I had to stifle a personal laugh today… (’cause this is no laughing matter).
As I was talking with my wife before we started our day I told her I was thinking about the challenges businesses are having with this new economy and how so many companies are laying off employees, but there are other ways to deal with the situation – hence the idea of “[tag]downsizing[/tag] without layoffs”.
I’ve already written a little bit about some of the problems caused by layoffs, and the fact that there are alternatives.
What I was thinking about this morning is a three step approach to dealing with the challenge of decreased orders, sales, & revenue:
- Evaluate the Impact of Layoffs
- Consider Downsizing Alternatives
- Prepare Your Workforce for Change
First, l realize that many companies need to act now to deal with business changes since we are into year 2 of our new economy. These aren’t things that take much time, just attention.
The Impact of Layoffs
As I commented before, research over the last 10-15 years is showing there is no strong evidence that layoffs really address [tag]business success[/tag] in the long-term. They may help deal with a short-term cost problem, but there is no real evidence that the short-term cost savings turn into long-term business success.
In fact, the evidence suggests just the opposite, that layoffs cause long-term business difficulty and even hinder growth.
Scott Hunter reported on the effects of downsizing in “The Negative Effects of Downsizing.” He stated, “Downsizing does indeed increase profits for the organization that undertakes it — but these profits are short-lived.” He then cites a [tag]Wall Street Journal[/tag] report on the results of downsizing:
Desired Outcome: Percent of Firms That Achieved Desired Results
- Reduced Expenses: 46%
- Increased Profits: 32%
- Improved Cash Flow: 24%
- Increased Productivity: 22%
- Increased ROI: 21%
- Increased Competitive Advantage: 19%
- Reduced Bureaucracy: 17%
- Improved Decision Making: 14%
- Increased Customer Satisfaction: 14%
- Increased Sales: 13%
- Increased Market Share: 12%
- Improved Product Quality: 9%
- Technological Advances: 9%
- Increased Innovation: 7%
- Avoidance of a Takeover: 6%
Downsizing alternatives
To my opening comment of why I stifled a (poorly timed) laugh… As I looked at the news I saw this article: “Toyota to Suspend Production for 11 Days in Japan.”
“We are coping with a slump in global sales,” Toyota spokesman Hideaki Homma said Tuesday. “Demand in the world auto market is so depressed that every model is falling sharply in sales.”
Toyota said last year that it was stopping production at its 12 domestic plants for three days in January. But it decided on additional closures because of the global downturn. Toyota will stop output for six days in February and five days in March, it said.
What is it about the differences in Western and Eastern cultures that allows a company the size of Toyota to ‘suspend production for 11 days’? This is obviously a drastic measure, and will dramatically affect the employees of Toyota in Japan.
How many large companies in the U.S. have taken this step to deal with the changes in the economy? Or some other steps? What are the [tag]alternatives to downsizing[/tag]?
In my earlier post I identified these alternatives:
- Reduce or Eliminate Bonuses
- Delay Pay Increases
- Delay New Hire Start Dates or Revoke Job Offers
- Unpaid Vacations
- Redeployment
- Retraining
Will they get the job done? Maybe.
What about:
- Suspending production (i.e., days people aren’t working, and not getting paid)
- Pay decreases
- Shortened workweeks (i.e., same pay rate, but less weekly pay)
- Rotating work shifts (i.e., 1 day off every other week)
Our culture has a hard time even thinking about this kind of thing, let alone acting on it. From a business perspective, does it address the cost issue? Yes. From an employee perspective does it address the work & pay issue? Ahh, there’s the rub…
Knowing Your Workforce’s Ability to Change
How many people would willingly take a [tag]cut in pay[/tag]? If you come up with other than zero, let me know your logic.
But, how many people would willingly take a cut in pay (perhaps via one of the different methods above) to avoid a layoff? Perhaps some would. Yes, these individuals would still have their personal challenges of mortgages and bills, but would still have a constant income – and work.
Last question, and more importantly, how many people would willing take a cut in pay to save a job and a business. You might if it is your business.
Knowing how invested your employees are in your business is critical to knowing how well you can weather a storm – or a change – to deal with a situation. Good, [tag]talented employees[/tag] will always be able to find work somewhere, even in today’s job market. Laying off part of your workforce may leave those who remain wondering when, not if, the next [tag]layoff[/tag] will occur and who will be let go.
Laying off part of your organization sends the message to the rest of the organization “start looking for another job.”
One study identified five levels of emotion a “survivor” may feel (Unfairness…, Worry…, Overworked…, Uncertainty…, and Isolated…). In each of these categories, the survivors overarching feeling was negative. As noted in this quote:
“the most frequently expressed emotions by survivors in the Power Company were perceptions of unfairness, mistrust, shock and demoralization. Survivors perceived the process and procedures related to the redundancy as ‘unfairly’ implemented. These findings show that survivors felt a strong sense of being ‘let down’ by the organization and that their psychological contract with the organization had been broken. This not only ‘shocked’ the employees but destroyed the trust previously established between the management and survivors. The findings show that survivors blamed the organization for the redundancies although the reasoning behind the redundancies (privatization) was outside the control of management. Survivors were found to focus their negative reactions towards the management and in particular senior management throughout the redundancy program.” (emphasis added)
Doing all you can to keep your employees, even in the tough times, sends the message “you are important enough to me in running this business that we’ll find a way to make this work together.”
Whose team would you rather be on?
[If you'd like to know more about your workforce and their ability to change, contact me or check out these tools.]
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