This is a powerful image for those impacted by recent layoffs. The article published
in the Feb 15 edition discusses why layoffs are bad for business. In particular
the author, Stanford professor, Jeffery Pfeffer summarized a few top reasons why
layoffs don’t work.
Doesn’t give the returns expected. In
terms of stock, Pfeffer points to research that shows stock prices go much
lower compared to peers who struggled but did not layoff. The cost of rehiring
and retraining employees down the road, plus the severance packages awarded,
also don’t reduce the overall cost of the action.
We export jobs as a result. Many
countries grow as a result of taking down our workforce.
Morale and productivity shifts. For
those that have to stay and take on extra work, or deal with the emotional loss
of co-workers, has a big impact on business operations. How businesses handle
layoffs is key as well as how expectations are set with those who stay. Pfeffer
also mentioned research that shows benefit costs increase as a result of
layoff.
The big
point Pfeffer mentions is that layoffs have become part of doing business –
not as survival tactic, but as a matter of regular cost reductions. The myth
that companies are immediately better off due to layoffs has grown so widely
that the practice is considered normal even if the business is doing ok. Furthermore,
in the last year due to so many business closures, companies felt the pressure
to copycat and have some kind of layoff to show they are “with the times.” No
matter how you look at it – layoffs should remain as they always have been – a last
resort to keep a business afloat, not a feeble attempt at strategic ROI.
