In this economic slump, most executives are following the most common method of addressing declining revenues — relaxing workers. Before you think downsizing solves your company’s financial problems, look at what experts and researchers have discovered about the unexpected consequences of lay-offs. In an article reviewing the research on the subject, Carolos Berfield argues that the direct costs of outplacement lay-offs and severance pay that initially add up, but indirect costs — such as the loss of experienced sales and marketing staff with good customer relationships — can cause permanent harm to a company.
How do lay-offs affect the performance of a company? According to an article in the New York Times entitled “The Disposable American,” some of the brightest and most experienced workers are either laid off or on leave. The study concluded that there was a significant loss of business efficiency in the post-disposal climate. The study went on to say that over 18 years, S&P 500 companies that did not rely on lay-offs to boost results outperformed those dependent on lay-offs. In an article in Inc.com magazine, author Carole Matthews notes that the cost of ramping up after a recession is higher than the cost of saving lay-offs. Finally, there is the public or consumer view of the lay-offs. If you buy from a company that treats its employees poorly, you may prefer to buy from a non-profit company. Here are some ideas from recent research:
• Emergency work lay-offs for 4-6 weeks
• Pre-retirement benefit
• Establish contingent labor force
• Sharing of work
• Long working hours or weeks;
• Homework plans;
• Reductions for all employees
• Loan to other entities
• Reassignments coupled with freezes
• Provisions for more generous absence
• Freeze’s overtime;
• Unpaid vacations and absences;
• Reduction of emergency benefits
Although not all of these steps may seem attractive to workers and companies, the establishment of a normal first wholesale lay-off plan has both hidden costs and considerable long-term damage to companies.