How Layoff are hurting companies ?

Time was, when layoffs were seen as an emergency strategy, the last resort in a downturn or crisis. Today, however, layoffs are a standard tool for doing business. As the economy continues to heal and job indicators improve, a number of firms have announced a fresh wave of layoffs?- ?citing the need to improve profitability.?

For most firms, labor represents a fairly significant cost. So, if you think profit is not where you want it to be, you say, ‘I can pull this lever and the costs will go down.’ There was a time when social norms around laying off workers when the firm is performing relatively well would have made it harder. Now it's a fairly normal activity.

The effects on employees are either direct, because people might be losing their jobs or indirect as employers might now regard their employee more negatively or become less engaged and productive. ?In each case, these consequences put the overall achievements of cost-cutting initiatives into question, as they can drive additional costs.

Layoffs are going to reduce costs immediately ! “But what does that mean two or three years from now when the firm is growing and now has to ramp back up by hiring a bunch of people? Now the firm must incur all these costs to hire and train workers.” In addition to the laid-off employees,? other workers may now leave voluntarily, all of which is disruptive for the firm and lowers productivity. “Layoffs may look good on paper because they have an immediate effect on costs. 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.”

Investing in Innovation and People

In?general, employee experience does make a difference. The better the experience of employees with their organization, the more satisfied, engaged and productive they are. Companies are making huge efforts to create a positive employee experience in their environment and invest to improve employee satisfaction. However, organizations are just starting to realize these efforts are severely jeopardized when they have to go from investing to cost cutting. The better companies can find ways to align their cost-cutting initiatives with protecting employee experience, the more likely they are to find a way to overcome a business decline and get back into growth.

Thus, I feel CHROs need to take the lead when it comes to aligning functional and enterprise wide cost-cutting measures with maintaining a positive employee experience throughout the organisation. The likely impact of every cost-cutting initiative on employees needs to be taken into account when calculating the potential cost savings. HR must demonstrate the hidden costs associated with cost cutting and find ways to level cost reductions with impact on employees to drive efficiency and effectiveness in cost cutting both in the short- and the long-term. The key is to establish a continuous project and risk management system that monitors all cost-cutting measures.

Let me know your views in the comments below !