Record job cuts - will employers pay the price?

The news keeps getting worse, as last week it was announced by the Labor Department that the unemployment rate surged to 6.7% percent in November, a 15-year high. The number of jobs lost - 533,000 - was the largest in 34 years. Those numbers would look worse had the 422,000 people who left the workforce entirely been counted. Economists believe many of those people gave up looking for jobs out of frustration.

It's evident that companies are trying to save for the future by cutting costs now, but there could be other long term effects that these organizations are not taking into account, such as:
  • Deterioration of corporate culture - massive layoffs may seem like a price saving option, but the effect on morale and culture, among other things, needs to be managed carefully.
  • Inability to ramp up when the economy recovers - while we may hope that most organizations are keeping the future in mind, failure to forecast and assess when the economy will recover may result in companies scrambling to hire people back. This could be more financially damaging than riding out the wave with more moderate cutbacks.
  • Productivity losses - layoffs can lead to improved productivity, assuming that companies properly selected weak performers and less essential positions; however, expanding the workload of remaining employees too much can lead to burnout, decreased engagement and poor morale.
It's not easy to avoid layoffs a down economy, and many times it's important and essential to downscale operations. Nevertheless, some organizations appear to be reacting to the actions of other firms out of fear of what's to come, rather than mapping out a course of action to take short term losses for the benefit of long term gains.
Erik Samdahl
Erik is the head of marketing at i4cp, and has nearly 20 years in the market research and human capital research industry.