Nokia, IBM, SAP, Dell lays off.
TCS comtemplating lay offs.
Till March 18th, 310,714 lay offs (Source).
Prime driving factor is the economic downturn and hence there is a huge pressure to bring finances under control.
Does it really help?
No, I don't think so. The reason "usually" cited when an employee is fired is non-performance within his skill set which got him/her the job in the first place. The reasons do not connect really well and these people probably should not have been hired at all.
While enterprises heave a sigh of relief by laying people off, I think they may be in for bigger trouble by inducing an increased sense of insecurity into the people who survive the lay offs. It does not stop there. The insecurity results in stress at work, depression and health issues. The perception of the employees about the company changes for the worse and these are the people trusted with carrying the company forward.
A survey on layoff survivors reveal some interesting statistics:
1. 87% of surviving workers say they are less likely to recommend their organization as a good place to work
2. 64% of surviving workers say the productivity of their colleagues has also declined.
3. 81% of surviving workers say the service that customers receive has declined.
4. 77% of surviving workers say they see more errors and mistakes being made.
5. 61% of surviving workers say they believe their company’s future prospects are worse.
So here is what I have to say. Laying people off is the least effective way and pay cuts is a the way to go. The teams will be in place and employees will respect the management. The concern may be that these employees become vulnerable to competitive hires, but in this economic slump, who is hiring? With that in mind, when companies have an option either to cut 5% cost or layoff 5% of the employees, why would they even choose the latter? When the market picks up, enterprises holding on to the employees, will be in a better shape than ones who are frantically looking to hire new people to manage the demand generated by their new projects.
Another option is to have employees take vacation with the basic salary till they get new projects. This way they retain the talent and reduce recruitment activities, thereby reducing costs. If these people are shown the door, they are going to send in toxicity into the market which may hurt the brand. Believe me, "word of mouth" is very powerful and with tools likes Facebook and Twitter, information passes virally which can be detrimental to the brand itself.
While it may look like the right choice at the moment, enterprises need to evaluate the third angle which results in inflicting negativity in the employee base who may not be laid off. Also, they need to have a long term vision of where they want to be when the market starts picking up.
Here is an article which questions why CEOs resort to layoffs when such moves no longer seem boost any profits.
Again, I feel, holding on to your employees with paycuts is the best choice.
2 comments:
Hiring processes are extremely flawed. How can you judge everything about a person in a matter of an hour or so? Very often, what you see in the interview is not what you get. During expansionary times, there is no stress on the bottom line of the company and you end up hiring people who are not worth their salary. I have seen that in every group that I have worked with so far. A recession gives you an opportunity to become lean and retain your top employees. Just like you reward people for good performance with promotions and pay hikes, the below average performers should face consequences. It is just the way of the world.
A company should not lay off people it has use for in the future that it cannot find easily. Non-performers who do not fit this criteria can be let go in recessionary times. Enforce pay cuts across an organization and I can tell you the morale is going to be hit too.
The problem with layoffs that most affects the morale is uncertainty. If the company has a clear idea of its plans and this is communicated to the employees, the insecurity could be localized to the people most likely to be fired. This will eliminate the worst effects of layoffs on the employee morale.
I agree with you the recruitment process. The process needs to be rigorous. general trend is to hire with 1 round of Tech interview and then may one HR round. That's about it. But, at companies like Google and Microsoft, you need to go through multiple rounds and anyone who is not good enough will break and never get through.
Paycuts in this situation will probably be well received compared to layoffs because layoffs are going to make people insecure where as paycuts will not.
Communication is very very critical and if communication is right, even paycuts can lead to catastrophe ...
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