Amazingly, an un-trivialized, un-sensationalized Newsweek cover story written by an academic. The author cites several studies that have shown the supposed benefits of corporate layoffs may not hold water. Sure layoffs help the bottom line (temporarily), but also eat into sales, and a company's stock value actually suffers. So it's a net neutral or even negative proposition. And no company ever rebounded from a major layoff to take more market share and greatly increase revenues. In fact it's often just a postponement of losses or the opposite effect, as rivals smell blood in the water and use the opportunity to snatch up talent. Clearly a trend exists that successful companies with good management have fewer layoffs. Southwest, Aflac, and Microsoft have had zero until 2009, while bumbling Delta and GM seem to engage in the practice regularly. And how can we forget Circuit City's Waterloo, when they decided to cut costs by laying off the subset of their sales staff making the highest salaries? Of course those people were also their best workers, so they slaughtered their milk cow for meat while Best Buy swept in to fill the void.
And what about all those socialist European nations with labor laws making it much harder to sack workers? Their labor force must be a lot lazier than America's, right? Well it turns out that worker productivity is actually better in nations with stronger layoff restrictions, like France and Sweden. What a revelation that workers who feel disrespected by aloof management and are terrified of losing their jobs (and health insurance) won't be as dedicated to the company and as focused on doing great work. Economically, America seems to have the tendency to motivate people with the stick rather than carrot. And of course there are the negative externalities of layoffs, such as mental and physical illness, destructive behavior, and reduced spending.
Everyone and their mother knows this, except it seems for the managers who sign the pink slips. They continue the destructive habit because middle managers believe that layoffs can help their careers. If they show their VP that they cut head count and still maintained or improved productivity (by whatever BS metrics they pull out of their asses), it shows they're a great leaders and deserve a bonus (paid for by their laid off staff). As is typical with America, the greed and ambition of a few end up hurting the organization as a whole and many innocent people along the way.
Layoffs just trigger a downward spiral anyway. Management decides to reduce the workforce to save money, but morale and productivity also suffer. Probably the layoffs were not conducted very sensitively, so it puts everyone on edge and many good employees quit even if their jobs were not in danger. The collective human capital of the company suffers, and sales follow. The bottom lines looks bad again, so management decides on another round of layoffs, and so it goes. The bottom line is dictated by costs AND revenues. Maybe instead of the kneejerk layoff reaction, struggling companies could actually figure out how to develop their workers to get the most out of them, which will result in better worker satisfaction, performance, and ultimately earnings. Isn't that real leadership? Any jerk can fire someone, but can you inspire them to do better?
On that note, has anyone seen "Up in the Air"?
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