cut during this phase are the middling performers within those businesses.
If the profitability trend continues to be down, the subsequent round is either further cuts or the the complete elimination of business usits, taking with it the remaining employees in that area–people that were above average performers. But by this time, the employment markets have seized up and these once well-regarded employees are now on the outside looking in as those fired first have claimed jobs and companies pull up their drawbridges to outside hiring. It is only once the growth prospects of the business appear promising that the thought of “up-grading our talent” occurs to the employer.
Moral: In an environment where the pay-for-performance scale is relatively flat to modestly upward sloping (i.e., not commission sales), it is better to be a below average performer and be laid off first than to be an above average performer and be laid off last. Even though the below average employee has not maximized his earnings in the short run, the opportunity to continue to get paid is greater over the long term than for the employee who may make more money in the short run but faces higher prospects of a longer term layoff.