Home > Collaboration and learning, Uncategorized > The Real cost of cutting jobs.

The Real cost of cutting jobs.

In the last few weeks, we saw a lot  of companies laying off staff , with the main objective to reduce short term costs, and improve their stock price.

I agree that in times of recession an organisation leadership should look at how to  become more lean, but from some reason companies prefer to cut jobs and release employees that are high preforming , committed and probably hold a lot of knowledge which allow the organisation to operate on a certain level of quality.

It also seems pretty obvious that  if there is an opportunity for voluntary redundancy with  a nice package , or even just the notion that layoffs are approaching,  the first people to sign up to it will be the high preforming with the vast professional network, skilled up and knowledgeable employees, as they  have the best chances to find their next job quicker than those who are less skilled. to compete in the market and  on even level will find it hard to even survive in the same industry.

Just  consider how much time, effort and cost was invested to get this workforce preforming the first place it a bit no brainier to release this workforce to the market which will l probably allow them to go to competitors or establish thier own practice and under price their ex employer, not to mention utilise their connections and network to attract clients and past client or intercept potential new business of their ex employer .

Unless the organisation stopped its activity in specific markets or niche , the real cost of laying off staff is an accumulation of the total investment in the last 2 years of  skilling up the workforce, doubling it as the same cost will have to be put again for someone else to take this workforce place sometime between now and the next 18 months. To all that add to that the cost of laying off (package, outplacement, reduction of performance levels etc.), the cost of recruitment , on boarding, handing demoralisation and …. the cost of unrecoverable Tacit Knowledge loss, which will have immediate impact on business processes effectiveness, costumer service levels, and any positive internal change in order to introduce  effective and efficient supply chain.

High preforming organisations capitalise on the opportunities that recession and reduction in the size of their market, by increasing their competitiveness, aggressively pushing out their main competitors and proactively motivating their employees to work in a collaborative way to exchange information, share knowledge and work together on innovative solution to gain more grounds. this can also be accompanied by acquisition or merger with organisations that add unique value.

In order to do that organisations need to divert funding to introduce and increase activities  of Knowledge sharing, internal redeployment of workforce which can contribute to the innovation and “out of the box” thinking processes around the specific objective of gaining more market share, and wining the battle on the customer loyalty and confidence.

SME (small and medium enterprises) should look on how to collaborate with their vendors and suppliers in order to offer a competitive and attractive offer to the market, or even considering to join up with competitors either as a joint venture or even a merger in order to ensure their survival and to battle out other none cooperative competitors.

big enterprises souled focus on how to utilize their existing workforce to improve their processes and offers to the markets, explore new niches emerging markets and by introducing cross functional knowledge sharing and transformation initiatives such as “think tanks” and tasks teams with clear objectives, while reviewing their supply chain and CRM activities. 

workforce performance should be monitored more closely in order to ensure that if lay offs are inevitable the total  cost including loss of knowledge and future recruitment and on boarding are considered as well.

  1. Eran Yuri Kolber
    March 22, 2009 at 9:48 am

    I fully support this view. This is one of the angles I have been pushing in my Infrastructure Optimization and IT2B workshops over the past few months.

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