Downsizing

Time to Rethink the Layoff

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Eric Von Seggern/Shutterstock

Many companies use the layoff as a tool to manage their human resources capital, but it may be time to rethink that practice. Taking into account the efficiency and labour costs of their businesses, many CEOs use layoffs as the primary way to reduce costs, thinking it the most efficient way to do so. The costs of layoffs, however, may be more than CEOs ever anticipated, and HR professionals have to be able to convince their senior leadership teams of the true price of layoffs.

Some interesting research from an article in the Harvard Business Review (HBR), regarding what happens to companies after layoffs, shows that a 1% downsizing can create a voluntary turnover rate of 31% a year later. The article continues on to state that companies that were able to keep on employees during an economic decline actually did very well in coming out of a recession and beating their competitors by 10% in sales and growth.

What can companies do instead of layoffs? Here are some potential strategies for success that companies could implement before or during an economic downturn:

  • Preparation for an economic crisis before it hits; in other words, having a contingency plan in place.
  • Decentralization; decentralized companies do better than centralized companies in times of economic crises.
  • Implementation of alternative options to layoffs, such as reduced work weeks for employees.
  • Investment in technology; for better preparation in the future.

During this pandemic, businesses have been placed under tremendous economic pressures and millions of workers have been laid off. Organizations that can weather the storm and keep on as many employees as possible will be better off in the future, according to the HBR article.

Discussion Questions:

1. Research an organization that has been successful in avoiding layoffs during economic downturns and summarize the main strategies they used. Use that research to assist your presentation development for question 2.

2. Develop a 5-minute presentation to review the top ways to avoid layoffs and still reduce labour costs for your VP of HR.

Should Managers Become Extinct?

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Snake curled in infinity ring. Ouroboros devouring its own tail. Serpent tattoo design, witchcraft masonic, vector illustration
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What does HR do in a world without managers?

Morningstar Farms, Sun Hydraulics, Valve, Medium, W.L. Gore, Zappos, Treehouse, Crisp: what do all these companies have in common? It is hard to guess, but all the above organizations have done away with traditional management. Crisp, a Swedish company, even axed its CEO.

Click here to watch a BBC video clip on the CEO-less company.

In 2011, Gary Hamel wrote an article called, “First lets’ fire all the Managers.” This was published in the Harvard Business Review (HBR).

Click here to read the article.

Now, in his new book (2016) Under New Management, David Burkus is saying“fire all managers.”

Is this a real trend or a fleeting notion? Organizations have been downsizing and flattening hierarchies for decades. Has the time come to really eliminate managers? If managers are gone what is the role of an HR department? Traditional HR spends a lot if its time on supporting managers. If managers are gone is HR next, or does the opposite happen and more HR resources are required to support employees?

Is it an interesting thought? Is getting rid of managers the Ouroboros of HR (the Greek mythological symbol of the snake devouring itself)?

This will be an interesting HR trend to watch; will manager-less companies become the norm or not?

Discussion Questions

  1. Your CEO has asked you to prepare a business case outlining the benefits of eliminating managers in your organizations. Develop a 10-minute presentation.
  2. Your VP of HR has asked to develop a list of recommendation on what would the role of HR be in an organization with no managers.

HR Lessons Learned – Downsizing

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It seems that employer insensitivity knows no international boundaries.  In August of 2015, employees of the Australian company Hutchison Ports, received notices that they were losing their jobs first by SMS text,  followed by an e-mail confirming their job loss.  To make matters worse, the messages were sent at 11:30pm directly to affected employees.

Not surprisingly, reaction to this approach by the employer was swift and viral.

Click Here to Read the Article.

Clearly, the human element was not evident in the implementation of this downsizing plan.  No matter what difficult decisions are made by senior executives we, as HR Professionals, must ensure that these decisions include consideration for the dignity and respect of all employees.

The approach by Hutchison Ports created a huge backlash that continues to impact the organization’s international reputation and their profitability.  Rather than having to clear up the reputational mess that they find themselves in after the fact, it might have been better for Hutchison Ports to allocate a more time towards their communication strategy up front.

And, it might have been helpful to spend  a few minutes reflecting upon the humans involved before someone hit ‘send’ in the middle of the night.

Discussion Questions:

  1. What advice would you, as the HR practitioner, have given to the CEO of Hutchison Ports?
  2. What would you do if you received a notice, via text, that your employment was terminated?
  3. Identify two or three practical HR initiatives that employees should have had access to in this case.
  4. Identify three alternative approaches the employer could have used to communicate with employees about downsizing.