Current Management Issues in the Real World: Layoffs - Essay Example

Current Management Issues in the Real World: Layoffs Current Management Issues in the Real World: Layoffs Management of organizations comes across some difficult decisions in their daily operations, especially when the economic times are tough. However, the issue of human resources is one of the most critical one for any management to cater to in an effective manner. Human resources refer to the workforce that is employed by the organization to fulfill the needs and tasks that are vital to the operations of the enterprise. This paper takes into account a recent article published in Newsweek that provides a reflective understanding of the concept of layoffs. The author made an initial assessment of the underlying concept that was emphasized upon in the article and then looked into other information available on the same matter (Pfeffer, 2010, p.26). This included an understanding of human capital and what it means to organizations, as well as examples of where layoffs have been used to strengthen the financial position of a company but have had negative effects in the long-term. The author reflected on the subject expressed in the article, by using material from other sources of literature, including online articles that have been published on various blogs and e-magazines. This helped the author gain a strong foundation on the subject matter and allow for the expression of views that affect the managerial issue of layoffs. The issue of layoffs is one that evokes public debate in depth. It is normally seen as the ideal way for making an organization cost-effective and tends to be the first step taking by enterprises when faced with tough financial situations (Baker, 2009). Even the recent downturn in the global markets saw financial service providers along with several other institutions take the step of downsizing the workforce in order to retain their profitability. However, it is not easy for management to make this decision as the chances of any downturn remaining for long remain slim; so when the situation returns to normal, recruitment drives will have to be resumed which in turn could cost the organization a lot more than current outgoings. A recent debate that has arisen discusses whether the decision to lay off employees is ideal for any organization, even when the economy appears to be in standstill or downturn (Pfeffer, 2010, p.24). Companies in the United States over the last few decades have shown a tendency to shed jobs; something quite evident from the auto industry. For most managers, the action of retrenchment appears unavoidable, as there is a general consensus in the cost of employees being the easiest to bring down in order to lower the costs faced by the organization. It is essential to note that the employment system in the Anglo-Saxon system, commonly a feature representative of the United States and United Kingdom, is based on flexibility and dynamic structuring (Bohlander & Snell, 2009). This means that employees are seen as a general commodity of an industry, and not so much as a part of a particular organization. Due to this outlook, it is easier for organizations to undertake recruitment and retrenchment activities as most members of the workforce possess the generic skills required. These skills are gained from tertiary education that provides the basic skill set in need by almost every organization. Management of organizations comes from the same basic background as the rest of the workforce. However, the development of efficient policies to get a better understanding of how to utilize the workforce and ensure alternative approaches to maintaining a cost-effective environment in the organization seems lagging. A good example of the negative aspect of layoffs was demonstrated in 2001, right after the terror attacks in New York. With air travel immediately suspended, management at various airlines took the usual step of downsizing their workforce, as they expected a significant drop in air travel, and wanted to protect the financial position of their companies. In the United States, only one airline decided not to follow this management decision that was exercised by all others. In the time to follow since then, Southwest has become the largest American airline by market capitalization, and retained its historic image of not enforcing any form of involuntary redundancy. Additionally, other airlines in the American domestic market have had to go on heavy recruitment drives to regain their staff lost due to the 2001 managerial decision, and have had to contend with a loss of revenue (Pfeffer, 2010, p.24). Research has found that several myths held about the urge that managers have to downsize aren’t true. For example, many believe that the reduction of workforce would help companies push up their stock price (Uchitelle, 2006). However, this has been found not to be true, based on data from the last three decades, showing that stockholder interest in companies which undertake extensive layoffs is diminished, with many believing that such steps signify the weakness in organizational structuring and processes. Also, downsizing does not assist with the company’s productivity. As workers are reduced, maintaining same levels of production becomes harder, and in industries where quality is imperative, this could prove a deciding factor in the any success falling for that organization. While layoffs may show a short-term positive trend on the profitability of companies, in the long-run there is more negativity as research within the organization gets hampered due to the limitation in workforce. A key issue that management needs to take into account is that layoffs tend to lose the company a significant portion of their high-quality people (Bohlander & Snell, 2009). The reasoning behind this is that employees who possess strong skills tend to be more in demand during tough economic conditions. Also, when companies take the step to downsize, they offer a pessimistic outlook to the workforce and the general public. This prompts all employees to look at available options; in many cases, this could be with a competitor in the same industry. Managers offer differing explanations to the activity of layoffs used by them in varying situations. In most cases, they consider it as a surgery on an organization or amputation of a certain part to save the entire body. However, researchers disagree with this explanation of managers using layoffs as a measure to cleanse the organization of unwanted workforce. The belief is that this action by managers is more like bloodletting, which weakens the body. By cutting the workforce, the impact of the action is not only on the cost faced by the organization, but also on the innovation, productivity and customer service that it provides in the industry. There is little evidence of the workload being decreased; this means a demoralized workforce is left to cater to the needs of the organization with the added pressure of performance being under the constant view of management. There is no hard and fast statement on the aspect of layoffs. While most research has shown it as being an unnecessary action, there is some support for this managerial issue. Where done in an ethical manner, layoffs can assist with ensuring optimum productivity is achieved by an organization (Abowd et al, 2009). One of the ways that managers can adopt is not to announce massive layoffs, especially when economic conditions in the industry or nation are not ideal. Instead, managers should undertake a deep review of the workforce to understand the productivity and skill set available to them at each stage, and then make more informed decisions of which employees can be let go or replaced without affecting the overall results of the enterprise. This way, the rest of the workforce continues meeting the productivity levels, or in certain cases, exceed them. The understanding of human capital remains devoid of management thinking in organizational processes, as they try to effect changes that are likely to benefit the enterprise. However the issue of workforce retention is much more than simply believing in productivity; it is linked to the understanding that the employees of an organization are an asset that should be protected and invested into, rather than removed when the situation seems challenging. Literature studied showed that the managerial issue pertaining to layoffs is more complex than that understood by those making the decisions. Companies are reactive to short-term situations, and take little time to understand the long-term impact that the loss of employees, especially those with tacit knowledge to the processes of the enterprise, can have on the productivity, innovation and value. Manager should undertake a more concentrated effort in understanding their workforce and develop a more effective way of creating a leaner and productive employee base; which does not necessitate the massive layoffs often utilized to lower costs and increase profit margins. The managerial issue of not understanding the value of the human capital present within an organization and the best ways to utilize them in order to remain competent through challenging times; remains a problem that still needs a resolution in all industries and sectors. For companies that are affected by global downturn or shifting economies, there is a need to take a soft approach towards cost-cutting measures, especially when linked with the workforce giving it the production and innovation that is competitive and of quality. This paper has shown views from research that the matter of layoffs can prove to be more detrimental to an organization, than beneficial. References Abowd, J., McKinney, K. & Vilhuber, L. (2009). “The Link between Human Capital, Mass Layoffs, and Firm Deaths” Producer Dynamics: New Evidence from Micro Data (pp. 447-472). University of Chicago Press. Baker, D. (2009, October) “Job Sharing: Tax Credits to Prevent Layoffs and Stimulate Employment” Issue Brief. Center for Economic and Policy Research. Bohlander, G. & Snell, S. (2009). Managing Human Resources. Cengage Learning. Pfeffer, J. (2010, February 15). “Lay Off the Layoffs” Newsweek, p22-27. Uchitelle, L. (2006). The Disposable American: layoffs and their consequences. Knopf. Read More