Friday, December 19, 2008

Layoffs - An Example

A real world example of the layoff discussion I recently wrote about:

My company let an employee go this week. As controller, I had a small part in that decision because I put together a productivity measurement for this particular division and it shows a fairly gloomy outlook for them at their current staffing level. This report measures each employee's productivity, aggregates them, and gives us a cost per unit number.

The cost per unit is too high, which necessitated the staff reduction. We looked at the employees with the worst productivity, factored in other performance issues, and selected someone to let go. This improved our cost per unit by 9%.

2008 was not a kind year to this division, and that's putting it gently. Our product is very labor dependent, so a 9% drop in labor cost per unit is significant. It allows us to keep our prices competitive in our market, as well as begin to improve our overall performance. Without this improvement, it's not unreasonable to expect our owners to contemplate shutting down the entire division. An action which obviously would affect the entire company.

But our former employee is without a job. She is now part of that unemployment rate statistic broadcast consistently in every media source. She likely doesn't know about the data used in the decision making process - nor is she likely to care. All she knows is that she was let go, and who knows what the job outlook is.

These are the dueling concerns every business faces. No one takes joy in staff reductions, but those with the data know that without reducing costs the business may not last as a going concern.


Frank Staheli said...

In this article and the one entitled "Layoffs: Pros and Cons" you make a good case of how employees that cannot be encouraged or helped to be more productive are making it more difficult for the company's bottom line. In many cases, they should be laid off as an indication that better was and is expected of them.

What about, however, the disabled employee? Do we owe them any loyalty? I, for example, have a legally blind employee. He is able, through the use of computer software, to do a fairly good job, but he's not as productive as the rest. I think, though, that laying off this employee would be the wrong (un-Christian?) thing to do.

Cameron said...

Layoffs aren't necessarily solely because the employee is not a good worker. In this particular case, it was just that sales weren't sufficient to justify a position.

You bring up a great question in regards to the disabled employee. One to which I don't know that I have a great answer to at this point. If increased productivity is absolutely necessary, or revenue just doesn't justify a position any longer, then perhaps a transfer to a position more suitable to his abilities would be reasonable?