There has been so much “trimming of fat” and “shedding jobs” in recent weeks that it’s becoming difficult to keep tabs on who is on the verge of collapse. Companies both large and small seem to be cutting employees faster than one can say, “who will be next?”
But when the pendulum dips back the other way, will companies that have downsized a large portion of their employees be prepared for an upswing in momentum? Will they be unable to meet their production standards if they don’t have the proper talent to keep the wheels moving?
Layoffs may not always be the right action to take, especially for small businesses who may be able to find more creative ways to keep their payroll roster intact.
The real cost of layoffs may actually come at a larger price than the pay cuts themselves. When you factor in costs like severance (if applicable), benefits continuance, outplacement, unemployment costs, cashing out vacation accrual, legal fees, and training employees to take on duties left by the vacated worker, a company can be facing a much bigger headache than they had originally mapped out.
Just ask Adobe Systems, who is laying off 600 employees. The terminations will end up costing Adobe about $80,000 per employee, or $50 million total.
Other unforeseen consequences of layoffs may have an even more damaging affect on a company who has an unsteady future. Morale, for example, might dip if employees think their job is in the line, especially if there has already been one round of layoffs. If morale dips, so goes productivity.
Another example is the ripple affect on business that layoffs might have. If a customer of Company A hears they recently laid off a few hundred workers, the customer could very likely decide to take their business to a more stable company, especially if they worked directly with casualties of the layoffs and were angered by the dismissals.
So besides being able to show investors that Q4 is likely to be more profitable than Q3 because of layoffs, what kinds of long-term benefits do companies incur from layoffs? I can’t think of many.
A Wall Street Journal article I read today discusses some interesting and creative ways that companies are coming up with to retain staff and keep morale high. Here are a few:
*Delay planned facility expansion or upgrades
*Cut contract help
*Eliminate overtime
*Offer voluntary retirement packages
*Raise employee health-care contributions
*Cut budgets for training and travel
*Cross-train workers so they may be redeployed to other areas of need
*Bring outsourced manufacturing in-house to keep workers busy
*Adopt a temporary four-day work week
*Allow employees to work at home if possible
*Ask vendors for discounts
*Move to a cheaper office space
What are some creative solutions that your company has implemented rather than resorting to layoffs? And if your company did make some staff cuts, how has it affected your office climate?
Popularity: 6% [?]
December 16th, 2008 at 1:19 pm
Great ideas. Another one is to do away with the 401k match. It may not be the most popular of ideas, but certainly more popular than layoffs. I’d be careful with the work from home idea – a person has to have the right mindset and motivation to pull that one off without sacrificing productivity, and not all employees have it.
December 16th, 2008 at 3:49 pm
Great ideas…..
There are many things that a company can do to avoid cutting head count.
1) The first one is to not over hire. I know this seems easy but it is a huge problem. There are many companies that have too many sales people to make their organization look good or bigger then they are. I have seem 10 experienced, high level sales reps out sell 30 or 40 reps in total. You will have to pay more per head for the 10 but the results, less time to train and less turn over is a huge cost savings.
2) Offer higher stock options or a higher comp…..many people go to work for small companies for the options. You could offer a $100 base and 20,000 options or a $90,000 base and 30,000 options.
3) Work from home saves a great deal of money. Again to the 10 sales people. – They are pros who you dont have to keep your eye on then let them work at home. You can pay for their cell phone and lap top. Saves rent, utilities, etc, etc, etc
4) Invest in the people and they will invest in you. I for one would take a pay cut in the short term if I worked for a small start up in order to keep people who I thought useful to the company. Most companies would not ask this question but if they did they would be suprised who would stay at a lower cost for now in order to keep their jobs or those of their co-workers.
I hope companies will learn from the lessons of today. Work smart and hire the right people. Have a company plan the same way you ask your people to have a plan.
December 16th, 2008 at 3:57 pm
It might cost Adobe $80k per terminated employee, but I am sure their cost per employee is normally closer to $200k (comp+benefits+SGA). The real issue is cutting too soon and too deep – how many of those positions will need to be backfilled because a few babies went out with the bathwater?
Check out Vault’s Layoff Tracker, updated daily:
http://www.vault.com/companies/layoffs.jsp
December 16th, 2008 at 6:35 pm
I have seen problems with retaining people for too long..they end up in positions that don’t suite their strengths within the company and eventually have to leave or be let go. The Big 3 auto and some of their suppliers are going through this right now.
December 17th, 2008 at 11:30 pm
Jobing could fall under that “small business” category and like many companies they have had to shed weight in recent months.
But they have their downsizing to an art form.
1. They don’t “layoff”, they FIRE people! Makes a big difference in unemployment costs.
2. No severance packages offered.
3. They don’t offer any sick or vacation days to any of their employees so no payouts. It also gives them a reason to fire someone if they need time off since there is no set amount of days an employee can have.
So there is the 3 step plan of how to downsize at no financial risk from Jobing.com.
GOOO JOBING!!!
Jobing employee just observing every day,
December 26th, 2008 at 1:07 pm
no they are not
but solution at orgnizational level are limited and short-term, quick fix.
we have to work across the system, sectors and industry, if we seek transformational changes.
also, there are insights about this from Complexity Adaptive Systems theory (how can organization adapt to environmental complexity that leads to lay-offs?)