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AN ALTERNATIVE TO LAYOFFS AND JOB CUTS IN ECONOMIC DOWNTURNS
It is difficult to pick up a newspaper or listen to a business news
broadcast, without being greeted with the news of another massive
corporate layoff or cutback. The economy catches a chill and as a
result the corporate world catches a profits "cold" and before long
the pink slips begin to fly. We have come to accept this as the
inevitable employment cycle. Is it any wonder that employees feel so
little loyalty toward their employers?
On the other hand, corporations seem to have no alternatives. With
the squeeze on profits and stockholders and analysts anxiously
watching, company leaders feel that they must act quickly or bear the
wrath of Wall Street. They understand that their response may in
fact be a little shortsighted, but investors have short fuses when it
comes to waiting patiently for the earnings statements to turn
around. Is there any alternative?
The answer is both "yes" and "no." In the short term, some cuts may
be essential, but it is far better to do so by the use of a scalpel,
rather than an ax. Why? Because your organization's long term
future may well be on the line and decided by how you respond to the
present economic downturn. Remember how, just very recently, most
business were in a slightly different predicament? That's right.
The problem was that we were all fighting over the labor pool,
especially for experienced, stable, well-balanced employees who were
likely to actually come in to work on Monday and Friday mornings.
Prepare yourself, because those days are likely to return with a
vengeance later this year or early next. It is unlikely that the
present economic woes will plague us much longer than a few more
quarters. Then watch out! If you thought the market for qualified
workers was tight before, it is likely to become much more so in the
near future. Between early retirements resulting from the present
shakeout, both forced and voluntary, the large number of laid-off and
terminated workers who have opted for entrepreneurship and the
shortage of new workers, especially skilled, available to enter the
workforce in the next few years, virtually all employers may be
singing the employee blues.
What does this have to do with your actions today? Plenty! Today
those losing their jobs are as likely to be well trained and highly
paid individuals with years of experience in the organization, as
they are to be low skilled entry level workers. Cutting them makes
a
large and immediate difference in the bottom line, that is, once the
charge-off for their severance has been taken. However, will they
once again be needed before their termination cost has been
absorbed? Will they soon return as independent contractors at yet
higher costs?
Worse yet, when soon they are again needed, will they be available at
all? If you will recall, the unprecedented ten plus year economic
boom we have enjoyed did not begin overnight. It began slowly,
allowing the necessary time to ramp up employment over many years.
If the present economic downturn ends as quickly as expected, there
will be little breathing time available before demand and output boom
once again. Those companies that are shedding their people wholesale
today may find themselves at an extreme competitive disadvantage
tomorrow.
One more very important aspect needs to be carefully considered.
Today's "right-sizing" is heavily targeting older, more senior
employees. They obviously cost more in salary and in benefits such
as health insurance, thus cutting them makes a larger impact on the
bottom line. Do not forget, however, that the younger workers are
anxiously watching and taking careful note. They are also asking
themselves, "Will this be my fate in ten or fifteen years when I am
forty-five or fifty-five and the economy slows?"
Many corporations are sending a very clear message to younger
employees by their treatment of the more senior people. The younger
employees may not leave now, when the economy is slow, but once the
turnaround occurs, many of them will decide its is time to create for
themselves a more secure future.
If you shouldn't be chopping, but sales and profits are sagging, what
should you do? INNOVATE! It is amazing what cost reductions can be
quickly experienced and what market share gains are possible when we
become innovators and teach each person within our organization's to
do likewise. What's more, by doing so, we position ourselves to jump
ahead of the pack as soon as the economy does begin to turn the
corner.
Any organization can cut its way to profitability in the short term,
but we cannot cut our way to long term GROWTH!
About the Author
John Di Frances is the Managing Partner of DI FRANCES & ASSOCIATES,
LLC founded in 1983. Phone:1-262-968-9850
Fax:1-262-968-9854
208 E Oak Crest Drive
Wales, WI 53183
www.difrances.com
synergy@difrances.com
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