Layoffs Are All Around Us, But What Do They Really Mean?

Apr 18, 2001

This time last year Recruiters everywhere were scrambling to find qualified talent to fill their open job requisitions. Layoff announcements were almost unheard of. Boy, what a difference a year can make. As more and more companies feel the economic pinch, layoffs have become a reality rather than a distant memory. But before you stop spending and start saving every recruiting dollar, some experts suggest you think before panicking. “What is interesting about this downsizing is that companies are taking initiative in laying off workers before they are experiencing any real shortfalls in their business,” according to Peter Capelli of Wharton Business School. What this really means is that companies are anticipating the worst and taking preventative measures to cut costs by laying off employees. At the same time they are creating a potential disaster by having to hire all over again for these positions once the market changes. Unemployment still remains around 4.3%, and if the economy remains steady or improves, refilling the vacated positions could become a real problem for the companies who have recently laid some of their employees off. For this reason alone, it is critical to look at layoffs as a last resort in terms of cost cutting measures. The media also fuels layoff paranoia. I am sure that all of you have seen the headlines about massive layoffs occurring at companies like Motorola, Cisco or Lucent. The media, unfortunately, likes to grab the headlines with negative news. Our society is strange in the way it likes to hear about the negative rather than the positive in terms of employment news. What the media tends to neglect to report is that while a large company may be laying off 15,000 people there are hundreds of other companies who are hiring these people before their seat even gets cold at their old job. This also does not take into account the employees that are re-hired within a different division within the same company. Just because one division of a company is struggling, it doesn’t mean that all of the divisions are having the same problem. A perfect example of this is here in California, where Power Gas and Electric (PG&E) has filed for Chapter 11. This doesn’t mean that PG&E is going out of business and the lights are going to be turned off in half of the state. If you read the fine print, only one division is filing for Chapter 11, which will allow them to reorganize their debt and doesn’t necessarily mean that it is lights out for California. It comes down to the simple fact that it is easier to see downsizing and much harder to notice hiring. The reason is that downsizing happens quickly and can be widespread, affecting hundreds, if not thousands, within one company. In terms of hiring it occurs over a longer period of time and at a slower pace, so it tends to fly below most peoples radar screens. All of this news about layoffs should bring caution to all of us, but it needs to be taken with a bit of skepticism. If you put the brakes on too fast, it becomes increasingly difficult to put the gas back on when hiring becomes a top priority within your company again. Now is the time to take stock of the employees that you currently have in your organization. There may be some fat that can be trimmed, but be careful not inflict long-term damage by letting employees go that you fought hard to hire just a year ago. Employees in this type of market become increasing nervous about their futures with their current job, so if cost cutting measures are in order, it is important to look at layoffs as a last resort. Don’t get caught up in the doom and gloom that the media likes to keep in the forefront of everyone’s mind. You must always remember that the employees at your company make your company what it is! <*SPONSORMESSAGE*>

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