THE COST OF CUTTING JOBS

An Unprecedented Phenomenon

·         The astounding number of job cuts in recent times has sent shockwaves around the world.

·         Following their below-par performance in 2008, some of the biggest names in the world of business were forced to downsize considerably and this trend is expected to continue for some more time.

·         From finance to automobiles, chemicals and consumer products, there is not a single sector that has been spared the ordeal.

·         While many companies have been on these rough rides before, there are others that are struggling to cope with the sudden reversal of fortunes.

The Cause

·         With the Financial Crisis making its presence felt across the world, most analysts don’t feel the need to search long and hard for the cause of the layoffs.

·         But, there are some who question the wisdom of laying the blame entirely on one cause. According to them, the crisis merely exposed the inherent weakness in the methods of working that some companies have adopted for years.

·         These faults never showed up as long as the economy was on the way up. They only became evident on the downward spiral.

·         To highlight this, experts point out how the crisis has failed to affect companies that work efficiently and whose products have a ready market.

·         According to some experts, layoffs are short-term measures at best. In all likelihood, companies are opting for this approach to fulfil their immediate goal of showing the current quarter’s performance in better light.

·         But, these stop-gap measures are actually compounding the issue. Companies are, perhaps, forgetting that downsizing will hit their performance; hardly desirable when the performance is heading south anyway. They also think that employees can be hired again when things change for the better, while ignoring the cost involved in doing so.

·         In short, it is a vicious cycle. Companies will downsize because they are in trouble and because of downsizing they will continue to slide into trouble.

·         Recession also has a habit of feeding on itself. Job losses contribute to weaker consumer spending, which causes the loss of more jobs in sectors like retail.

·         Layoffs are not an extraordinary step. In a strong economy, an individual company or even an entire business sector that is not doing well may resort to layoffs to improve their situation. But, in the present scenario, many companies are dumping jobs at the same time. As a result, the economy does not get a chance to recover.  

·         As mentioned earlier, not all downsizing is due to the economic crisis. Some companies have been forced to adopt harsh methods because of a declining demand for their core product. For example, it is common news that a loss of market for its PCs has hit Microsoft really hard, causing the company to shed jobs.

·         But, this decision was also prompted by Microsoft’s desire to diversify into other avenues, a desire that was obvious when it attempted to buy Yahoo a year ago. In fact, Microsoft is planning to hire personnel specializing in other fields to launch a fresh attempt to buy Yahoo. The layoffs are a strategic decision, rather than forced by the economic slump.

The Effects

·         Job cuts are usually the last resort, adopted only after other cost-cutting processes, such as reduced wages etc., have failed.

·         Companies that opt for job cuts usually have to deal with a lot of underlying problems. Managers need to select and notify employees, a task that is emotionally demanding.

·         The period after the layoffs is quite often characterized by a struggle to manage operations.

·         The management has to devote time to chalk out new business processes to handle assignments with the downsized staff. The prospect of losing out on important projects because of being understaffed to efficiently handle them is an ever-present danger.

·         The management also ends up devoting most of its time to employees who are being laid off and ignoring those who remain. There is little wonder, therefore, that the survivors complain of increased workload, lack of direction and a feeling of being undervalued and unappreciated.

·         The organization suffers as it lacks the confidence to take risks. There are increased rifts and differences between employees and an increase in the competition for resources within the organization.

·         There is also no reason to believe that the economy will never pullout of its nosedive. Therefore, companies need to be careful not to panic and downsize to such an extent that they lose out on competent people and, thus, fail to capitalize when growth options showup again.

·         As odd as it sounds, economic downswings have their uses. They help to eliminate inefficient business practices leaving behind only the best and most competitive.