
The case against layoffs:  they often backfire - j_baker
http://www.newsweek.com/id/233131?from=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+newsweek%2FTopNews+%28UPDATED+-+Newsweek+Top+Stories%29
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Tiktaalik
There are entire companies formed by bitter ex employees who will never work
for Electronic Arts again.

I agree with everything in this article. It just really nails it.

~~~
access_denied
SAP was founded by former IBM employees who weren't allowed to do the project
inside of IBM.

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phpnode
FTA: "...about one third of the companies that had laid people off
subsequently rehired some of them as contractors because they still needed
their skills."

This happened to me a few months ago, I was made redundant by my employer only
to be immediately rehired as a contractor because they need my skills. Now
they have to pay me more than before and I get to work from home and use the
saved commuting time on bootstrapping my startup. I'd never go back as an
employee now. So it was a pretty inefficient cost cutting scheme on their
part.

~~~
holygoat
You might be surprised at the amount of money they save by not having you as
an employee.

They save a few thousand a year on your desk; thousands on unemployment taxes
in many states; SS and income tax contributions; healthcare benefits, stock
awards, and bonus schemes; etc.

Regardless, it's not necessarily intended to be a pure cost-cutting scheme:
switching you to being a contractor essentially improves their liquidity.

It's a little like someone with lots of cash getting a mortgage to buy a
house: they could afford it, but they'd rather pay a little more over time to
get additional flexibility.

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paul9290
Is the job market that bad for us techies; web designers, developers, Internet
marketers, SEO and such? Which fields are suffering the most? Ones that don't
require special skill sets?

Where I live and fortunately (mid Atlantic region) there are always many job
postings for web design/development on craigslist. My viewpoint Im not seeing
all the unemployed; even with friends.

~~~
JeffJenkins
Assuming you're a male between the ages of 25 and 44 with a college education,
probably not that bad. The New York Times did a good infographic:

[http://www.nytimes.com/interactive/2009/11/06/business/econo...](http://www.nytimes.com/interactive/2009/11/06/business/economy/unemployment-
lines.html)

~~~
_delirium
Of the factors you listed, it looks like being 25+ and having a college degree
are the main ones. The unemployment rate is almost as low for 45+ as for 25-44
among college graduates, and the unemployment rate for women in those groups
is actually lower than for men (the lowest unemployment of all groups in the
infographic is for white women 25-44 with college degrees).

(edit: thanks greatly for the link, btw. it looks like it's been up for a few
months, but I missed it the first time around.)

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houseabsolute
> A study of 141 layoff announcements between 1979 and 1997 found negative
> stock returns to companies announcing layoffs, with larger and permanent
> layoffs leading to greater negative effects.

The simpler explanation is that companies in the worst straits are likely to
make the deepest cuts when performing layoffs.

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joe_the_user
Well,

At best, this is an argument for postponing layoffs at long as practical. If
you in a declining industry, for example, layoffs are inevitable.

Indeed, the goal of keeping as many employees as possible is nice but if it
causes the entire corporation to go bankrupt, you haven't avoid layoffs.

It seems like the best policy for an organization would be maximum honesty,
minimum practical layoffs and giving all employee a shot at switching
positions within the organization.

But these generalization really are hard. Intel has profited while laying-off
people through continuous internal competition. It could be brutal but it
worked for keeping the company profitable.

~~~
_delirium
Some can be avoided by not doing cyclic shedding/adding of workers. The
justification for layoffs in a downturn followed by hires in an upturn is that
it cuts costs: if you fire someone today and then hire someone else two years
from now when things pick up, you've saved two years of salary/benefits over
just keeping them on payroll through the downturn. I see this article as
providing an argument that maybe saving that two years of salary isn't worth
it.

(There are other problems in that particular case, like companies that follow
that hiring/layoff model always being a step behind in recoveries--- they're
never well placed to catch booms early, because they spend the first year
desperately scrambling to hire talent instead.)

~~~
Mz
_if you fire someone today and then hire someone else two years from now when
things pick up, you've saved two years of salary/benefits over just keeping
them on payroll through the downturn._

The problem with that thinking is that there are costs involved in laying
someone off and hiring anew two years later. And you have paid those costs to
get no productivity out of them. I read an article some years ago that
indicated that one company which paid top salaries for its industry saved
money by doing so because they spent so much less on the hiring process and on
training, and also because of general quality of work and customer
satisfaction, because their employees tended to stick around. I have also read
that one company/industry which laid people off suffered 10 years down the
road when they found they had no one in the pipeline to fill managerial
positions as they came open. So the (potential) costs involved here are not
just the salary involved.

~~~
joe_the_user
_The problem with that thinking is that there are costs involved in laying
someone off and hiring anew two years later. And you have paid those costs to
get no productivity out of them._

Uh, suppose that when you originally fired the person, you simply didn't have
the money to pay their salary? At that point, there is no thinking involved,
just a decision that's forced on you. And like a lot of desperation cost-
cutting, it might indeed cost you more money in the long run. But saving that
long-run money won't help if you can't pay rent and buy food next month.

 _I read an article some years ago that indicated that one company which paid
top salaries for its industry saved money by doing so because they spent so
much less on the hiring process and on training, and also because of general
quality of work and customer satisfaction, because their employees tended to
stick around._

That is if a company is in a niche producing items which haven't simply become
commodities.

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jteo
On one page: <http://www.newsweek.com/id/233131/output/print>

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sabat
There are two sides to this -- layoffs are acts of desperation, and layoffs
can be good for a company's health.

Here's what I mean.

The corporate world seems to have Layoff Fever. So many of the 2009 layoffs
seemed as though they were inspired solely by herd mentality, and perhaps by a
desperate attempt to please investors. Layoffs cost a lot of money in
severance packages, decreased ability to execute, and probably more. A layoff
is a bet against the future.

Conversely, though, if you've ever worked at a larger company, you may have
noticed people who don't actually seem to do anything except play political
games and collect paychecks. It's corporate welfare; they take more away from
a company than they contribute. Those people should be laid off in any
economy. Unfortunately, because of their political savvy, they usually survive
at least the first rounds.

~~~
j_baker
Those people shouldn't be laid off. They should be fired. There's a _big_
difference.

~~~
sabat
They should be fired, but in practice they rarely are.

There's not really a big difference between a firing and a layoff, except in
terms of scale. Rarely are whole groups of employees fired, but layoffs are --
well, precisely that.

When planning layoffs, managers are usually told to identify the "dead wood"
in their organizations -- unproductive, wasteful souls. That'd include our
corporate politicians, and in some cases, they are actually included.

~~~
sokoloff
Because the "identify your deadwood" request is often only used when planning
layoffs, managers who don't want to appear uncooperative may warehouse
deadwood in good times to have something to sacrifice in bad times.

"Why does so-and-so still work here?" can sometimes truthfully be answered "So
we'll have someone to lay off when the company calls for 10% cuts."

