Saturday, September 04, 2010

Culture of Layoffs

Another story about another company laying off a percentage of their workforce. This time all we're told is that 81 employees were laid off, representing 5% of the workforce, and that the company "ended production of some unprofitable products".

I wonder what would happen if companies were expected to report more information about layoffs - and by "expected" I mean by law where possible, and by convention and community standards otherwise. And if they don't provide the info, newspapers should investigate and get the goods.

The information I'm looking for has to do with the negative side of layoffs. How long, on average, had these people worked there? What percentage got a good performance ranking in their last review? What sort of severance did the company provide? What was the total direct cost to the company of the layoffs (severance, out-placement, travel and consulting fees required by the move)?

If all these details were provided, would the market automatically react as strongly to reward companies that lay off a big chunk of their workforce?

I once worked for a publicly-owned company whose management was committed to avoiding a take-over. Every time the stock price fell they laid off employees to bring it back up. There were so many layoffs that they didn't use the terminations to get rid of low performers: terminations were totally a function of what someone was working on, and the best and the brightest regularly got cut. This culture of continuous layoffs created a totally dysfunctional company with a decidedly subpar product, but it also kept it successful.

That kind of success is a market distortion. Unproductive - even antiproductive - behavior is rewarded. It's a systemic failure.


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