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Is lay off the only measure to ensure cost cutting? Should companies not take it as a last resort to ensure trust in their employees?
Related to country: India

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This is a question I have been Asking people from quite some time and interestingly got lots of different replies by people across the globe. Here are a few, hope you will enjoying reading:

George Sibbald: Some see periodic cuts as health for any company. Jack Welch cut 10% every year. Do you think there is more to head count cuts? Maybe you are missing the point?

Where as "unpaid days off" gets people waiting for the next shoe to drop. Sure to dive productivity into the tank.

First rule of head count reduction do it fast and deep BUT only once, the work on productivity

Eric Quéré: Having been on the business end of the axe, more than once I can empathize! However, please allow me to play Devil’s advocate, and shed some light from a different perspective.

Employer’s view:
Lets say for instance that your gross salary is $150,000/year. Your employer’s total cost for you is over $200,000. Therefore, if you are laid off your employer adds $200,000+ to the bottom line.


Employee’s view:
Lets say for instance that your gross salary is $150,000/year. One day you get an offer for a similar position paying $200,000+, will you leave the current position? I will not pretend to know your mind, but I will say that the prospect would be hard, very hard, to ignore.


We can see that loyalty does not really exist from either side. That is why when you get hired you are asked to sign a document stating that you understand that your employment is “At will” and can be terminated at any time with or without cause, and you have the same, unwritten, right to quite at any time with or without cause.

Richard Fournier: This is a very timely and interesting question. A question that many of us have had to make the difficult decisions on.

Layoff's come in different flavors.
1) Performance management and continuous top grading to ensure you keep/recognize the top performers and weed out the disconnected. A healthy 10% annually will keep the teams fresh.

2) Hard times requiring cost cutting.

When layoff's occur during hard times as a cost cutting exercise, it should be one of the last places one looks, unless you're extremely fat and know what dead wood you need to shave off without impact.

There are many ways of cutting costs without impacting people and productivity. It is amazing what a forensics accountant will find as they go through the ledgers with a mandate of find every dollar we don't need to spend. They'll find you every penny.

As examples: How much does your firm spend on:

 Office supplies that grow legs and walk away
 Entertainment such as seats or boxes to professional sporting events
 Paid food and beverages
 Overtime and on-call pay
 Cost of ownership on hardware and software. Do you really need the maintenance contracts and why. It may be cheaper to buy spares than a full maintenance contract.
 Hold on to your PC's that extra year instead of buying or leasing new.
 Review your telecom costs such as long distance, carrier providers and fees

All of these could save you hundreds of thousands. As long as your employees understand that tightening the belt now, will help save job cuts and allow for quicker recovery, they won't mind a bit that they lose their free coffee, pen or occasional hockey ticket.

Second to last, while reviewing the numbers, make sure you understand the cost of keeping a customer. In some cases the costs of keeping a customer could run much higher that the revenue they generate. This can provide you two paths to follow:

1) Take this as an opportunity to talk with the customer. Let them know although you value their business, they are costing you more than you make and you cannot continue this way. See if there is a compromise to up sell or service less as you have employees to pay as well.

2) Alternatively it is your right to fire the customer at that time, but allow yourself the ability to rekindle the relationship later.

Lastly, you have no where else to save and must impact your headcount. Make sure you look in the right places. What greatly affects revenue, customer service and longevity; try not to mess with these. Allow your managers to bring ideas to the table to avoid letting the wrong people go. In most cases they will help and in those rare cases of self protectionism, you’ll see through the BS and make the decisions that are required.

Often management will go to the quick answer of cut heads for the quick savings, not looking ahead to understand the impacts in productivity and their future products/services or sales. Often companies that take the quick wins will often take much longer to recover.

At the end of the day, having saved in other areas and reduced the impact to employees, productivity may still be affected, but perhaps with less impact to the company’s future.

It's a slippery slope to walk and it only takes one informed decision to make it through hard times and be able to rebound; or one quick, short sighted decision to slide down that slippery slope to a long and painful outcome.

These are the decisions not to be made lightly and why we are paid the big bucks.

Terry Drinkard: Layoffs are a variable cost reduction, as a general rule. It may make sense if you happen to be in a labor-intensive industry that is going through the down part of the business cycle. That said, there are a lot of other cut-backs that can contribute to reduced costs.

We should also keep in mind that it is always more efficient in terms of effort to expand the top line than to reduce costs.

David Rivkin: Clearly most companies find this the easiest way to save money and employees are looked at as mere machines so loyalty is not of concern to them. They would rather keep wasting money on unused office space and other infrastructure that are not cost effective or efficient because they are not good managers in the first place.

Layoff happening across the world is really horrifying, Please share if you have any other corrective measures which you think can help our people and our economy.
Take a look at layoff report or submit if you have similar info on : www.jobeehive.com

March 25, 2009 | 2:05 AM Comments  0 comments

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