Closing the Business

In the early 1990s, a former food broker and his wife purchased a small ergonomic consulting company. He had 15 years of sales and marketing experience and had been looking into new business ventures during the previous year. They had minimal knowledge about the ergonomic consulting business, but he was very impressed with the service that he received as a customer. He had ambition to grow the company into new markets, rather than just selling to corporate professionals, and eventually, he wanted to resell the business at a reasonable profit. It had appeared that the company operated by itself and the staff members cared deeply about the company’s success. In the first year and a half, the company made a profit with little effort on the owners’ part because large contracts had been signed before they assumed the business.

In the meanwhile, little effort was given to increase the sales and marketing of the company. In the following two years, a declining economy, aggressive competition, and decreasing human resource budgets led to the company losing profits. This led to downsizing by eliminating equipment, space, and employees. For example, the owners stopped investing in technology, they scaled back from 2,000 to 1,000 square feet, and they began to lay off employees. In addition, when increasing sales was the most critical strategy, the sales staff was reduced to only one person. Then, creditors began calling on a regular basis on overdue accounts and the owners limited employees from buying necessary supplies.

At this point, some of the employees began to notice that the company wasn’t doing well and decided to find employment elsewhere. Others believed in the company’s success and remained there. After owning the business for approximately six years, the owners informed the employees one day before closing the business, and then they claimed bankruptcy. In retrospect, it had been quite obvious that they had been planning the close of the business for sometime.

Should the owners have provided the employees more than one day notice that they were closing the business since that would have been in the employees’ best interest?