Understanding Layoffs Mike Hake Intisar Khanani Monique Box Wes Kepler Jeff Brunson

Overview Disadvantages of Layoffs Alternatives to Layoffs When Layoffs Are Done…

Disadvantages of Layoffs Short-term to response to an ailing economy Inappropriately conducted Across the board layoffs Seen as the solution to business problems Short term: don’t take all aspects of the future into account. Inappropriately conducted: Across the Board: don’t retain enough employees to perform necessary services let go top talent due to inadequate workforce planning Seen as The solution: Improving business processes is the key to increased profits; layoffs do not themselves accomplish this

Disadvantages of Layoffs 50% of employees experience decreased morale 41% of employees experience a decreased sense of loyalty 27% increase in resignations 70% of layoffs do not result in increased profits (Turner) Some facts Decreased morale: job security, sense of being appreciated and valued, means less personal interest in seeing the company survive Decreased loyalty: means decreased commitment to company goals

Alternatives to Layoffs “Layoffs are disrupting and difficult for everyone; most organizations are taking steps to avoid them if possible.” Helen Dinan, Society for Human Resources President and CEO A number of alternatives exist

Alternatives to Layoffs Natural Attrition Voluntary Early Retirement Employment Freeze Work Sharing Benefits: maintaining ee morale, loyalty, and commitment while increasing productivity. Natural Attrition: wait for employees to leave of their own accord, and keep their positions empty. This can lead to quick cost savings without many of the negative impacts in a company with high turnover. Voluntary Early Retirement: same idea as attrition—leave positions empty Employment Freeze: use when businesses have lower profits due to decreased business. Retaining current employees forces the business to improve their business plan and perform a productivity analysis. Work Sharing: all employees face cut-backs and “share the pain.” Common bond b/c even executives face these cutbacks. Can reduce work weeks, temporarily reduce wages, etc. Temporary remedy until other reductions such as attrition take place.

Advantages of Layoffs Investors will be pleased Stock prices typically rise Rising stock prices increase shareholder value -Many believe that the instigators behind these layoffs are coming from Wall Street, which is true to an extent. Wall Street does indeed have a major presence and influences among Fortune 1000 companies. The trend along Wall Street seems to be down size your company, and up the value of your stock. Layoffs usually tend to increase stock prices, and therefore shareholder value by reducing labor costs and taking proactive steps to better business practices. Companies need to make sure they are not sending the wrong message to investors; they do not want to be seen as a company with serious problems.

Advantages of Layoffs Businesses can get the same product with fewer workers Labor costs will be lowered Technology is saving companies $ Increased automation According to an article in Forbes, “business can get the same or nearly the same product with fewer workers, suggesting that the job cuts were well conceived” The economy has been experiencing growth, but with this growth has come advanced automation, rapid advancement in technology, and fast paced information. Advanced automation in machinery and assembly have reduced the need for employees who receive low pay and require little skill at their job. Yet, this new technology is enabling the workers to become more productive. This then has reduced the number of employees needed for a given profit level

Advantages of Layoffs Organizations are seen as in tune with current business practices Profits can go up Productivity can go up Organizations are in tune with current business practices, in today’s market the trend is towards downsizing. So when a organization is not meeting its numbers it is an easy excuse that is seen as a common business practice. -Following labor force reductions organizations profits go up by an average of 32% while productivity increases by 25%

When Layoffs Are Done… Interview with Bill McGowen, Sun Micro. Open lines of communication Treat employees with dignity Offer post-employment services “Layoffs are painful but effective. They are due to poor performance management, but they allow the company to restructure.” Open lines of communication to keep trust high Post-employment services: resume help sessions, outplacement services, and career counseling at no extra cost helps with morale and loyalty. Should not be done often—do it once, do it right, and don’t let it happen again.

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