Staff cuts can lead to long-term bleeding
Deirdre McMurdy, Sympatico / MSN Finance
For the past few months, it seems a week has not gone by without news of significant corproate bloodshed: layoffs - often thousands of workers at a time - have become an accepted part of the economic landscape.
Given the dire circumstances in which many companies suddenly find themselves, it's not surprising: they have to cut costs across the board and they have to downsize to cope with reduced demand. They also have to manage the perceptions of investors and other stakeholders - and therein can lie a problem with long-term implications.
First of all, there's the herd mentality to consider. CEOs all too often tend to watch what those around them do - and then they emulate it. In boom times, that often leads to excessive prices paid for mergers and acquisitions - or whatever is trendy at the time. In downswings, cutting staff takes on an equally competitive edge and it's seen as sending an important signal to the outside world that the company must be on the right track because of the number of scalps littering the lawn.
But relying too heavily on employee cuts can often mean that other, more creative and cost-efficient changes aren't even considered. Surely in every organization there are other, supplementary ways to pare back budgets?
The other thing is that based on accepted practice, seniority often counts and people who've been in a job for a long time get precedence. That's short-sighted in terms of future growth and nurturing of the next wave of talent. It also means that when the recover sets in - as it inevitably will - a company may have built a reputation in hard times that makes talent harder to recruit.
There's much more to being an effective manager than knowing how to swing an axe. It's just that sometimes that reality gets overlooked.
Posted by: Dave Mitchell | Jan 27, 2022 11:02:49 AM
Cutting productive staff, the workers and producers and keeping management staff, "the core" in place makes about as much sense as a dairy farmer getting rid of his cows if the price of milk were to drop. If and when there is a recovery the companys with staff in place stand to benefit since they dont have to rehire, retrain or reintegrate new personell. Early retirement programs don't necessarily make any sense either, if a companies strength is its people why get rid of the most experianced and therefore most valuble assets. So too suvive a company shouild first look outside of the box, are there other revenue sources, can they put employees to work looking to improve effiency, reduce waste, improve quality and possibly find agreeable ways to tighten the belts of all staff including senior magement. Now is the time to cut the chaff, to investgate ways to lure business away from competitors, and to agressively look for ways to benefit from the mistakes of competitors.
Posted by: Kate | Jan 28, 2022 2:19:28 AM
In today's world word of mouth and reputation is everything! How you treat your customers and employees can come back to haunt your business later on.
I think that the media is a bit at fault here for over publisizing the economic doom & gloom, and that does nothing to help the situation at all infact it probably makes it far worse!
There is mass hysteria, mass cutting and downsizing, and my question is," Does it really need to be??" No, I think probably NOT, and this running with the pack mentality certainly doesn't set one's company apart from the others!
Posted by: Stan | Feb 3, 2022 8:43:41 PM
I have to shake my head in wonderment when I hear or read that the sub-prime mortgage has caused the problem we are now in. I am of the opinion that this problem started before this came an issue.
Back a decade or so companies started buying up profitable companies and paying above the share price for that company. These companies all of a sudden were carring debt. They down sized thus adding to their debt load. Since they had all this debt load renumeration to the middle class employees in these organizations did not keep up with inflation.Consumers started to demand lower prices on consumer goods.The only way business could provide this was to off-shore some or all their production. Over the last three or four decades the middle class employees have been encouraged to put away funds for a rainy day. There is many products in the market place many of these products invested in the stock market. How many times in resent years have I heard market was down because of profit takeing. As the postwar generation gets ready to retire they are finding that all this money that they put in these accounts is gone along with their dreams of retirement.
The fininical industry requires to be regulated from goble perspective.Stan