Company Layoff

Historically, layoff is often associated with bad publications for companies performing it. Furthermore, there are various other negative effects that are associated with the application of layoffs. Sometimes, layoff is the only way that the company must perform, in the sense that managers of the company have no other solution to cope with problems of the company. Despite the comments of observers and researches revealing the bad effects of massive layoffs, company layoff still becomes a part of modern companies’ daily lives.

Concerning the issue, this paper will review articles about layoff and several important factors. The review aims at creating a simple conclusion regarding the practice of layoffs and their tendencies. Afterwards, the paper will use one of the latest layoff policies to justify the conclusion and also to evaluate the layoff within a company. The focus of the paper is to describe the effects of company layoffs and present a practical example of the conclusion.

Company Layoff

Definition

By definition, layoff refers to a termination of employment of an employee or group of employees due to unfavorable business situation. The term is common in the business environment and does not often generate uneasiness.

However, mass layoffs often become the source of debacle and confrontation in the workplaces. Firing employees in individual manner does not generally raise too much problem because they generally contain justified reasons of why the employees’ employment must be terminated.

In addition, mass layoffs often generate trouble due to the fact that mass layoffs are performed solely due to economic reasons. In other words, employees being laid off could have performed no mistake in hi/her job that deserves the termination of employment. Within this paper, the discussion is focused more on mass layoffs rather than individual layoffs (Layoffs, nd.).

Why Layoff

 Researchers identify two reasons concerning layoffs. The first category relates to the internal condition of the company in which layoffs are performed. Companies perform layoff because of profitability reasons. The goal of performing mass layoff is to reduce the labor cost of the company. This is true since in most manufacturing companies, labor costs become significant parts of the operational costs of the company. Therefore, reducing the labor cost without hurting revenues could mean enhanced profitability (Layoffs, nd.).

However, some layoffs occur because management believes that revenues in future periods will go down. This could be the result of enhanced competition, problems with corporate supply chain, changes in managerial structure, etc. In order to maintain profit, management often decides to cut labor costs (Layoffs, nd.).

Another reason of performing mass layoffs is external reasons. A downturn in macroeconomic conditions could result in financial problems for most companies. This macroeconomic downturn could have effects limited to certain industries or could happen nationally. In order to cope with such problem, companies could decide to cut labor costs and saves some level of profitability. This type of mass layoffs generally costs less debacles because ’everyone is going through the same problem’ at the time. However, there are also records that macroeconomic downturn and mass layoffs in some countries result in widespread class actions and public protests.

General Effects of Layoffs

 Layoffs are often performed as the last solution. In other words, layoffs are seen as the last solution to save a company from a terrible fall. Nevertheless, the fact often denies that premise. Layoffs often decrease corporate value rather than enhance it. Researchers state that this is due to the poor tendency of managers and business owners to look only to the financial aspect of the layoffs. In other words, they often neglect the intrinsic effect of the layoffs. The financial aspects of layoffs are generally easy to calculate, however, managers generally fail to assess the value generated by employees that must be laid-off. Thus, managers could well be loosing more value from the layoff compare to the financial savings they gain from the process (Hymowitz, 2007).

Another bad effect of layoffs generally comes from the layoff that influence working environment. Layoffs often reduce employees’ motivation. Surviving employees generally becomes more wary and possess the feeling of unsafe which reduces the working performance of employees. Moreover, the feeling of unsafe could generate the decision to seek for new jobs rather than waiting with uncertainties (Hymowitz, 2007).

How to Make the Best Layoffs

Layoffs are generally correlated to bad business. The term generates negative atmosphere for most people in the working environment. Therefore, business owners and managers generally place layoff decisions as a last resort rather than a preferable alternative. Some alternatives to layoffs are: establishing a hiring freeze, relocate employees to other sections or departments, cutting managerial and administrative salaries, shortening the work week, offering early retirements, etc. However, if layoffs are imminent, there are some activities that could reduce the negative effect of mass layoffs (Sullivan, 2001).

The first step in making the best of corporate layoffs is planning the layoff strategy. This includes identification of common problems that could happen during layoffs. Managers of the company are suggested to perform researches and benchmarking to the best practice of company layoffs. Identification and evaluation of all alternatives to layoffs must be performed prior to deciding any layoff decisions. Planning the layoff strategy also involves preparing the budget for layoffs, notifying everyone involves and affected by the layoffs, etc.

The second step of managing layoff is making sure that we involved all the people that should be involved in the layoff decision, like CFO’s, HR officers, the corporate attorney, senior managers, etc. The company must them select a layoff expert, this person is responsible for the layoff process and to educate others on how to perform effective layoffs. In addition, the worker’s union must be involved within the process. Lack of educating the union leaders about the necessity of the layoffs could mean failure in performing effective and successful layoffs (Sullivan, 2001).

The third step is managing the process carefully, this includes the preparation of a worst case scenario and socialization of involve people, setting the layoff criteria and maintain the credibility of the criteria during the process, identification of top performers, the people that the company cannot afford to loose and protecting them, etc (Sullivan, 2001).

RadioShack

RadioShack Corporation is a chain of electronic retail stores in the United States, Europe, Central America and South America. The company has 6,000 stores in USA and has reported sales of $ 4.6 billion in 2006. In August 10, 2006, the company announces the layoff of 400 to 450 employees at the company headquarters. Company officials assert this action is necessary to reduce company’s overhead expense and enhance competitive position in the marketplace in the long term. The action is also decided to support small number of stores having financial trouble. In the company headquarters, 1 out of 5 positions are eliminated which affected employees of all levels in RadioShack.

The layoff decision by the company is widely understood by many observers; however, the layoff generates significant controversy because of the manner in which the layoffs are performed. The 400 employees are notified of the layoff 10 days in advance of the actual layoff. Email notification was delivered to employees who were terminated. In August 10, 2006, employees were sent the emails and they were given 30 minutes to pack up and say goodbye to co-workers and then meet their senior supervisors. After the meeting, a larger meeting was held to deliver the employees with their benefit packages and ask their questions.

This manner of layoffs generates a widespread public attention. Many state that they have never seen such amount of employees laid off by emails. According to the general practice of corporate conduct, this demonstrates the lack of sensitivity by corporate management. The company has performed various efforts to delete reportage of this incident. According to some observers, this is one of the worst practices of corporate layoff in the history of corporate social responsibility. There are many articles that respond with cynicism in reaction of the poor methods of firing people who have been contributing to the company’s success, some even for many years.

I believe that the company will not obtain the value they aim for when they decided to perform this layoff decision. As discussed above, there should be various measures to face the negative effects of layoffs to employee morale. Insensitive behaviors like one performed by RadioShack will significantly hurt employee morale and their respect to the managers of the company. In result, working productivity could be seriously affected.

Bibliography

Hymowitz. Carol. 2007. ‘Why Layoffs Could Cost More Than They’. CareerJournal. Retrieved March 24, 2007 from http://www.careerjournaleurope.com/columnists/inthelead/20010725-inthelead.html

‘RadioShack lays off employees via e-mail’. 2006. USATODAY. Retrieved March 24, 2007 from http://www.usatoday.com/tech/news/2006-08-30-radioshack-email-layoffs_x.htm

Save‘Layoffs Common but Still a Company’s Last Resort’. N.d. Jobwerx. Retrieved March 24, 2007 from http://www.jobwerx.com/HR/layoffs_common.html

Slaggle, Matt, 2006. ‘RadioShack to offer free online training’. USA TODAYRetrieved  March 24, 2007 frrom http://www.usatoday.com/tech/news/2006-10-18-radio-shack-classes_x.htm

Sullivan, John. 2001. ‘Key Steps in Effective Layoffs’. ERE.net. Retrieved March 24, 2007 from http://www.ere.net/articles/default.asp?d=H&CID={B6BCB155-2D2F-4C2E-82EC-CB33C6D1E3F9}