Saturday, 7 February 2009

No Layoffs --- Ever !

I came across an interesting article today, from which I stole the title of this post. Click here to read the article.

The article listed 9 American companies that have never had layoffs, ever. They range from $ 11bn turnover Devon Energy to smaller enterprises. One of them has been in business for 81 years. Reading through the list, I noticed some trends.

Many of them are privately owned and do not have to bear the tyranny of quarterly results. Most of them are extremely conservative – neither flashy growth nor steep falls; just steady chugging on. All of them are supremely devoted to their employees. The phrase that caught my eye was “If you a do a good job, you’ll always have a job”. All of them communicate very openly and share the pain during bad times. One employee’s statement summed it all ; “It's an honor and pleasure to work for a company that considers you a valuable individual." Wouldn’t you die to have a workforce like that ?

These days, unfortunately, people losing jobs is all too common news. In China it is estimated that a staggering 20m workers lost their jobs. Half a million Americans have lost their jobs each of the last 2 months. The story is being repeated in most countries.

This lead to me to muse as to whether such scale of job losses are really warranted. Its seems almost a macho thing these days to announce huge job losses – somehow the market interprets this as real action being taken to cut costs. Sure costs have to be shed to stay afloat in choppy waters, but I argue that layoffs should be near the bottom of the cost cutting measures rather than at the top.

The mere threat of job losses is enough to send employee performance spiraling downwards. At a time, when you need dedicated concerted action to ride the downturn, a distracted , fearful workforce is hardly likely to rally together. In other walks of life, disasters bring people together. In business, that rarely seems to happen – you get thrown overboard or you desert the ship. Company cultures are lost in an instant when massive layoffs happen. When the upturn happens again, you emerge a weaker , anaemic organization.

It is one of the most degrading of events to an individual to be laid off for no fault of his. If you are a poor performer, sure, you deserve the boot. But if you were a star performer yesterday, and suddenly you are redundant, that’s a sickening blow in the stomach.

This post simply raises the issue – its too complex an issue to analyse in one post. Perhaps, in a later post, I’ll muse on what might be alternatives.

Most companies, if not all, claim that employees are their most important and precious assets. Really ?


Anonymous said... is indeed a very complex issue and therefore has multiple facets to the same. Indiscrimate layoffs, just to shore up the share price in the next trading session, obviously is a no no. However, in the event of a secular downturn, or if a disruptive technology makes an industry redundant, I suppose there is very little alternative but to go in for this avoidable and painful step, in the interests of the overall benefit of the organisation and the rest of its' people. One would prefer to cut off a part of the body rather than allow gangrene to set in deeper. Not a pleasant analogy, I am sure.
PS Sundaram

Ramesh said...

Yes Sundaram, sometimes it is inevitable, but my arguement is that it should be the last resort and not the first one.

GK said...

Your question - "Most companies, if not all, claim that employees are their most important and precious assets. Really ?"..

Well.... No....

My question - "What is a company? Is it the CEO and his lead honcho?"

Ramesh said...

GK - I think its everybody in a position of authority ; in the context of this post, everybody who decides that layoffs are the thing to do.

hansjoerg said...

The business we are in, the BPO business is very often about restructuring a business maybe even in good days, maybe not for cost saving to save the business, but for other aspects such as better controll or better structure. Very frequently this involves also layoff of good performing staff. Is therefore the BPO business a bad business, no it is not. Not the layoff as such (as much as this is a painful process) is the problem, but how and why it is executed. To me it always comes down to integrety and intention of the leaders.

Ramesh said...

Hansjoerg - Of course BPO isn't a "bad" business. Companies can act responsibly even when they outsource. Why start a captive shared service centre onshore only to outsource 3-4 years later and layoff all those who built it on shore. Retrain and absorb as many of the affected people as possible. Layoff only as the last option, rather than as the first option - this is just a plea for some balance.

Anonymous said...

Pradip- I agree that there is a lot of lipservice being paid to treating employees as valuable assets. I would like to link this article to the one on life long service to the company. The way I see it is that these are 2 sides of the same coin. Employees are more mercenary in the current environment and employers are similarly looking at short term gains; obviously the ones such as the examples above who operate differently have a happy group of employees working for them with low employee turnover rates

Ramesh said...

Absolutely right Pradip. It takes two to tango. I'll post sometime on mercenary employees too ...

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