Staff Cuts - The Reality
We are in one of the worst recessions for a long time (take your pick on the number of years since the last "bad one" - everyone has their ideas). The main effect that we are seeing is the number of redundancies coming through as the altar of cost-cutting is piled high with sacrifices. First to go are usually the "softer options" like strategic investments, training, contractors/consultants, sponsorship, entertainment, travel, but once these go, the next cut is headcount and associated salaries, NICs, pension and insurance contributions.After this, what? When a firm cuts headcount (as many are being forced to do), what happens? Not only will they see a reduction in headcount, but also in:
The knowledge and experience that those made redundant used to get the job done goes with them (perhaps to a competitor). Colleagues left in the company who relied on that knowledge suddenly have it removed. Efficiency and service levels are reduced and costs increase.
Those made redundant will have networks of colleagues and outside suppliers or contractors who helped to get things done. These vital contacts will go. Again, those colleagues left will suddenly have to deal with gaps in the service proposition.
Morale amongst those left will suffer as colleagues and friends leave. Staff left will need to work harder to cover for them and will lack the knowledge/networks/experience of the departed, resulting in increased fatigue and stress. This is part of downsiing in hard times, so they need to accept it.
Customer Service will inevitably suffer as the machine has lost its efficiency. The company may be able to get it back up to speed, but do you really want dissatisfied customers in a recessionary climate, particularly if they can go to the competition?
Inevitably, these things go in cycles and the recession will come to an end. When that will be is anyone's guess, but when it happens will people then be fighting to attract new talent again? Will the "right" talent be available? What will it cost? Will the savings generated earlier be wiped out by the costs of advertising, interviewing, re-hiring, re-training and new employees getting "up to speed"? Will this prolong customer suffering before service is again at previous levels?
This is not an argument against headcount reductions - more to make sure that managers realise the impact of this action and prepare themselves and their teams for it in order to minimise potential disruption.
Labels: Strategy
posted by William Martin @ 18:10
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