Layoffs Continue Despite Belief in Upturn

More than six months after the sudden, resounding crash of the financial system, things are starting to look just a little better. Over the past few weeks, as Q1 earning reports were filed, there was more good news than bad; at least relatively speaking. Many companies reported mild profits, others beat analyst expectations for protecting or improving their stock value, and even some hard-hit financial institutions showed signs of improvement. Ford posted a quarterly loss of less than $2 billion, also defying rather dismal expectations.

The Dow Jones, which declined since the beginning of the year to a low on March 9, 2009, has since rebounded nearly 2,000 points. While real estate markets continue to struggle, potential first-time homeowners are beginning to feel the itch of “If I don't buy something within the next couple of months, I'm never going to get a better deal in my lifetime.”

In other words, things are looking up. Stocks are on the rise, many companies are starting to report profits once again and there's a sense that the real estate market is poised to turn itself around.
Employment, however, continues to be a problem. According to a recent Wall Street Journal article, a majority of companies expect the economic upturn to begin at the end of this year or early 2010. But in spite of these promising signs, a large percentage also intend to move forward with layoffs and other cost-cutting measures. Is this the right move?

Late-recession workforce cuts can end up costing a company in the long term, as severance packages have immediate costs that may be followed by training and hiring costs in the near future. Also, as more jobs become available, remaining employees - discouraged by cuts to benefits, including healthcare and 401(k)'s - may be less inclined to stick around.

But even with optimistic signs of recovery, many companies are still in a position where they may not survive if they don't act drastically now. The risk of losing employees in the future or spending more in the long-term may not mean much to a company that is facing extinction today.

Of course, there are ways for companies to compromise. Salary cuts, shorter workweeks and mandatory unpaid holidays are generally considered good alternatives, as they result in fewer lost jobs and may be regarded as more temporary and employee friendly than other cuts.

The bottom line is that companies need to look at what will allow them to survive and thrive. If the company is going under in a matter of months if they don't take drastic measures now, well then, they don't have much of a choice. However, if a company can weather the storm for a while longer - even if it means losing money - they may be in a better position to thrive in the near future.
Erik Samdahl
Erik is the head of marketing at i4cp, and has nearly 20 years in the market research and human capital research industry.