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Gen. Monty Meigs (Ret.)
Military leader

Gen. Monty Meigs (Ret.)

A retired U.S. Army General, Montgomery Meigs has commanded U.S. and NATO forces overseas and is now President and CEO of Business Executives for National Security.

Layoffs Are Not Productive

Unless it is absolutely necessary to save the firm, the practice of laying off employees to generate cash by not paying their salaries seems in some ways counterproductive. The resulting balance sheets may look better, and the firm may have additional funds in hand to service short-term costs, but the practice has at least three negative results.

First, rejected employees who had been loyal, usually leave feeling bitter.

Second, announcements of large cuts in the workforce and seeing good people leave abruptly generates angst in the ranks that undermines initiative and creativity, two qualities most needed in hard times.

Third, the cash generated does not represent profit from growth of sales or services rendered. It can indicate the beginning of a death spiral as the firm eliminates human capital needed for the recognition of and penetration of new markets.

Surely, alternatives exist that mitigate these negative effects: With "at will" employees, if some must go to soften the economic hit, why not offer them a part time consulting arrangement without benefits? Job sharing would save costs and keep on board some of the truly valuable employees, ones that the firm truly do not want to lose. It would also underpin morale of those not in the executive suite. The troops would quickly pick up on the fact that "platoon headquarters" was doing its best to lessen the blow. Or, the firm could also generate cash just as quickly by implementing pay cuts with the biggest share coming from the people who receive the largest slice of the pay account.

By Gen. Monty Meigs (Ret.)

 |  February 9, 2009; 12:06 PM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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I was laid off twice during the '90s. The first time, my (former) department paid through the nose for equipment service calls and software contract reinstatement fees, because in their haste to hustle people out the door, they hadn't asked about the tasks that would no longer be covered. After the second layoff, many of us found out (months after the fact) that our COBRA paperwork hadn't been processed because - duh! - they had laid off the person who processed the COBRA forms.

Corporate layoffs can have the unintended effect of showing the laid-off that it's possible to survive sans cubicle. I'm planning for the day when I can stop working to pay for golf outings and career coaches for all these corporate executives and start a business for myself.

Posted by: n_mcguire | February 10, 2009 10:12 AM
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The second and third reasons against lay-offs are excellent.

There is one more inisght I would like to add.

In organizations that are efficient you usually have 20% of the staff that do 80% of the work.

These 20% are usually not good at politics and they get layed off at the same time the under achievers do.

So lay-offs in efficient organizations usually hurt more than help.

If the organization is in-efficient then that's management's fault and they are the one's that should be laid off but since they have the power they are the most protected group.

Either way lay-offs initially are bad: either the best or the wrong people get laid off.

Posted by: agapn9 | February 10, 2009 9:59 AM
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