There seem to continue to be some fallacious ways of thinking in your reply. It is very common for people to always think that more humanity-affirming ways will apply to "someone else" but never to them. I have actually heard people claim exactly the opposite of what you have said -- that non-stack-ranking may work in a service business, but not a product business! The grass is always greener I guess.

The brass tacks economics always matter, of course. Your situation suggests to me that you have over-hired, or hired incorrectly. Rather than creating a company culture whereby people are pruned, it would create a better workplace to simply not hire too many people to begin with. Operate in a leaner fashion, even scaling back revenue opportunities and saying "no" to new business when you have to, so as to disallow the company to grow in unsustainable ways that then lead to a hard requirement for layoffs. This won't be possible 100% of the time, but going for a stack ranking approach instead is like you are just giving up on intelligent, sustainable growth and instead saying you will grow randomly and unsustainably, and then simply fire people when you have to pare back.

There is also the question of how much of a financial cushion you leave yourself. Instead of being "forced by the economics of [your] industry to let people go" you should use your knowledge of those industry economics to build a safety cushion that allows you to continue supporting everyone's payroll through the lean times. Yes, sometimes the lean times go on so long that you can't do this indefinitely, but the more you budget for it, the better.

Basically, I do not see anything about your situation that makes it special in these regards. I've worked in statistics consulting firms before, where the work is highly variable and where the business really needs a high level of productivity from everyone. Even in that situation, the company was able to avoid layoffs by planning ahead, hiring conservatively and hiring for versatile workers with broad skill sets, and budgeting for safety payroll cushion to express the company's value that avoiding layoffs until the absolute last minute (and communicating very transparently about it all the time) was deeply important.

If you read more from the Wiki article that I linked, you'll also see some of Deming's well-known criticisms of stack ranking -- and Deming was a well-known productivity expert [0] who helped many Japanese firms gain international reputations for efficiency and quality (firms that faced tough brass tack market economics just like you do, but without resorting to stack ranking).

Many of the negative sides of stack ranking could have deleterious effects on your business even during times when you do not need to fire anyone. It is known to affect morale and productivity very badly. It is known to be highly susceptible to office politics and cronyism, especially when times are tough and employees scramble to secure their position. This in turn often leads to a combative and overtly zero-sum / competitive workplace, which is well-known to be bad for productivity (I imagine especially in a service business).

At any rate, it seems like the specifics of your situation which you are using to justify stack ranking don't actually indicate that stack ranking would be useful or productive for you, and in fact suggest that it might even be counter-productive.

The best recommendation I can give is for you to deeply question and re-evaluate some of the assumptions you seem to be working on (for example, that there's no way to address both the market economic constraints on your business and also the need for company values which preclude frequent layoffs and promote longer-term investment in employees). Without re-thinking some of these assumptions, I think it's doubtful that any method of determining who to layoff is going to be constructive for you.

[0] < https://en.wikipedia.org/wiki/W._Edwards_Deming#Seven_Deadly... >