This fall, jobs are falling to the ground more quickly than leaves fall from the trees. About to be laid off (according to the WSJ): Yahoo -- 1500 workers. Xerox -- 3000 workers. National City Bank -- 4000 workers. Merck -- 7200 workers. Hewlett Packard -- almost 25,000 workers. In some cases, the market has already cut workloads, with consumer demand shrinking. For companies anticipating poor markets for their products and services, layoffs can take a big bite out of fixed costs, if they are implemented well. As I wrote in an earlier post, managers implementing downsizings must do so carefully, with a scalpel rather than a hatchet, and above all, must cut out work, and not just workers.
In other cases, though, it will be important for businesses to focus on their high-margin products and services, while controlling costs -- which does not always mean eliminating headcount. Eliminating waste in raw materials can yield big savings, as can increases in operating efficiency. Managers may also consider other creative alternatives to layoffs, such as asking for volunteers to switch to part-time, implementing one-week unpaid vacations, or moving to a 4-day workweek (with a 20% drop in pay).
Why avoid layoffs? There may be hidden costs. Morale and productivity are sure to drop among the survivors, and some of your key employees may depart when you would rather have them stay. Customers who hear of the layoffs may be concerned about the company's continued stability, or fear that the quality of what they receive will decline. When the company is ready to rehire, training new employees can be expensive.
While layoffs are sometimes necessary, they are not a surefire solution to problems with customer demand.
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