Over the past several years, the news has been filled with huge layoffs by companies trying to cut costs. Is this a strategy that really helps a company? Every day, in the course of networking, I have the opportunity to talk with, not only people who are in transition because of cost cutting efforts, but also I have opportunity to talk with people “left behind” after the cost cutting. The story is so often the same. Significant resources of knowledge and skills have left the company, leaving those left behind swimming against a rip current. The more they struggle to make up for lost resources, the further fall behind on objectives. They are asked to do more and more, all with decreasing efficiencies and effectiveness. Managers are looking to leave the company because they no longer have the assets in place to meet the demands for the company to succeed.

In a corporate environment, every person in the company, through the tasks and projects they work on, needs to contribute in a way that they are helping the company do one of three things:

  1. Help the company generate revenue
  2. Help the company reduce costs
  3. Help the company mitigate risks

If an employee is not doing this to a degree greater than their annual cost, it really doesn’t make sense for the company to be paying them. The company should not wait for a crisis to let go of underperforming employees. Typically, companies expect to cost savings or revenue generation 3 to 5 times the cost of the employee. If the employee is achieving this success, it NEVER makes sense to cut the employee to save costs.

Does your company understand the true value brought by your employees? Is your company costing itself more by trying to reduce employee costs?

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Comments
  1. DanTrojacek says:

    Greg, Your article is right on target! Over the years, I’ve seen a lot of good, knowledgeable, experienced employees lose their jobs through the “elimination” of their position. When that employee’s workload is added to someone else, the performance of remaining employees is affected. Further, all too often, operations positions fall first, rather than looking more internally to the “below the line” costs. For example, If sales and marketing were doing their jobs and sales revenues were increasing then no cut backs are necessary, right? Your article correctly addresses head-on the issue of succession planning, or the lack of.

    • Thanks Dan! As always, your insight is a valuable contribution. Companies need to address the evaluation of employee contributions and policies that inhibit or promote greater contributions to the over all success of an organization.

  2. Greg, good article. I really think that often management gets into an “avoidance” game with employees who are not pulling their weight. Sketchy job descriptions, sporadic reviews and lack of clear expectation setting usually contribute to this “game”. Then, instead of dealing with the employee, there is a tendency to do a major “sweep” through the entire department or company, possibly eliminating people who would have/could have done a better job had they had a more concrete directive from senior management. So, we have good people losing their jobs over less-than-wise management decisions. How can we better educate managers about the care and feeding of their valuable team? That’s the question! Blogs like this, make us think. That’s a good thing!

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