For anyone who watched 60 Minutes last night, you know that there is a great deal of pessimism out there about how quickly this recession will end.
Employers are struggling to control costs and keep layoffs to a minimum. A new, thoughful article by the Wharton school suggests that employers be innovative in their approaches to dealing with this economic crisis.
[Wharton Professor Peter] Cappelli suggests that it’s worth thinking about what kind of problem a company is trying to solve. If there is a concern about what happens when business activity picks back up, for example, companies that hold on to their workers would be in much better shape than companies that have undergone large-scale layoffs.
The costs of layoffs go beyond the morale problems they cause — both for those laid off and those who keep their jobs. Unemployment insurance premiums spike. Depending on the company, there are severance packages to consider and outplacement services (costly in these days of bigger demand for them). Litigation is a not insignificant risk. Cappelli suggests that if a company can cut back without instituting layoffs, it should do so. "Then you don’t have those start-up costs" once things are back on track.
On the other hand, there’s nothing like a good economic downturn to get rid of dead wood. A sagging economy can be an opportune time for management to deal with performance problems by using the bluntest instrument possible, Cappelli says. Firing people is often difficult to execute, but an over-arching justification tends to lessen complications.
The subject of alternatives to layoffs is almost always seen from the point of view of the employer, he adds. It would be a rare employee who suggests his or her hours be cut. But executives can share the decision by asking for voluntary pay cuts in exchange for some sort of deferred compensation, such as shares of stock or extra vacation.
In giving my presentation tomorrow on the subject of RIFs, the article’s points are timely. Layoffs are never easy and coming up with solutions to lessen the impact may make the company stronger in the long-term.
Ultimately, if company does decide to conduct a round of layoffs, making sure that it has considered alternatives will only strengthen the company’s rationale for the layoff (thereby preserving a valuable legal defense).