Does running schools like a business actually argue for keeping LIFO? -- part II, the need for layoffs

In part I, I discussed the implications of LIFO (Last In, First Out) and non-LIFO lay-offs from a business perspective, particularly how LIFO, though not ideal from a management point of view, did offer certain advantages. (Just to be clear, as I said in the last post: "It's important not to confuse headcount reduction, which we're talking about here, with cleaning out the deadwood, where how long a person has been with the company should not be a factor.")

This leads to a bigger question: what are the reasons a company would want to have lay-offs and other forms of head count reduction? Different situations suggest different policies so you can't have an intelligent conversation about lay-off without first establishing the context.

To keep things simple, let's talk about three common situations:

Permanent drop. You are simply going to need fewer employees in the foreseeable future because of a drop in demand and/or a rise in productivity;

Cyclical drop. Your need for employees has decreased sharply but you anticipate ramping back up in the not-too-distant future;

Non-headcount driven lay-offs. Your need for employees hasn't actually dropped but lay-offs allow you to accomplish some other, almost always unstated, goal such as replacing highly paid employees with cheaper substitutes, getting rid of union leaders or creating patronage positions.

An example of a technique that works well in one situation but not another is reduction by attrition. Since permanent drops tend to be slower and can often be anticipated well in advance, you can frequently deal the problem by curtailing hiring and possibly offering some incentives for early retirement. This will take longer but given the potential for disruption that comes with approaching lay-offs and the danger of chasing away the people you need to stay (who are generally the most employable), there is a lot to be said for the attrition approach.

In the case of a sudden cyclical drop, the opposite advice holds. Cyclical drops often give less advance warning and by the time attrition shows results you might be on the other side of the cycle. This would mean you could have people exiting at the very time you start to need more employees.

To further complicate things, there's another issue managers often need to face when dealing with cyclical drops. Lay-offs need to be handled in such a way that the company will still be able to attract high quality applicants in the near future. In other words, you would like to maintain a reputation as a great place to work even while you are laying off a large portion of your workforce.

When applying these ideas to schools, two facts are particularly relevant:

First, not only is education a labor-intensive industry, but the primary workforce (teachers and administrators) have to have at least a bachelor's degree and need to be certified and vetted;

Second, the attrition rate is very high for teachers in their first few years.

Since automation and outsourcing are not big factors in education, permanent job losses in a district generally are caused by demographic shifts and possibly the introduction of charter schools. In either case, these are relatively slow and predictable phenomena. With competent management on the state level, most if not all of these cases can be handled by adjusting hiring practices.

Cyclical drops are generally caused by economic downturns. I've said before that I believe panicked, pro-cyclic government lay-offs are bad ideas in general. Furthermore, I am absolutely certain that there are ways to make state budgets less vulnerable to these downturns. Having said that, the most popular way of addressing current budget shortfalls is to get rid of large numbers of teachers and since there's no reason to believe that's going to change in the foreseeable future, how should we handle this situation?

Here is where a couple more arguments in favor of LIFO pop up. Remember, we are talking about reducing staffs to suboptimal levels. That implies that at some point, probably within the next two to four years, we will want to start increasing headcount. Given historic attrition patterns, it is safe to assume that a large number of the newer teachers will leave as soon as the economy picks up which happens to be when you most want to expand headcount.

Then we get to the asymmetry of information problem I discussed in a previous post:

We take our already somewhat understaffed schools and lay off, let's say, 200,000* teachers selected based in part on some quality metric. We then run the schools severely understaffed for the next year or so until state revenues recover.

That 200K will be made up of three groups, the good, the bad and the better-than-nothing. The good are effective teachers who end up on the list through a combination of bad luck, bad metrics and bad administrators (go here to see how the last two can work together). The bad are teachers at the very bottom of the quality scale. The better-than-nothing are teachers who aren't all that effective but are probably still at least as good as most of the people you could get to replace them.

Given the flaws in our system of ranking teachers and the innate difficulty of the problem, a fair number of good teachers will end up on the list. Likewise, given the problems with recruiting teachers for problem schools, better-than-nothing teachers will continue to make up a large part of it.

The upshot of all this is that, given population growth and the high level of teacher attrition, you will need a substantial number of the people you laid off to come back if you are to have any hope of meeting staffing targets. This wasn't as much of a problem under last-in/first-out for a couple of reasons. First, the attrition rate for new teachers was so high that many of the teachers you laid off wouldn't have been there in a couple of years even if you hadn't let them go. Second, leaving under last-in/first-out carries minimal stigma. For those who really wanted to it was easy to get back into the field a year later.

Under the 'reform' system, there is a serious stigma and a deadly asymmetry of information problem. Keep in mind that administrators are basically stuck with new hires for a year (you try finding a certified replacement in, say, November). They know that a teacher laid off under that system might turn out to be first rate, but do they really want to take the chance?

Let's say 100,000 of the laid-off teachers fell into the need-them-later category. We have screwed these teachers out of contractually obligated compensation, scapegoated them for all the problems in the education system and made them unemployable in their chosen field. Would you come back under those circumstances?

Which brings us to the third kind of lay-offs. It may seem strange to modern ears, but teaching positions once fell under the spoils system. That's one of the reasons that teachers and other public employees have so many job protections (from Wikipedia: "Louisiana, under state education superintendent T. H. Harris, led the move to establish a teacher protection policy in the 1930s because of past political considerations in hiring and dismissal of educators").

In addition to the political advantages of having lots to hand out, mass lay-offs can be devastating to unions, particularly when there is some potential for administrators to game the system. LIFO offers a considerable degree of protection against this abuse (most union leaders aren't first or second year teachers) and it completely blocks the practice of getting rid of certain teachers just because they're highly paid.

It is easy to forget that practices like LIFO and tenure were put in place to discourage people abusing their power. If you take these practices away without replacing them with other safeguards, you can't reasonably expect everyone to resist the temptation to abuse them again.