Another Article on Firms that Don’t Use Layoffs
Here’s a follow up to my recent post on layoffs (or not to layoff). There was a lot of good discussion and I’ll amplify my point that it’s got to be part of your corporate DNA to manage in a way that allows you to avoid layoffs. If you haven’t built your company around that philosophy, it’s probably impossible to avoid the need to “cut heads” by suddenly deciding at some point “we want a no-layoff philosophy.”
The WSJ article had other examples of no-layoff firms.
As layoffs mount amid the slowing economy, some employers are cutting costs without axing jobs.
Hypertherm Inc. has never laid off a permanent employee in its 40-year history. A 20% downturn in sales in recent months led the closely held maker of metal-cutting equipment to eliminate overtime, cut temporary staff and delay a facility expansion, says Chief Executive Dick Couch.
Managers are transferring employees to busy segments from those with less work. The Hanover, N.H., company also may bring some outsourced manufacturing in-house to keep its 1,100 workers busy, Mr. Couch says.
I really disagree with the idea thrown out by the Oliver Wyman consultant:
Some workplace experts say layoffs are a useful part of the business cycle, allowing employers to weed out poor performers, increase efficiency and promote a high-performance culture. Layoffs “are not inherently bad,” says Mark Nadler, a partner at management consultancy Oliver Wyman’s Delta practice. “Some people…are just more crucial to the survival of the organization than others.”
That’s so anti-Deming… “perform highly or you’re fired!!!” If only life (and management) were that simple. If you truly have to get rid of a poor performer, why mask it mass layoffs? Because of legal issues? Do layoffs really drive true efficiency? If you just get rid of people and don’t have any process improvement, sure people “get by” but what corners get cut in the process? How does quality suffer? Seems like a pretty irresponsible (and ineffective?) way to improve efficiency. Any comments on his last statement??
Heidi, on the WSJ comments section, said this well and it mirrors my thoughts exactly
The comment by Mark Nadler that layoffs allow companies to get rid of low performers shows how lazy management at some companies has become. If a person is a chronically low performer, they should be trained, counseled, redirected and then possibly let go well before a lay off. If companies work with their staff to ensure best performance all of the time, then perhaps they can avoid some of the down turns. Using layoffs is like using an atomic bomb to kill a housefly.
As Andy suggested in his comment to my earlier post, the constant hiring and firing has costs that are real, but hard to quantify in the “here’s how much our layoffs are going to save us” analysis.
Others say employers often underestimate or overlook the costs of layoffs. Anat Lechner, clinical associate professor of management at New York University’s Stern School of Business, cites expenses for planning, legal fees, severance, outplacement and redistributing work. Layoffs also reduce productivity among survivors and cost a company institutional knowledge, she says.
Add the cost of recruiting and training new workers when business picks up, and layoffs “simply do not make any sense,” Ms. Lechner says.
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The article also lists other things that companies do to cut costs to avoid layoffs, some painful and maybe also harmful to the business in the long term.
- freezing hiring
- offering voluntary retirement packages
- cutting hours (or going to 4×8 work weeks)
- reducing salaries
- delaying raises
- raising employee health-care contributions
- cutting bonuses (Dr. Deming might ask “did they really help to begin with?”)
- cutting employer contributions to retirement plans
- cutting budgets for training, travel and other perquisites (does cutting training also kill organizational knowledge?)
Oh, don’t forget taking the batteries out of clocks. Probably not a recommended strategy.
This was the real eye-popper to me (having only worked in industry since the mid 90’s):
Until the recession of the early 1980s, both companies and employees considered layoffs temporary, says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School. As the idea of permanent layoffs gained acceptance in the late 1980s and 1990s, employers stopped trying to avoid them, Mr. Cappelli says. Today, many companies argue that alternatives such as across-the-board salary freezes and budget cuts are more harmful, because they can drive away top performers.
So if it hasn’t “always been this way,” it can change back to the way it used to be, right? Do we have “Neutron Jack” to thank for this social acceptance of mass permanent layoffs?