Cutting Staff to Join In?
Posted on November 27th, 2008, in Business, Employees | 5 Comments »
I am seeing a fair number of companies cutting staff that probably don’t need to. They are reporting record earnings, or at worst nominal drops in revenue, and yet they are cutting upwards of thirty percent of their staff. What is going on? Why are they making such aggressive cuts in their staff if the money is still rolling in?
The ME TOO Mindset
I was recently talking to a colleague of mine, and it was said that watching the news go around about all the cuts and the horrible economy most definitely pushes out the feeling that companies should make cuts because others are. When you put massive amounts of people together, you’ll notice quite often there is a tendency to follow a leader, even if it is in the wrong direction.
Are many companies letting go of hard working people just because they have seen the news that their competitors have let go of staff? Do they see this as a way to remain competitive and bolster their revenue figures? Is this just a great excuse, so that those that do the firings don’t have to feel bad?
Again, I am not saying that there isn’t a reason to downsize, if your revenues are going south, or your cash burn rate is too high to be sustained over the long haul, but to do it without any other provocation other than your competition cutting back is ridiculous.
Companies expect their staff to work hard for them, and be loyal, and then there is a hiccup in the economy and people are being downsized like there is no tomorrow.
I really think that if most companies took a moment to pause, really analyze the situation, and take preventative measures that don’t require a loss of talent and staff, they would be able to ride out this economic storm without contributing to the negativity that is currently hanging over the new media / Internet and technology related industries.
What do you think, were all of these firings really necessary?
I won’t say all are necessary but you need to remember that profits are reported either annually, or quarterly at best. Third quarter earnings may have been massive, but they will know what is happening now and will be making predictions based on emerging trends.
A significant slow down in custom, impending deflation (in some markets), and greater competition from price wars mean that a company that doesn’t prepare now may find itself outgunned and slipping quickly to the bottom of the pile.
- AndrewI think most of them probably aren’t necessary, but some no doubt are. It’s hard to draw the lines at where that separation is though. The effect of the PERCEPTION of the current state of the economy is far strong than any practical effect the economy can have on the public…so there is ALWAYS overkill in things like down-sizing (or up-sizing as the case may be).
If each company did it’s own research as to the likely effect of the current economic issues I’m sure that MANY of them would notice just how little they would be affected on a practical level, and how much of their opinion of the situation is based purely on perception.
It’s a simple supply and demand issue really. The actual value of any product means less than the perceived value…which in turn means the cost of the product is not necessarily a reflection on quality or anything do do with the product itself so long as people perceive it a certain way.
Economics is tricky…and I’m certainly no expert…just my 2 cents.
- Brad LeclercHere’s my peeve with these layoffs: why is it that businesses only take a close look at their expense when times are tough, and why is it that they get ride of their most valuable asset, their employees.
Whenever I hear about massive layoffs, the first thing that comes to mind is poor management. Oh, so now that times are tough they start making the tough decision and make their companies more effective and productive. This should always be a priority, whether in good times or tough times.
It’s not too difficult to manage a business when times are tough, but you can truly appreciate great management when times are tough.
- David “CrazyKinux” PerryI think companies are realizing that this downturn may last a long time, and that they have to protect themselves. One of the largest expenses web companies have is staff, so if they’re still running on savings or VC money, they *have* to cut back at very least for the appearance of trying to be fiscally responsible in case they need another round of funding down the road.
It’s unfortunate, sure, but sometimes, you have to sacrifice a few to make sure the business can stay afloat.
- WTLI think it’s a mixture of things, and one of the big reasons is greed. A company sees that it can justify getting rid of staff, while requiring the remaining staff to create the same level of output, and even if they don’t need to get rid of people, they do it anyway, to make more money. And they kill the remaining staff in the meantime, who tries to keep up with the extra workload.
Plus – some cuts are simply stupid. During the oil industry downturn in the late 90s, a friend said the oil companies were laying off their exploration depts — who were the ones who would find new oilfields and bring in new revenue — while keeping the bean counters, who mainly counted existing beans and didn’t come up with new revenue sources. It was the stupidest way they could possibly have behaved, but it was the standard way everyone reacted.
- Phyl