The Ineffectiveness of Layoffs in the Short- and Long-Term

The month of September in the U.S. saw the greatest number of jobs lost in one month in the ninth straight month of job losses. That companies are cutting back on staff is not truly surprising given the news of global markets falling and companies struggling under the credit crunch. But a recent news brief from Workforce Management offers sobering research from the Academy of Management Journal. Per the study:

“Even moderate layoffs can trigger an exodus of key employees that wipes out any cost savings. After analyzing “quitting rates” at about 200 companies, researchers say firing even less than 1% of their workers causes companies to experience sustained turnover averaging 13%, or 2.6% higher than the average turnover rate of firms that aren’t downsizing.

Also noteworthy: a long-held belief that providing employees with professional development doesn’t guarantee a boost in retention, as many employees use the tools and newfound knowledge to seek employment elsewhere.”

This research is noteworthy for two reasons:

1) Layoffs aren’t the answer - Today’s savvy employee knows no job is guaranteed, especially when the economy turns sour. After cutting resources deeply during the last downturn, human resources leaders are now positioning themselves more strategically to ensure the company has the right people in the right jobs when the market turns. This strategy will help the company rebound more quickly than those that did a less considered layoff.

2) Professional development won’t increase retention – What does influence retention is strategic recognition by engaging employees in a culture where they are continually appreciated through a system that ties their efforts to company goals and values. In this way, employees see how their efforts directly impact company performance.

What policy has your company adopted during this downturn – layoffs or retention? What has the impact been? Be sure to take our weekly poll.