The lesson in layoffs

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The lesson in layoffs

By Anna MaskerIn standard14th December, 2008

There were 533,000 jobs lost in November alone. Add that to the hundreds of thousands of jobs lost over the course of the year and 2008 could be a record year for layoffs. With so many jobs being eliminated in such a short period of time it begs the question: should those people have been hired in the first place?

I have worked for two companies which could not have been more opposite in nature. One, an industrial manufacturing business, and the other in the consumer business of a pharmaceutical company. From my viewpoint, one was run like a speedboat, the other like a lumbering barge. Ironically, the manufacturing business was the speedboat. Here’s why: in good times, they kept lean. Headcount was as hard to get approved in good times as it was in difficult times. Everyone was expected to question the value of what they were doing and eliminate the waste or make the processes within their jobs more efficient—all because they knew that getting more people was not an option.

On the other hand, in the pharma company we had some banner years with new product launches and while our business was growing 5-7% per year our headcount growth was exceeding that by many times. It seemed as if we were adding people weekly and creating a whole lot of reports and bureaucracy to keep all these people busy and, well, “useful.” What we did create was a slow organization weighed down by a tremendous amount of overhead, and when things started getting bad, that overhead (read: people) was the first place to look for cost savings.

The lesson: Adding people to an organization should be considered with the same scrutiny as if you were buying a large piece of equipment or building. You should understand the true ROI and evaluate your “ROI hit rate” with past hires.  The contribution to the growth of a company of any new staff member should be evident and quantifiable. Step back and question any analysis that paint a rosy picture—numbers can be manipulated to show anything you want then to. Removing people in a layoff or termination may cost you much more in time, money and morale than not hiring them in the first place, so think hard before you extend an offer.

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