To Lay Off or Not Lay Off?

By Donald Sears  |  Posted 2009-04-23 Print this article Print

That is the question that many companies answer by a resounding "Unfortunately, yes."

But some companies are questioning the wisdom in layoffs if an economic turnaround comes in the next year. According to the WSJ, a recent Hewitt Associates survey of 518 large U.S. companies found that 54 percent think the recovery will happen late 2009 to early 2010.

While it's nice to hear something positive in recovery expectations, it's not particularly comforting given the news around layoffs and unemployment. Just today the Department of Labor released revised unemployment numbers for the last week that show another increase: From the DOL release: "In the week ending April 18, the advance figure for seasonally adjusted initial claims was 640,000, an increase of 27,000 from the previous week's revised figure of 613,000."

That puts the new "advance seasonally adjusted insured unemployment" number at 6,137,000.

There are many ways to reduce costs while keeping employees--think pay cuts, hourly reductions, decreased benefits--even paid time off with no loss of job (lucky, bastards).

Meanwhile, the issue for those companies in the must-reduce-costs-right-freaking-now bracket, layoffs are simply the quickest, most expedient way to get numbers off the books. But what about all the severance and rehiring costs once things turn around? From the WSJ article:

Peter Cappelli, professor of management at the University of Pennsylvania's Wharton School, says shorter workweeks and mandatory furloughs could be better options for companies that sense a turnaround coming. "Once business comes back, no one is quitting over a furlough," he says.

Others say that salary cuts save jobs. Arnold Worldwide, a Boston-based advertising agency with 800 employees, implemented a tiered salary cut in April. Chief Executive Fran Kelly says the measure helped him "dramatically decrease" the number of required layoffs.

In addition, he says, he won't "lose great people, have severance expenses and have clients whose services become disrupted."

Looking at these unemployment figures from the DOL, it's amazing to see the weekly raw data on the effects of recession on blue collar workers. While the numbers are not necessarily large week to week, they speak volumes. When you look at the state-supplied comments on state-by-state trends, the overall decline in manufacturing, construction and services is astounding.

It's not new news, by any stretch, it simply continues to decline. |

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