The detriment of layoffs in an economic recession.
Posted by Joanne Brent on 24 Apr 2009 at 11:37 pm | Tagged as: HR Strategy
Employers should remember that while layoffs and other high-impact cuts may be necessary for some companies, many other strategies can produce similar results without affecting employee morale. There are five guidelines for employers which can be considered cost-reduction strategies. The first guideline is that while layoffs are sometimes necessary, employers should consider alternatives before conducting layoffs because they have a significant effect on employee morale and could cost the company significantly if the skills are difficult to replace when the economy picks up.
A recent survey conducted found that a 75% of employers had already instituted hiring freezes and 63% of employers have already conducted layoffs. The survey, which included more than 500 large employers, also found that most employers say that they must take further actions to reduce costs through the end of this year. In addition, many companies may only be considering cost-cutting strategies that have a significant impact on the majority of their workforces.
For example, more than a quarter of respondents (28%) say they are contemplating organisational restructuring, and 25% are considering additional layoffs. Twenty-two percent may reduce or eliminate their employer 401(k) match.
“What makes this next wave of cost reductions even more difficult than the first is that the ‘low hanging’ fruit is already gone,” said Joanne Dahm, practice leader of Hewitt’s North American Talent and Organisation Consulting business. “Companies around the world are looking for the right combination of HR cost-cutting actions that maximise savings while minimising the negative effects on the workforce. While high-impact actions like layoffs and 401(k) match suspensions may be necessary, many other strategies can produce similar results and help preserve employee morale and engagement. There’s no silver bullet answer–so the key is finding the right combination of trade-offs for each organisation.”
Hewitt’s four other guidelines for employers as they consider cost-reduction strategies are:
Understand Employee Preferences. Before cutting HR programs or benefits, organisations should understand which are the most meaningful to workers. Companies may find they can cut programs that most employees didn’t value in the first place, and save a significant amount of money without hurting morale.
Take Inventory of Global Programs. It’s important for global companies to evaluate whether HR programs and benefits outside their home countries are overly generous relative to the rest of the market. Without taking a global view, employees at company headquarters are likely to shoulder a greater burden of the cost-cutting efforts.
Make Leaders Visible and Accessible. Senior leadership needs a set of consistent messages and a well thought out communication plan to explain the business realities and rationale for tough decisions–and leaders should communicate regularly in a variety of forums, both formal and informal.
Encourage Open Communication. Creating an ongoing dialogue with employees at all levels is more important now than ever. Managers should have regular and informal conversations with employees to stay attuned to their concerns and raise red flags to senior leaders. Regular channels–like the corporate Intranet, town hall meetings and company newsletters–are easy ways to keep employees informed, involved and engaged, especially as the company works through tough issues. One of the worst things managers can do is retreat behind closed doors, leading employees to fear the worst.
