Layoffs Are All Around Us, But What Do They Really Mean?

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This time last year Recruiters everywhere were scrambling to find qualified talent to fill their open job requisitions. Layoff announcements were almost unheard of. Boy, what a difference a year can make. As more and more companies feel the economic pinch, layoffs have become a reality rather than a distant memory. But before you stop spending and start saving every recruiting dollar, some experts suggest you think before panicking. “What is interesting about this downsizing is that companies are taking initiative in laying off workers before they are experiencing any real shortfalls in their business,” according to Peter Capelli of Wharton Business School. What this really means is that companies are anticipating the worst and taking preventative measures to cut costs by laying off employees. At the same time they are creating a potential disaster by having to hire all over again for these positions once the market changes. Unemployment still remains around 4.3%, and if the economy remains steady or improves, refilling the vacated positions could become a real problem for the companies who have recently laid some of their employees off. For this reason alone, it is critical to look at layoffs as a last resort in terms of cost cutting measures. The media also fuels layoff paranoia. I am sure that all of you have seen the headlines about massive layoffs occurring at companies like Motorola, Cisco or Lucent. The media, unfortunately, likes to grab the headlines with negative news. Our society is strange in the way it likes to hear about the negative rather than the positive in terms of employment news. What the media tends to neglect to report is that while a large company may be laying off 15,000 people there are hundreds of other companies who are hiring these people before their seat even gets cold at their old job. This also does not take into account the employees that are re-hired within a different division within the same company. Just because one division of a company is struggling, it doesn’t mean that all of the divisions are having the same problem. A perfect example of this is here in California, where Power Gas and Electric (PG&E) has filed for Chapter 11. This doesn’t mean that PG&E is going out of business and the lights are going to be turned off in half of the state. If you read the fine print, only one division is filing for Chapter 11, which will allow them to reorganize their debt and doesn’t necessarily mean that it is lights out for California. It comes down to the simple fact that it is easier to see downsizing and much harder to notice hiring. The reason is that downsizing happens quickly and can be widespread, affecting hundreds, if not thousands, within one company. In terms of hiring it occurs over a longer period of time and at a slower pace, so it tends to fly below most peoples radar screens. All of this news about layoffs should bring caution to all of us, but it needs to be taken with a bit of skepticism. If you put the brakes on too fast, it becomes increasingly difficult to put the gas back on when hiring becomes a top priority within your company again. Now is the time to take stock of the employees that you currently have in your organization. There may be some fat that can be trimmed, but be careful not inflict long-term damage by letting employees go that you fought hard to hire just a year ago. Employees in this type of market become increasing nervous about their futures with their current job, so if cost cutting measures are in order, it is important to look at layoffs as a last resort. Don’t get caught up in the doom and gloom that the media likes to keep in the forefront of everyone’s mind. You must always remember that the employees at your company make your company what it is! <*SPONSORMESSAGE*>

About the Author

Scott Hagen (shagen@recruiters-aid.com) is a graduate of San Diego State University, with over 8 years of high tech corporate recruiting experience with industry leaders such as Qualcomm, Cymer, and Pyxis. Scott is also a co-designer of the Recruiters-Aid PERS (Proprietary E-Recruitment System). Recruiters-Aid provides Internet candidate sourcing and screening services, and guarantees results-or the clients do not pay. Recruiters-Aid manages one of the largest free recruiting resource sites (http://www.recruiters-aid.com/kit.html) online. Recruiters-Aid services were created specifically for recruiters who don't have time to source the Internet themselves.
  • Eric Lane

    Scott Hagen’s article is RIGHT on target.

    This very much appears to be the first market-wide pre-emptive lay-off cycle I’ve seen in my 20+ year career.

    This ‘downsizing’ cycle is as irrational in many cases as the last 2+ years have been in ‘upsizing.’

    Having lived through the talent ‘gold rush’ we seem to be leaving ‘talent ghost towns’ behind.

    Organizations seem to be doing a much better job managing product inventories than managing talent inventories.

    Workforce planning is still the missing link to reduce these swings. I hear it talked about, but too infrequently acted upon. This cycle may provide the window for making the best case for even light-weight Workforce Planning… if nothing else, to capture for the future how bad today’s Workforce guesses really are… so MAYBE we can at least learn from the trends.

    One other thing… in too many cases, these are the worst managed lay-offs I’ve seen in my career… particularly among the dot coms. Even Semiconductor lay-offs of the early 80’2 were more humane and thoughtfully executed.

    If organizational leadership REALLY believed talent was the ‘difference’, as much effort would be spent on treating exiting employees with respect and dignity as was spent to woo V.C. money.

    It’s not expensive to do it right… you just need to REALLY believe ‘talent’ is worth the effort.

    Thanks Scott for your article… I’m forwarding it to everyone I can.

    See you soon,

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  • Rick Edwards

    I cannot agree more more. The media is so negative such as highlighting the layoffs occurring. This despite a still very healthy 4.5% unemployment rate. The media still seems to forget the during the 1980’s this country was facing a nearly 13% unemployment rate. Scott – thanks!

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  • Martha Damerell

    Scott,

    Thanks for saying it so clearly. I have been wondering for months why, in light of the massive layoffs, that the unemployment rate has moved up only .2%. If the economy can absorb all the people being cut, then that economy looks pretty healthy to me. As a technical recruiter, the people I talk with still measure their “unemployed” time in hours rather than weeks. I’m afraidd that companies take advantage of shaky times to jettison marginal products/projects/employees without appearng ruthless. The stigma cutting people’s jobs to bolster profits can stay with a company for a long time making it difficult to attract quality employees in the future. Third quarter should be VERY interesting.

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  • Michael Maisel

    Knee-jerk reactions seem so incongruous with the way HR professionals conduct their practices, that I would have to agree that the sigh of relief, or belief that the supply and demand tables have turned a 180 is coming from sources other than the HR community. Though I won’t jump on the media-bashing bandwagon, a real-life reality check is in order.

    A while ago, I spoke about Internet recruiting strategies to a group of 150 He professionals in Grand Rapids. That morning, the lead story on the local news was that one of the area’s largest employers was laying off 1,200. The sponsor of the seminar, not an HR professional, was worried that the presentation was suddenly irrelevant, because this layoff could only spell gloom and doom. I decided to deal with it head on and told the group this:

    Certainly the trauma of the event will prove stressful and upsetting to many of the families affected by the layoff, but the reality is that most, if not all of these folks will be absorbed into the marketplace very quickly. The local unemployment rate was about 3.2% at the time, and I told the group that, as a result of the layoff, it was probably now 3.21%. Statistically, the layoff will hardly show up at all on the radar scope.

    If you immediately cease, or drastically scale back your proactive recruitment efforts, you will soon find your pipeline dried up and restarting it, with a 3.21% local unemployment rate will be costly, difficult and take a lot longer than you think.

    A healthy company, with enlightened management, is always receptive to the opportunistic hire of a person with mission critical talent – whether actively seeking that talent or not.

    There’s only one Alan Greenspan, so few of us can predict the economic future with any degree of certainty. If things have slowed a bit at your company, or in your area, I suggest:

    – This, too, shall pass. So, don’t stop sourcing. Stay ahead! When it does pass, the pent up need for talent will demand speed and precision – a poor time to begin to ramp up.

    – You may see a small increase in unsolicited resumes. Don’t think this is your sign from above that the drought is over.

    – Learn from history, to avoid repeating it. During the last significant recession (I’m NOT saying we’re in one now!) and companies couldn’t lay off fast enough, not only did productivity, service and growth suffer, but when we emerged from it, companies that cut too drastically were out of position to rebound and grow.

    “It ain’t over till it’s over!”
    Yogi Berra

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  • Michelle Montez

    Thanks for the great article. I too believe that all the bad news published whether it be in the paper or in those news “teasers” on Tv have a negative effect. The perception is that everything is crumbling since only the bad is reported. What about the hundreds of dot coms and start ups that are successful– Why don’t we ever see that stats on those?

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  • Mark Walsh

    We probably don’t see the stats because these people aren’t hiring. Or if they are, they are doing it very discreetly.

    This is a board for recruiters. Recruiters are among the first people to be laid off. In the metro Boston area, I have not seen a single corporate job posting for a recruiter on any major job board in over 3 months. Our company is replacing their contract recruiter (me) with a perm person on June 30. The job won’t be announced for 2 more months, but we are receiving about 10 resumes per DAY from recruiters who will take the job at any price. The original salary to be offered was around $60K. It is now down to $40K and falling, and there is still no shortage of applicants – with the job yet to be announced!

    People are getting desparate. Not just recruiters. I get 100+ resumes per day from skilled Java developers, QA people, Unix admins, etc that can’t find work. Some have been unemployed since February. This market is sick. Very sick. Articles like this one are like the kid with his finger in the dyke.

    “Hey – no worries guys. I got it covered. You can all go home to bed now… ”

    Right.

    We may not be in a recession, but these layoffs (over 100K in the Boston area since December) have caught a lot of people off-guard and people are hurting.
    ———————
    “Thanks for the great article. I too believe that all the bad news
    published whether it be in the paper or in those news “teasers” on Tv have
    a negative effect. The perception is that everything is crumbling since
    only the bad is reported. What about the hundreds of dot coms and start
    ups that are successful– Why don’t we ever see that stats on those? “

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