Layoff Myopia

This week I received another call from a senior professional acquaintance informing me that he had been laid off after 22 years of dedicated loyal and award winning performance.  His employer cited the current economy, and the Federal Government’s Sequestration forcing budget cuts across the board.  The call was the 5th call that I have received in 2013 and it’s only March.

Out of curiosity I ventured onto the Bureau of Labor Statistics website and discovered that their Mass Layoff Statistics program (http://www.bls.gov/mls/) was itself being terminated due to                                                         Sequestration.  Wow.

Clearly, the economy is not in good shape; although some would argue that we are moving in the right direction. 

At any rate, I started thinking about the human predisposition for “quick fixes” in life as well as work.  It often seems as if the first action a company (or government) undertakes is a reduction in workforce, or layoff.  These layoffs often are governed by rules and or processes, which have no real data to support the selection or value of the employees terminated.  I would also argue that many of these decisions are based upon personality conflicts,  lack of value placed upon sustainability,  and frankly outright laziness.

What about a possible alternative?   If you ask any performance improvement practitioner about the possible cost improvements from Lean, Six Sigma, Value Stream projects or any of the Continuous Improvement Tools in the world, most would probably say that the cost improvements can range from 20% to as much as 80%.  But they would follow with,  “It takes work and support of leadership” to be successful.  In my career, I would agree with these folks.  In fact, less than 10% of all of the companies that I have assessed or interviewed have completed any kind of Value Stream Mapping of their key and critical processes.  Furthermore, I have only run across a formal documented “Job Skills Certification” program within a company twice in the last decade.  Not sure what to make of this, other than to say it is, “Seat of the Pants Management”, which is all too common in todays world.

This brings me to the point of this “rant”.  Why don’t leaders focus on improving their companies and/or government agencies? Certainly a modest 25-30% improvement in expenses would help offset a financially challenging economy.

The improvements made would help the company through the difficult times, and position the company for a greater success in the good times.

Layoffs may help boost the bottom line in the short term, but the long-term costs may be more than the savings.  Consider the following costs: severance packages, accrued vacation payouts, benefits continuance, manager’s time to reallocate work, and increased cost of unemployment insurance.  In addition, we have the indirect costs of low morale affecting lower productivity and quality, lost knowledge and skills, lost innovation,  lost contacts, lost market share,  angry customers, and the cost of  recruiting and rehiring during an ensuing “ramp up”.

So in summary, while layoffs may seem to be an easy fix, the long term effect may not even come close to the ROI of focusing on improving performance.

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