Kodak's filing for Chapter 11 protection has gotten a great deal of attention. Much has been said about the causes of the fall of an iconic brand. And there has been a good deal of speculation over whether and how Kodak will be able to rebuild.
Lessons for leaders abound in these stories, but we see another sort of cautionary tale — a human one. The people who dedicated years and even decades of their lives to Kodak are experiencing a seismic loss.
Some employees are speaking out about the pain they're currently going through. One Kodak employee lamented, "Couldn't be any sadder. Could not be any sadder, with 33 years with Kodak it's heartbreaking, it really is. You kind of saw it coming but when it hits, it's sad." Another said, "I've been here for 15 years. It's depressing, more because there's such a part of the community and has been for over 100 years...it's kind of like watching your favorite football team lose in the playoffs."
Although Kodak's employees are likely concerned about their jobs and benefits, it is clear that they are also sad because they care deeply about the company. They put much of their lives into helping a great company succeed by turning out products they were proud of. They are grieving.
Ann Mulcahy, the former CEO of Xerox, understood how devastating a bankruptcy would be to her employees. In 2000, when her advisers recommended that Xerox file for bankruptcy, she said the following:
You just don't get it. You don't understand what it's like to be an employee in this company. To fight and come out and win. Bankruptcy's never a win. You know what? I'm not going there until there's no other decision to be made. There are a lot more cards to play.
Mulcahy's concern about employees paid off. Her conviction carried Xerox through four years of struggle to undeniable success.
But the human cost of bankruptcy goes well beyond employees. Kodak is such an important part of the community that almost everyone in Rochester, New York, is affected by the bankruptcy. Kodak was a fixture in Debbie Goyette's neighborhood as she was growing up: "We were a Kodak neighborhood...Going up and down the street very few people did not work at Kodak." Rochester mayor, Tom Richards, summed up the feelings of the city when he used the word "shock." Kodak has long been a generous employer and model corporate citizen, a benevolent force in building and supporting Rochester's social, educational, and cultural institutions. Now it looks like that era is ending.
Admittedly, we are in no position to judge whether or not Kodak should have filed for bankruptcy protection. But here's the larger lesson: Leaders need to be aware of, and take seriously, both the financial and the emotional impact that such a step has on workers and communities. Gerard Arpey, the former CEO of American Airlines, did this recently. When American's Board of Directors decided to declare bankruptcy, Arpey resigned, foregoing any severance pay. In describing his rationale for stepping down, he spoke of the company's commitments to its employees, creditors, and stockholders:
I believe it's important to the character of the company and its ultimate long-term success to do your very best to honor those commitments. It is not good thinking — either at the corporate level or at the personal level — to believe you can simply walk away from your circumstances.
Unfortunately, too few leaders are like Arpey and Mulcahy. Bill George and Andrew McLean point out that, as the stigma associated with bankruptcy has diminished, too often it has come to be viewed merely as a vehicle for avoiding obligations. Mulcahy and Arpey both understood the crushing blow that bankruptcy would deal to their employees and fought hard to avoid it. Mulcahy succeeded, and when Arpey was unable to do so, he felt he should not profit from the pain of his workers. We would love to see more leaders act so courageously.
Has your company ever filed for bankruptcy? How did it affect you?
This blog first appeared on Harvard Business Review on 1/26/2012.