The person who is laid off suffers the most distress, but remaining employees suffer emotionally as well. Because the layoff disrupts the status quo, employees have to pick up extra responsibilities and form new work relationships, which can cause stress.
The productivity level of employees who work in fear is likely to go down. The situation is even more damaging to the company when the person who has lost his job stays around until the date of termination of his contract. Leanes Lowrie has been writing professionally since Leanes is also a diploma holder in journalism from Concordia University. By Leanes Lowrie. Direct Costs One of the things a business owner considers when he needs to save money at a company is laying off staff in anticipation of saving money on payroll and benefits.
Having gone through this layoff experience, I want to share this article in hopes of bringing attention to the harmful effects of layoffs to not only the employees who are let go, but also the companies that implemented the layoffs. Emotionally, victims report high levels of stress, increased drug and alcohol abuse, more marital problems, and feelings of depression, unhappiness, anger, frustration, and dissatisfaction with life.
The act of choosing is severely restricted by unemployment. Attempting to solve problems with limited resources frequently means that the quality of the solution is poorer, which can engender a sense of failure and lowered self-esteem.
For most organizations the single biggest expense is the salaries and benefits paid to their employees. By eliminating jobs, they reduce payroll costs. By eliminating many jobs 4, — 10, jobs in some very large companies , they can save vast sums of money. But then comes the problem of getting all the work accomplished by the people who remain. Although downsizing has forced organizations to operate with greater efficiency, some organizations are discovering they cannot reclaim the productive output they had achieved with a larger workforce.
In short, the loss of jobs did not strengthen their economic position but instead weakened it. In fact, direct costs of laying off highly paid tech employees in Europe, Japan, and the U. When senior leaders in the organization believe the downturn in business is permanent, instead of downsizing, Cascio suggests retraining employees to develop new lines of business. For example, popular cost-saving strategies include: Freezing or reducing hiring; Cutting travel and entertainment; Reducing pay or raises; Scaling back employee events; Conducting targeted layoffs, and so on Cascio, Takeaway: As professor Paul M.
Muchinsky wrote , p. Downsizing is sometimes necessary, but it is important that organizational leaders understand and consider the short- and long-term costs, as well as the many alternatives to downsizing that are available Cascio, Employers also often underestimate the cost of layoffs in immediate financial terms, as well as in the lingering burden it places on remaining resources — both financially and emotionally.
The toll of layoffs is high. In many industries, layoffs beget lower productivity and profits. When sales are slow, for instance, many retailers cut staff. But several studies show a correlation between bigger staffing and substantially higher sales. What about profitability? One study that examined a large specialty retailer found that conformance quality how well an employee executes prescribed tasks has a higher impact on profitability than service quality defined as the extent to which the customer has a positive experience.
Another consequence of understaffing at this retailer was lowered morale, a finding echoed in other studies. Layoffs are going to reduce costs immediately, says Cobb. Now the firm must incur all these costs to hire and train workers. Yet in reality there are a lot of costs that layoffs impose on firms that might not show up on an income statement quite as clearly. He expects to have results in a few months.
But one recent study indicates that the American worker is becoming increasingly unmoored to the full time employer. The percentage of workers engaged in alternative work arrangements — temps, on-call workers, contract workers and freelancers — rose from The study, released in March, shows that workers hired out through contract companies showed the sharpest rise, increasing from 0. What is clear, Cascio notes, is that plenty of firms have handled internal and external stresses without resorting to layoffs, and come out the other side with positive results.
He points to Southwest Airlines, which, like the rest of its industry peers, suffered during the Great Recession. And as the economy recovered they transitioned back to their original jobs.
Another approach was taken by Steve Jobs, Cascio says, who took advantage of downturns to focus on innovation. It turns out shortly after the recession ended was when the iTunes Store opened. Then after the Great Recession, they bring out the iPad in and People really need to hear examples like this. Other countries — Germany in particular — have regulations that help to temper the knee-jerk impulse to lay off staff.
For Wharton management professor John Kimberly, the key question is how leadership thinks, in the short run and long run, about the way it wants to manage its human capital. Kimberly says that if a company can manage through a rough patch with creative strategies without laying off, employees will emerge with a greater sense of loyalty, and that loyalty will pay off for the company.
Yet in reality there are a lot of costs that layoffs impose on firms. Cobb says options before getting to layoffs include offering early retirement, slowing down hiring and retraining workers.
And there is some indication that firms, worried about loss of talent, are using these options more than they once did, according to the Society for Human Resource Management. But real change would take a shift: understanding that getting long-term gains sometimes means taking short-term lumps. University of Michigan professor Gerald F. Davis argues that for a long period, large corporations were a dominant force in America — through employment practices, expansion choices and community connections — and that now, the U.
As firms have more and more ability to use outside contractors in place of full-time employment and production, many firms do not need to IPO to raise the amounts of capital as did firms for a century prior.
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