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Yash Gupta
Business School Dean

Yash Gupta

Yash Gupta is Professor and Dean of The Johns Hopkins Carey Business School.

The Danger in Layoffs

The latest employment figures from the Department of Labor are truly alarming -- 598,000 jobs lost in January, 3.6 million jobs lost since December 2007, the U.S. unemployment rate at 7.6 percent. During such times, the desperation to reduce payroll replaces rational thinking. But there is a huge danger in layoffs if they're done arbitrarily -- merely to enhance productivity in the short term. Organizations that react this way tend to lose good workers who are essential to the survival of the company. These are the workers who will help the organization recover when the economy turns around. Good leaders need to recognize that not every part of labor is dispensable.

Layoffs should be strategically planned and executed. Company leaders must define which facets of the organization are key over the long term. Which services must be maintained, and at which level, in spite of the economic conditions? What kind of skill set within the work force must be preserved? This careful approach is even more crucial for knowledge-based companies. Workers at these companies are often young, millennial-generation people with the ideas and energy that pave the way to the future. They're in short supply and high demand, and aren't necessarily loyal to organizations.

Layoff plans must be made not only in a strategic way but also with a great deal of transparency. The company's leaders must explain, very clearly and openly, what they're doing, why they're doing it, how they're doing it, who is going to be affected, and to what end. A lack of both transparency and employee involvement in the process will almost assuredly create feelings of distrust among the remaining employees toward their leaders. Consequently, these employees might seek opportunities elsewhere, bringing about a severe loss of the organization's knowledge base. But if the company's reduction process is open and transparent, the employees might be more willing to share the pain.

Also, when the economic climate improves, you can help yourself attract new workers by pointing to the ways that you demonstrated care and respect for laid-off employees -- for example, by providing outplacement services for people who were laid off or, perhaps more importantly, helping them acquire skills that will make them more marketable.

The essence of humanity must always be preserved. Organizations must show their employees that they can trust the leadership. It is imperative for company managers to understand that layoffs involve human beings and their livelihoods; therefore, compassion is an essential ingredient to maintaining and improving an organization's standing as a place where people would want to work. By offering outplacement services, training, and moral support, an organization demonstrates its understanding that losing a job is a significant event in a person's life.

By Yash Gupta

 |  February 10, 2009; 10:29 AM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: Honest Tea, Layoff-Free | Next: Emotional Leadership


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People who have become stagnant and burned out bring in contractors to do their work. They don't want to learn new technology because it is a struggle for their stagnant brains. The contractor cannot be put on staff because she is "too old" and when the downturn comes, the contractor is out the door. The work stalls. Meanwhile, the contractor must wait for the upturn to work again. This phenomenon leads to maintaining the status quo, which resumes with an upturn. The stagnant employee remains in the same stagnant state.

Posted by: IIntgrty | February 10, 2009 11:32 AM
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