Any benefits are purely temporary and do not address the long-term issues. Long-term problems need long-term solutions. These long-term solutions include figuring out how to attract new customers, what new products and services to offer to consumers, and what potentially profitable new markets should be expanded into. Long-term solutions require long-term thinking, not focusing on what can fix the problem for right now.
Reason 3: Layoffs do not capitalize on the "share-the-pain" philosophy that bonds employees as friends. Employees have often worked for many years with each other and see each other more than they even see their families and relatives, so it is inevitable that they will also be friends.
Survey after survey shows that employees would make individual sacrifices such as reduced hours, job-sharing, pay cuts to avoid their co-workers being laid off.
Reason 4: Firms often find that they wind up hiring back at least some of their laid-off employees as consultants -- at higher salaries. The companies wind up hiring back laid-off employees at much higher consultant fees than they were making previously as employees.
This "re-hiring" happens because management realizes too late that they lost institutional memory and valuable skills in laying off people. Reason 5: Too many decision-makers don't ask the all-important question first: "How will downsizing allow us to serve our customers better"? He points to Southwest Airlines, which, like the rest of its industry peers, suffered during the Great Recession.
And as the economy recovered they transitioned back to their original jobs. Another approach was taken by Steve Jobs, Cascio says, who took advantage of downturns to focus on innovation. It turns out shortly after the recession ended was when the iTunes Store opened. Then after the Great Recession, they bring out the iPad in and People really need to hear examples like this.
Other countries — Germany in particular — have regulations that help to temper the knee-jerk impulse to lay off staff. For Wharton management professor John Kimberly, the key question is how leadership thinks, in the short run and long run, about the way it wants to manage its human capital.
Kimberly says that if a company can manage through a rough patch with creative strategies without laying off, employees will emerge with a greater sense of loyalty, and that loyalty will pay off for the company. Yet in reality there are a lot of costs that layoffs impose on firms. Cobb says options before getting to layoffs include offering early retirement, slowing down hiring and retraining workers.
And there is some indication that firms, worried about loss of talent, are using these options more than they once did, according to the Society for Human Resource Management. But real change would take a shift: understanding that getting long-term gains sometimes means taking short-term lumps. University of Michigan professor Gerald F. Davis argues that for a long period, large corporations were a dominant force in America — through employment practices, expansion choices and community connections — and that now, the U.
As firms have more and more ability to use outside contractors in place of full-time employment and production, many firms do not need to IPO to raise the amounts of capital as did firms for a century prior.
Today, Cobb adds, many firms that do an IPO do so not to raise capital, but to provide a return to early shareholders and employees.
So firms like Google and Facebook are publicly traded, but their ownership is highly concentrated among founders, and the companies use dual-class shares to ensure that the control of the firm remains with the founders. Other firms, like Dell, have gone private, which allows them to make longer-term decisions without the fear of missing quarterly earnings targets.
One might imagine, Cobb suggests, a world where Wall Street has less influence on corporate decision-making. And the question is where we strike the balance between them. The disruptions to the global supply chain hold lessons for both companies and consumers, say Wharton professors Santiago Gallino and Barbara Kahn.
Investors who espouse environmental, social and governance ESG principles will achieve little by selling their shares in so-called "dirty" companies, according to new research co-authored by Wharton's Jules H. Yet rental housing is not a reliable option for most because of lack of development and other challenges.
Meanwhile, many[…]. Log In or sign up to comment. No mention of technological unemployment here. Arguably companies are using layoffs to reduce their need for labor as they rely more on smart machines. That seemed to be the correct context.
The studies referenced are overlooking a major point. The problem with the conclusions these professionals cited is that most, if all companies executing layoffs as a cost reduction measure, are actually eliminating the people with no regard to the work.
Some time ago Boeing announced thousands of layoffs. In addition, layoffs can rupture ties between salespeople and customers. Researchers Paul Williams, M. Sajid Khan, and Earl Naumann have found that customers are more likely to defect after a company conducts layoffs. Geoffrey Love and Matthew S. Employees who are downsized pay a price beyond the immediate loss of their jobs.
The effects follow people throughout their lives. A few companies have been experimenting with better ways to handle their changing workforce needs. So far, the results seem very positive. An analysis of their experiences reveals that an effective workforce change strategy has three main components: a philosophy, a method, and options for a variety of economic conditions. A workforce change philosophy serves as a compass for senior leaders. A philosophy helps leaders answer the following questions:.
The philosophy of the French tire maker Michelin, for example, includes hiring people for their potential rather than for the job. A workforce change strategy should anticipate three different scenarios.
The company also has a defined approach to workforce change and restructuring. Whenever possible, staff at the entities concerned and their representatives are invited to work together to seek and suggest solutions for restoring competitiveness and reducing overcapacity, which may open up an alternative to closing an activity or site. When restructuring is unavoidable, it must be announced as soon as possible and carried out according to the procedures negotiated with the staff representatives.
The ensuing changes on a personal level must be supported for as long as is necessary to ensure that the reclassified employees find a satisfactory solution in terms of standard of living, stability, family life and self-esteem. When Nokia was contemplating that massive workforce reduction in , its senior leaders articulated a philosophy with four core values:.
A company must communicate its intent directly without leaving any of them in the dark or piecing together scraps of information to figure out what the future holds.
Having a clear methodology will allow companies to explore alternatives to layoffs, and if they cannot be avoided, minimize the harm they cause. To establish one, firms need to address three questions:. As a result, Michelin integrated three planning processes—product planning, territory planning, and restructuring planning—into one.
The product-planning groups project their anticipated production for the next five years, and then the territories identify which regions will have too much or too little production capacity and what technologies each factory will need. The restructuring plans come out of the dialogue between the product and territory heads.
For example, in October , Michelin determined that it would have overcapacity for truck tire production in its Budapest factory and decided to close it in mid Michelin has set up an accountability structure that clearly delineates who is responsible for what.
It identifies factories that should be closed or downsized and directly oversees all European restructurings. Finally, Michelin establishes a committee for each factory that will be affected, consisting of regional and country executives who are responsible for implementing the restructuring plan.
Two senior executives at headquarters—a director of restructuring and a director of product planning—coordinate the entire process. Like any other good strategy, an effective workforce change strategy includes goals against which success can be measured. An example of these comes from Honeywell.
As it turns out, the firm was able to improve substantially on all three measures. To monitor progress on the second goal, performance against competitors, financial data providers developed two measures: the percent change in operating income from the — peak to , and total stock returns in And at A workforce change strategy should anticipate three different scenarios: a healthy present, short-term economic volatility, and an uncertain future. A healthy present. In the immediate term, senior leaders should practice disciplined hiring and use stringent performance metrics to build a strong organization that can weather change.
A lean approach to staffing will help companies avoid yo-yoing between overexuberant hiring during growth and damaging staff reductions when demand falls. Before Cote began his turnaround in , Honeywell had a policy of hiring freely during good times and then cutting jobs in downturns.
The drastic head count reduction of was too much for Cote, who responded by introducing hiring controls. Too often managers use layoffs as an excuse to avoid difficult discussions about performance. Lincoln Electric, an arc-welding products and consumables manufacturer headquartered in Cleveland, Ohio, has had a no-layoff policy in its U. Part of the reason it maintains that policy is that it has a reputation for high-quality and efficient staff, thanks to very strict performance standards and a rigorous evaluation process.
Employees are assessed twice a year in five areas. Performance is competitive within departments, and performance ratings are tied to a merit-based compensation system. Short-term volatility. Experienced managers develop a range of ways to reduce costs without resorting to destructive layoffs.
Three approaches implemented by Honeywell, Lincoln Electric, and Recruit Holdings, a Japanese human resources and advertising media conglomerate, demonstrate how much room there is for creative management during downturns. During the Great Recession, Cote used furloughs instead of layoffs at Honeywell. Having weathered three recessions when he was at GE, he had developed a sense for when a business cycle might run its course.
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