The Hidden Costs of Employee Layoffs
1. Significant indirect costs often wipe out the direct savings of layoffs.
While layoffs may seem like a good way to cut costs in the
short-term, the direct and indirect costs of downsizing can paralyze your
company’s long-term revenue-generating streams.
2. Your best employees might bolt after a round of cuts.
The top performers who survive a layoff won’t
necessarily feel obligated to soldier on. A 2000 study by Roderick Iverson and
from the University of Melbourne, and a 2003 study by Sarah Moore, Leon Grunberg,
and Edward Greenberg
from the University of Colorado at Boulder,
both confirmed that employees were far more likely to quit jobs in environments
of repeated downsizing.
3. The best types of workplaces often suffer the most.
If your company touts itself as receptive to the needs and
personal development of its workers, layoffs can be even more troublesome. A
recent report by researchers Christopher
Zatzick and Roderick Iverson of Simon Fraser University found that layoffs
at “high-involvement workplaces” — those with
management strategies that give employees the skills, information, and
motivation to be competitive — can be markedly more detrimental to
the organization than layoffs at an average company.
4. Layoffs don’t improve organizational performance.
Since some of your best and most experienced employees will
jump ship after a layoff, workplace productivity is bound to suffer, and the
psychological effects of a layoff on those who remain can be even more
detrimental to your company’s continued performance.
5. Employee retention is linked with customer retention.
Negative public perception of a layoff can be another
unexpected cost. Convincing
customers that layoffs are absolutely necessary is probably impossible, since
most companies that lay off employees aren’t actually in dire
straits. So companies that hold
on to their employees and eschew a policy of frequent downsizing are far more
likely to keep customers — and thus keep revenue flowing.
Link to the original article from BNET
Posted on Thu, February 4, 2010
by Carlos Bergfeld filed under