Posted by: Matthew Molinari | April 20, 2011

The Layoff (Blog #16)

Layoffs are never easy but handling them wrong can make the whole process even harder. In some cases, the decision can be just as hard on the employees who stay with the company as those who were asked to leave. It was interesting to see that layoffs can actually have the complete opposite effect on the company’s future than what is expected.

Between the lag of seeing the savings on salaries, around 18 months, the loss of morality for employees who stay and the cost to eventually replace the positions once the company turns around, the layoff “answer” should be the last resort. Really, most people wouldn’t think of layoffs as the first option but the upper management at Astrigo all pointed to reducing the work force by 10% as the best way to reduce costs.

What was interesting was that each person had a different  view of which 10% should go. Some saw the most tenured employees as an asset, some saw them as deadwood, some saw them as the most expensive to cut. Others looked toward the new hires as the answer. To some, they would be the cheapest to cut while for others, they were the most talented and had the brightest upside for the future of the company. When one said giving nice severance packages would help draw future hires, another said firing the new hires would make it difficult to find qualified candidates in the future.

So what is the answer? Really, there probably isn’t a right answer but just the best answer for your company. I think the best thing to do is make any solution fair and be honest about it. The worst thing Astrigo did was to drag out the decision and let rumors fly. This hurts morale which in turn leads to dissatisfied employees which can hurt customer service and lead to further reduction of the bottom line.

There also seems to be a lot of backlash in the last 10 years from employees who see their upper management spending fortunes on parties and other expenses while the company goes under. Really, since employees make the company, cost cutting should start from the top and move downwards so that employees can see the cuts are happening to the company as a whole and not just to the employees. Cuts are never easy but at least that way, they seem as fair as possible.


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