Layoffs - American Style

Earlier this morning, I read a Newsweek article written by Jeffrey Pfeffer titled "Lay Off the Layoffs." If you haven't read it, you should. He explains the impact that layoffs have on companies, not only on the employees who are laid off, but on those who stay. He also shows that S&P 500 firms that downsized remained less profitable than those that did not, even after statistically controlling for prior profitablity.

In my first professional HR position, I was at a company that was downsizing. In the 6 years I was there, I laid off approximately 950 people. My experiences in that role line up well with Pfeffer's observations. Our best and brightest were leaving in droves, and those that remained were demoralized. Eventually the company was sold and closed - an inevitable result.

So what's my point? Companies shouldn't fire people? Not exactly. Performance issues need to be addressed and non-performers removed. No question. But think long and hard before you start removing people due to economic layoffs. Can your company absorb the reduction in morale, stock prices, productivity and loss of talent that Pfeffer found? Instead, consider ways to expand your market, branch out into new areas and reduce other costs. Get your employees engaged in finding new opportunities for the whole company, not just for themselves.