Crash Diets

Crash Diets

Redundancies are like weight loss programs, at least in theory. Carrying around less fat leads to better health, which results in increased levels of energy and productivity.

But is weight loss always a good thing? Not if it reaches the point of cutting muscle, instead of fat.

Given the enormous costs of recruiting and training employees, it’s surprising that so many companies are purging themselves so quickly of their valuable talent resources. Even in a recession (or whatever the economists are calling it), you’d think companies would hang on a bit longer before cashing in their chips.

But old habits die hard, especially in the face of shareholder pressure to maintain corporate earnings at all costs. Hoping that across-the-board staff reductions will cure what ails them and mollify Wall Street, giant corporations are predictably repeating their knee-jerk reaction to disappointing earnings by announcing major layoffs. Only this time around, the strategy of cutting staff may have lost much of its edge.

Indiscriminate job cuts have the same effect as throwing the baby out with the bath water. But even more harmful to corporate health is the practice of liquidating assets that are certain to fall into the hands of the competition. When a company lays off a top-producing engineer or salesman, that person will naturally drift toward the competition, infusing the other side with years of product knowledge and longstanding customer relationships.

Front-Line Recession Fighters

Luckily, there’s a counter-trend at work in today’s employment marketplace, as thousands of smaller, privately held companies take a different approach to their human capital. Faced with the same slow growth or diminished profits as the giant corporations, small business owners are also forced to tighten their belts. But instead of playing the layoff game, they’re learning to live with aging capital equipment or last year’s software in order to hang on to the employees they’ve spent so dearly to recruit and train. By investing in the future, small businesses are not only helping stem the tide of unemployment, they’re collectively easing the severity of recession.

While it’s hard to work up much sympathy for a multi-billion dollar company eager to sacrifice 5,000 employees at the alter of corporate profits, trimming the fat from an organization isn’t as easy as it might appear.

Take the case of Ford Motor Company, which tried to implement an objective three-tiered rating system, designed to thin the ranks of consistently under-performing managers. Since no legitimate end is served by rewarding mediocrity, a merit plan would seem both logical and fair—unless you happen to be the individual viewed as a liability. Blasted by a blizzard of age discrimination lawsuits, Ford was forced to trash its own rating system—and with it, any hope of reforming a workplace that insures equal outcomes instead of high levels of performance.

With so many regulations restricting what large employers can do with respect to their employees, it’s a wonder anyone is ever laid off. And yet whenever the economy sneezes, it’s the big corporations that are first in line to perform major surgery.

Experts who predicted an end to the “binge-and-purge” hiring mentality following the last recession were proven wrong, as recent layoffs have perpetuated a seemingly endless hiring and firing cycle. The good news is that when the economy heats up again, so will the frenzy to hire more people—which only proves that the employment “paradigm shift” of the mid-1990s appears to be stuck in neutral.