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How Can Companies Cut Costs Without Mass Layoffs? (Report Date: June 2003, Full Report: 19 pages) Summary In today’s tough economic environment, companies are resorting to mass layoffs to relieve the financial difficulties they face and the pressures placed on them by their shareholders. According to a survey by global consulting firm Bain & Co, almost 40% of the 100 U.S. senior executives surveyed stated that they would resort to layoffs in an economic downturn. However, this approach to resolving financial problems generally does more harm than good. There is increasing evidence which points to the harmful effects of layoffs on a company’s medium and long term results, and which suggests that companies are better off hanging on to their employees than letting them go. More importantly, firing people as an instant reaction to financial troubles does not tackle the root cause of the financial problem, and prevents companies from achieving their strategic goals. This report draws attention to the negative consequences of mass layoffs on an organisation and provides recommendations on ways to reduce costs without firing people. It identifies the main drawbacks that come with corporate layoffs, including lost productivity, future cost increases, loss of customers, loss of valuable expertise, and expensive lawsuits. It also gives companies useful tips on how to cut organisational costs without having to get rid of people, such as applying pay cuts, giving employees more time off, using existing resources more efficiently, identifying key players and poor performers, cutting back on perks, and more. The aim of this report is to encourage companies to spend more time devising ways to make layoffs their last resort when financial difficulties arise. They need to realise that by neglecting employee interests, they are sacrificing their key to long-term success and sustainable competitive advantage in the market.
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