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Case Study: Cheryl Ways and Agilent Technology's Layoffs

Please complete this case study with at least 3 sentences for each question. This is a leadership class on change.

Cheryl Ways and Agilent Technology's Layoffs

Cheryl Ways, a 30-year-old IT professional, took a call at around 9 p.m. on October 15, 2001, from her husband, who rang complaining about her still being at work and asking her when she was coming home. Most of her co-workers had already left for the day, but she worked on for another half hour before shutting down her computer and heading out of Agilent Technology's empty building. What's remarkable about this story is that Cheryl had been told three weeks earlier that she was soon going to be laid off. So what was she doing, still working hard for the company putting in long hours just before being finally let go?

Ways was one of 8,000 staff at Agilent Technology who were cut from the firm during 2001 and one of 2 million people throughout corporate America who lost their jobs that year. A technology and electronics manufacturer and maker of measuring and testing equipment, Agilent Technologies was spun off from Hewlett-Packard during
1999. Hewlett-Packard was known for its "precept that workers will give their best if they're treated honestly and listened to" and this philosophy was emulated by Agilent. Maintaining an open style of communication through e-mails, meetings, and other media, senior management openly acknowledged that downsizing went against the embedded HP way of caring for staff.

Prior to commencing downsizing, Agilent tried other solutions to their business woes. Faced with a 23 percent decline in sales, a sharp fall in orders, and a falling share market, the company put in place a pay cut of 10 percent to save costs. This was seen as a temporary measure, with Agilent's CEO Ned Barnholt predicting a "slow and gradual recovery." The company tried other cost-saving measures such as reducing external consultants and hirings and calling on staff to limit travel and other discretionary spending. There weren't clear guidelines for how to do this or how much savings were needed. As Juan Yamuni, and international treasury analyst, said: "Top management was good about guiding you instead of getting a direct order." It also tried to minimize layoffs by reducing variable pay such as stock options and bonuses.

Despite laying off 8,000 workers (20 percent of the company) in 2001, the following year the company was listed at number 31 on Fortune's 100 Best Companies to Work for. This suggests that, for the most part, it had retained the trust of its employees and displayed empathy toward their plight. Staff knew what was going on through a
"barrage of emails and face-to-face meetings with top management down; even the tired sound in the CEO's voice as he delivered news of mass layoffs." Other forms of communication with staff included a newsletter call InfoSparks that came out twice a week, "coffee talks," brainstorming meetings, and public-address-system speeches.

When staff were laid off, Barnholt decreed that there were to be no across-the-board cuts, that specific staff would be identified, and that they would be told directly by their managers. The 3,000 managers were given a daylong training session with an outplacement agency to assist them in delivering the bad news. According to Karen Scussel, vice president of HR Operations: "The main thing is to keep the communications open . . . That's how we're maintaining morale. The main employee morale issue is anxiety, and we've learned a lot about how to deal with it." She also said, "We keep talking about hanging in there. Employees have come to believe in our purpose." And it seems to have worked, at least for a while. Staff realized that management would prefer to continue with the HP values—but recognized the financial difficulties facing the company. As Cheryl Ways said about being let go, "I felt horrible that they had to do this"; working hard up to the end was her "gift" to her co-workers who remained, "to leave my job in the best possible way."

For others, working hard right up to the end was for other reasons, such as trying to prove themselves in order to stop the decision to close down various parts of the company. For example, Dave Allen, the general manager of Agilent's semiconductor factory at Newark, California, announced in September 2002 that the division would be
closed and shifted to Colorado and that most would lose their jobs within the year. Production at the plant initially dropped but then increased. Asked about this phenomenon, one of the workers at the factory, Mary Dominguez, said, "[M]aybe Fort Collins won't work. And maybe they'll let us stay."

The early optimism of a gradual recovery seems to have faded, with the staff who remain feeling the pressure; as Steve Peterson, a global online manager, said, "We are just really working hard and are discouraged that things are not better." In November 2002, it was announced that 2,500 more jobs would be eliminated and in February 2003 it was announced that a further 4,000 jobs would follow suit. Whether Agilent's open communication style will be enough to retain people's motivation into the future is likely to be sorely tested under these conditions.


1. How would you describe Agilent Technology's communication process for dealing with downsizing?
2. Which approach—"getting the word out" or "getting buy-in"—best characterize the communication process? Why?
3. Apply Stace and Dunphy's contingency approach to the case. What emerges from your analysis?
4. What assessments would you make of the media used by the company?
5. What are the limits to an open communication style when faced with ongoing rounds of downsizing? What else might be done by management to retain staff motivation?

Solution Preview

1. How would you describe Agilent Technology's communication process for dealing with downsizing?

I would describe their handling of the downsizing as effective because they kept communication lines open and were honest with workers. Honesty is an attribute that workers respect because they are given up-to-date facts about the downsizing situation and are able to prepare for any eventual layoffs and take advantage of any assistance that the company will provide such as severance payments or workshops for looking for equivalent jobs at other companies or building their ...

Solution Summary

The expert completes the case study for Cheryl Ways and Aglient Technology's Layoffs. The limits to an open communication are given.