New Staff-Cut Policies Can Make
Workers Miss Old Euphemisms

April 24, 2002

Wall Street Journal

Why announce layoffs, attract bad publicity to your company and create doubts about your business acumen, when you can "raise standards" and ax laggards instead?

Because it's dishonest and mean. Fired workers carry the stigma for the rest of their careers.

Facing a brutal business downturn, many law firms are nnouncing layoffs. But Silicon Valley legal powerhouse Wilson, Sonsini, Goodrich & Rosati isn't "laying off" any of its workers. It's canning them -- shedding staff for supposed performance reasons.

Yale and Berkeley grad Peter Thottam says he got a good performance review and full bonus last year, only to have Wilson Sonsini tell him months later, "It's not working out" (management-speak for "Get lost!"). Other ex-Wilson associates report similar shoves from grace.

"Denying this was an economics-based decision is the height of hypocrisy," says Mr. Thottam, who spent years working long hours at the firm.

Wilson Sonsini stands by its no-layoffs story. "We define a layoff as when a company makes a decision to reduce head count or eliminate certain positions either for economic or business reasons," says Managing Director of Operations Donna
Petkanics. "Performance-based terminations are not that. You look at the performance of the specific individual in that job and determine they're not performing at the level you need."

Ms. Petkanics concedes Wilson Sonsini's head count has dropped 10% from last year, to 720 lawyers. But she insists that many left "voluntarily" and that the firm is hanging on to everyone who "meets the quality standards."

Sure, and Yahoo stock was a buy at $230 a share.

At unionized companies like mine, layoffs are based on objective factors like seniority or department, which eliminates the stigma of being fired. But a growing number of nonunionized businesses, like Wilson Sonsini, are using performance as the justification to make big cuts in staff. Employment lawyer Garry Mathiason says he has helped companies shed some 168,000 people that way in recent years.

The main difference: who gets the blame. Copping to economically driven layoffs tells the world it's not the workers' fault. Wall Street might applaud layoffs at publicly traded companies, but executives at the smaller businesses that employ most U.S.
workers don't like the bad press that can follow. Hence, the move from the cowardly world of euphemism (downsized, early retired, put on leave, outplaced), to the cruel world of just not stacking up.

Actually, Mr. Thottam's departure was voluntary in one way: He signed a paper saying so. Wilson Sonsini asks its nearly departed to sign a "separation agreement and release" stating, in some versions, that "WSGR and Employee have mutually agreed to
terminate the employment relationship."

Other agreements impose a gag rule. At least two ex-employees signed agreements that state: "Employee agrees that there will be no publicity, directly or indirectly, concerning any Separation
Information. ... Employee hereby agrees to be responsible in liquidated damages ... [if employee] in any way divulges any part of the Separation Information to any unauthorized third party."

And if employees don't sign? No severance, no outplacement help and no benefits.

Ms. Petkanics calls the agreements "good employment-law practice" and says the forms and their language are standard for any employee termination. She says the confidentiality clauses are there to protect the departing employees, who often negotiate the terms of their departure.

Other firms take a different tack. "We didn't want to solve our problems by saying there were performance problems with good attorneys. That wouldn't be fair to them," says Richard S.
Odom, chairman of San Francisco-based Brobeck, Phleger & Harrison, another Silicon Valley heavy that this year laid off staff -- and called them layoffs.

Many of Wilson's ex-employees -- Mr. Thottam included -- are still looking for work. Recruiters partly blame the stigma of being fired,
which has caused some ex-Wilsonites to doubt their own abilities.

In the end, Wilson Sonsini hasn't gained much. The firm's performance-based cuts are the worst-kept secret in the legal community, particularly at the institutions it needs most: big law schools where it recruits every year.

"Students are pretty bright," says the head of career services at one prominent law school. "How could a firm suddenly make so many hiring mistakes?"