Corporate Downsizing May Backfire Mass Layoffs Deprive Companies Of Needed Talent, Undermine Worker Loyalty
If you’ve been downsized, and your philosophy is “Don’t get mad, get even,” just wait a few years.
“Some companies have gone too far and downsized too much,” said Michael Hitt, professor of management at Texas A&M University in College Station. “They haven’t thought of what they’re losing, such as the valued skills and loyalty of employees.”
Hitt has a warning for the U.S. companies that, since 1987, have wiped out 4 million jobs: “By the year 2000, we’re going to see the effects of downsizing. In the short term, companies will see gains. But in the long-term we don’t know whether they can remain competitive.”
More than 375,014 workers lost their jobs last year in work force “reductions,” and that hurt productivity and, therefore, the bottom line. Hitt says that some of the companies have “cut too deeply, and might not recover.”
Maury Hanigan, president of Hanigan Consulting Group, a New York-based management consulting firm, already is seeing some of the negative effects of downsizing.
Hanigan founded her firm in 1986, and in 1993 she began to focus on retention of qualified employees.
“I saw the need to educate companies as to why they need to look at the effects of downsizing, but until they feel the pain of losing valuable talent, it’s often hard to convince them they need to worry,” Hanigan said.
The “pain” is being felt today, Hanigan says. “Because of downsizing, companies not only cut out valuable employees, but by breaking the loyalty contract they’ve changed the attitude of employees. Employees now say, ‘I know you’ll keep me as long as you need me, and I’ll stay here as long as I get what I need.”’
Another result of downsizing is that managers have smaller staffs and must do the detail work themselves. “That means they don’t have time to do strategic work or plan for the future,” Hanigan said. “And the remaining support staff is overwhelmed.”
That situation is “dangerous” for companies, she says, and retaining the remaining employees is becoming an acknowledged problem, particularly in view of the high cost of turnover.
Hanigan is a consultant for the nation’s top corporations, among them AT&T, which last year announced massive layoffs. “One of the smart things AT&T did was to realize it had valuable talent at risk and looked at the best practices of retention,” Hanigan said.
She’s currently conducting exit interviews for another company whose female and minority employees are leaving in greater numbers than its white male staff.
“We’re finding the reasons they’re leaving are the same issues - lack of job satisfaction, not being treated fairly and unclear communication from the top - that cause majority males to leave,” said Hanigan. “But women and minorities are like canaries in the mine: They’re warnings that something is wrong.”
Because of cutbacks, companies are in danger of losing their most competent employees, according to Roger E. Herman, president of Herman Associates Inc., based in Akron, Ohio.
“If employers don’t change their thinking about their employees, don’t switch from autocratic management to facilitating leadership and building trust, their companies won’t be able to survive,” said Herman.