Aggressive downsizing at France Télécom culminated in 19 employee suicides. Case studies by Cynthia Montgomery and Ashley Whillans show how mistreating workers can have deadly consequences.
In 2009, a 51-year-old man killed himself in Marseille, a city in southern France, leaving behind a suicide note that blamed his employer for “overwork” and “management by terror.”
“I am committing suicide because of my work at France Télécom,” his note said. “That’s the only reason.”
That same year, a 49-year-old technician at the same company stabbed himself in front of his colleagues after learning he had been demoted. Between 2006 and 2009, at least 19 France Télécom employees took their own lives, 12 others attempted suicide, and eight suffered from serious depression, all of which was reportedly linked to job-related misery.
In a landmark ruling in 2019—the first of its kind—a French court found that a number of executives at France Télécom had fostered an environment of institutional harassment in the ruthless means they used to reduce the labor force. It’s a tale of a struggling company that resorted to inhumane means of reducing its workforce, according to a trio of case studies co-written by Cynthia Montgomery, the Timken Professor of Business Administration at Harvard Business School, and Ashley Whillans, assistant professor in the Negotiation, Organizations & Markets Unit at HBS.
The cases hold a crucial lesson for business leaders: Tormenting workers can result in dire consequences. While the cases describe an extreme example, Montgomery wonders if the improper pressure tactics used at France Télécom may sound familiar to employees at other companies that have deeply downsized their staffs.
“There’s a lot that happened in the situation that should sound alarm bells for others,” Montgomery says. “The cases point to risks that can arise when firms facing severe competitive threats adopt a single-minded focus. Framing cutbacks as a drive to save a company can make extreme means seem justifiable.”
A company spiraling into debt
France Télécom’s troubles started in the late 1990s, after the French government turned the national telephone monopoly into a publicly traded company, now known as Orange. The telecommunications industry was shifting from landlines to cell phones, and foreign companies were entering the French market.
“It went from being a monopoly with no competition to having intense cross-border competition at the same time the company was under profound transformation,” Montgomery notes.
In response, the firm aggressively tried to enter new markets, bidding unprecedented sums to purchase competitors and buying up pricey technology. The spending spree sunk the company deep into debt, according to the research.
When the dot-com bubble burst in the early 2000s, the stock market crashed—and so did France Télécom’s share price. In 2001, the once-profitable company lost 8.3 billion euros (equal to $15.1 billion today)—the second-biggest loss of any French company ever. A year later, the company’s debts totaled 71 billion euros, three times the value of the firm.
Early retirement packages introduced in 1996 helped France Télécom eliminate one-quarter of its 162,500-member workforce by the mid-2000s. Yet the company continued to struggle. In 2002, turnaround expert Thierry Breton took over as CEO, restructuring the company’s debt, reducing operating costs, and cutting staff through attrition and retirement, rather than layoffs.
By the time Breton left the company in 2005 to serve as French Finance Minister, things were looking up: The company was turning a profit.
22,000 workers must go
Didier Lombard stepped in as CEO later that year, promising shareholders revenue growth, debt reduction, and generous dividends. Though the company had already reduced its headcount by tens of thousands, its fixed costs remained higher than those of some competitors, so Lombard vowed to cut an additional 22,000 people.
To reach its downsizing goal, Lombard told 200 France Télécom executives that “we can no longer protect everyone.”
“We have to get away from this position of a mother hen,” he reportedly told managers, according to the research. “It will be a bit more authoritarian than in the past. It’s our only chance to get the 22,000 [job cuts].” In 2007, Lombard vowed he would “get the departures one way or another.”
To start, the company encouraged additional voluntary departures and offered to help people find new jobs, but got few takers. Many workers were civil servants who expected job security for life. And, at the time, unemployment was also high in the country—between 7 and 12 percent—making it difficult for workers to find new jobs.
Managers asked to demote and degrade workers
In late 2006, the firm ended its early retirement program and shifted to more aggressive steps to downsize staff.
The company restructured its workforce, reportedly demoting many of its highly experienced technicians to low-skilled commercial roles. For some, this meant “going from a position of considerable autonomy and professional status to a situation in which they had to read a script from a headset, sell products over the phone, and ask permission to use the toilet,” the case says.
Managers strictly monitored attendance and behavior, asked some workers to reapply for their jobs, and gave what seemed like unmanageable workloads to others. Some employees returned from vacation to find that a company car, badge, or desk had been stripped from them.
During performance reviews, company officials told managers to use the word “if”: “If we shut down the service” or “If we transfer you to a new role,” the case says. Officials also encouraged managers to move workers who weren’t meeting expectations to new workspaces or even remove their office chairs.
Some who resisted a new role or location were left with no office to go to and no work to do. Managers were told to expect the five stages of grief from their upset subordinates—the Kübler-Ross model typically associated with handling death.
Senior leaders told lower-level managers to drum up evidence of low productivity in case lawsuits arose related to employee departures. Company officials kept a careful count of departing workers and doled out bonuses to managers based on the number of workers in their groups that left.
Managers and workers alike exhibit stress
Many managers, especially those who weren’t pushing enough people out, worried they were on the chopping block themselves. One manager who had overseen 200 workers was accused of “professional incompetence” and abruptly relocated across the country. “I have no work anymore,” he reportedly said. “I am not even in the organizational chart. Imagine how isolated I feel … I have this unbearable feeling of worthlessness. I am good at nothing, a parasite.”
Union surveys found that two-thirds of respondents were stressed and half wanted to quit. Local physicians told the firm’s head of human resources that many employees were suffering from mental health issues, including anxiety and depression, sleep and appetite disorders, and addiction. Some workers had hanged themselves or set themselves on fire, while others had jumped out of windows, off highway overpasses, or onto train tracks.
According to the case, the majority of suicides were “male technicians in their 50s who joined France Télécom before privatization and were disoriented by the company’s multiple restructurings.”
“You are left with the most vulnerable people in the organization, who passed up earlier opportunities to leave,” Whillans said. “Now management was focusing on them to an even greater extent, creating more of a perceived threat. The organization turned against these workers as if they were the ones causing the problems.”
Acting on a complaint from a French labor union, a French prosecutor in 2009 opened an inquiry. Lombard appeared on TV the next day to argue that the employee suicides were unrelated to work and were a “fad,” a comment that he later acknowledged was an “enormous gaffe.”
Company officials guilty of harassment
In February 2010, French labor inspector Sylvie Catala found that the company’s “moral harassment” had “endangered human life.” She blamed Lombard, deputy chief executive Louis-Pierre Wenés, and chief HR officer Olivier Barberot for putting intense pressure on middle management, who passed this pressure on to other workers without considering the “psychosocial risks.”
Soon afterward, Lombard stepped down as CEO, and in 2012, French authorities charged France Télécom and the three executives with institutional harassment. During the trial, Lombard denied any wrongdoing, saying that he was making difficult cuts to save the company from bankruptcy.
In 2019, the French court found the three executives guilty, and each was sentenced to a year in jail, with eight months suspended. The ruling made clear that it was the “means chosen to reach the departures,” not the departures themselves, that were illegal. Four other executives were found guilty of complicity. France Télécom was fined 75,000 euros—the maximum amount allowed by French law at the time. The defendants were also ordered to pay about 3 million euros in damages to victims.
What could the firm have done differently?
When Montgomery teaches the cases in executive education classes at HBS, her students, who are business executives, tend to focus initially on external factors to explain the company’s difficulties—including increased competition in the industry and the inflexibility of French labor laws and unions—rather than management decisions.
When they learn about the suicides, however, “there’s a stunned hush in the room,” Montgomery says, “then the floodgates open. Personal stories and frustrations flow; the mood completely changes. We hear from people who feel they’ve been caught in similar dramas—from one side of the desk or the other.”
Then executives consider ways in which management might have acted more strategically earlier in the process—for example by handling things differently in the initial phases of the restructuring, pushing back against the French government and other shareholders by resisting the pressure for increased dividends, or more accurately gauging the likely acceleration of competition and its implications for employees.
“People understand that sometimes downsizing is necessary, but the way it was carried out in this case had huge implications,” Montgomery says. “Top management went in with a playbook, and even when it was played out, they just continued to plow through, to push, head down, rather than pull back and rethink the situation. The humanity was lost.”
For starters, says Whillans, in laying people off, management could have included employees more proactively in the process, rather than taking an antagonistic stance against them.
“Just a feeling of being included in the conversation can make employees feel as if the situation is less out of their control,” says Whillans. “It can make them feel more safe and secure, and move them out of a threat mindset into more of an opportunity mindset.”
And management could have considered more creative solutions to staffing issues—for example, offering furloughs instead of layoffs in some cases.
“The government still continued to be a shareholder and cared a lot about dividends, so the leader faced this huge burden of performance, which perhaps could have been lessened,” says Montgomery. “Rather than negotiating, he just became more stuck, and more and more narrowly concerned about the numbers.”
A compassionate approach to restructuring
France Télécom’s story should be a wakeup call for companies that charge ahead with disruptive reorganizations. Some employees—especially older, longtime workers—can feel left behind, which research suggests can create feelings of loss of purpose, and in turn put workers at a greater risk for depression, opioid addiction, and even suicide, Whillans says.
“It’s important for managers to realize the psychological threat that workers are facing as they come up against ageism and structural unemployment,” says Whillans. “It’s a hugely under-discussed issue.”
Learning from the missteps of France Télécom can help business leaders take a more compassionate approach to restructuring, even when competitive pressures make those changes necessary. Sometimes that means taking a breath before single-mindedly executing a plan that may cause damage, while other times it requires pivoting along the way.
“As a manager in a really challenging situation, the impulse is to just do the thing in front of you; it isn’t to stop, reflect, and think about how you might do things differently,” says Whillans. “We make worse decisions when we are myopically focused. It’s better to pause, take a look around, and reconsider the situation.”
Source: hbswk.hbs.edu
