There was a great article in Newsweek a few weeks ago that exposes the true cost of this country’s culture of layoffs. As we all know, at the first hint of even a slight reduction in business, American companies call in H.R. and start chopping heads. The common perception is that costs are reduced in the short term, thus allowing these company’s to survive and even thrive in the long term. The further assumption is that once the economy rebounds and revenues increase, these company’s will hire back the folks they let go. Tough luck for workers that had to do without a paycheck for a year or two, but if that’s what it takes for the business to survive, (and keep the remaining workers employed) then it was actually the correct and ‘moral’ thing to do.
As a businessperson myself, I accepted this conventional wisdom. Which is why it was quite an eye-opener to learn what the true cost is of this country’s culture of layoffs. Here are the three most important learnings:
- Being leaner and meaner, doesn’t necessarily mean more profitable. In most cases, fewer staff means the quality of a company’s goods or services goes down, not to mention less infrastructure to lay the foundation for future business. In the end, that results in less business.
- This loss in productivity is reflected in the perception of our country’s goods and services as a whole. When our biggest companies are downsizing, even businesses that don’t are hurt.
- Because stock price is ultimately tied to performance, after laying off workers a company’s stock doesn’t go up, on average it goes down.
While the current rate of job losses is declining, downsizing during a downturn is still the accepted wisdom. I’m afraid it may be a while before that thinking changes – if it ever does! It just means that as a job seeker you’ll have to work harder and smarter to succeed in the face of this backward response to business downturns.