Survey: Heavy layoffs to continue

NEW ORLEANS, LA.NEW ORLEANS, LA.
June 29, 2009 5:44am

Corporate downsizing is on a record pace through the first five months of 2009 and is expected to remain heavy through the end of the year, according to a new survey by outplacement company Challenger, Gray & Christmas Inc.

The decision to make job cuts in most cases does not bring an end to the challenges facing a company that is forced to enact them, says the report, released Monday at a conference in New Orleans.

And one of the biggest challenges employers must address in the wake of a layoff is keeping the surviving employees engaged and focused.

The survey of human resources executives found that 54 percent consider employee-engagement the biggest challenge that companies face after job-cut announcements. The next biggest challenge, selected by 23 percent of respondents, was easing anxiety over the possibility of additional layoffs.

The results of the survey were released at the Society for Human Resource Management 61st annual conference.

Surprisingly, only 15 percent of survey respondents said ensuring that quality and quantity of output remained consistent, despite having few employees, was the primary challenge.

“Companies that focus on output will create a workforce that is motivated by fear of job loss instead of by loyalty and pride. That may work for the remainder of the downturn, but as soon as the recovery begins, the company will undoubtedly experience heavy turnover,” says said John Challenger, chief executive officer of Challenger, Gray & Christmas. “Companies recognizing that employee-engagement is the key to continued quality output will not only survive the downturn, but will be poised to thrive when the expansion begins.”

At the moment, it is unclear as to when the Great Recession will bottom out, Challenger says. Since last June, employers have announced 1,652,082 job cuts, according to monthly tracking by Challenger. About half of those (822,282) have occurred during the first five months of 2009. At the current rate, 2009 is on pace to surpass the record 2001 job-cut total of 1,956,876.

The good news is that monthly job-cut totals have trended downward since reaching a seven-year high of 241,749 in January. However, this decline in job cuts could be short-lived. The second quarter is typically the lowest quarter of the year when it comes to job cuts.

Corporate downsizing may continue to remain slow during the summer months, but if the past is any indication, the pace could accelerate again in the latter half of the third quarter through the end of the year, Challenger says.

Between 2001 and 2008, the second quarter experienced the lowest job-cut average at 256,513. That is about 10 percent lower than the next largest quarter, the third quarter, which averaged 285,742 job cuts during the same eight-year period. The heaviest downsizing typically occurs in the fourth quarter, which has averaged 352,744 job cuts since 2001.

“There have been some promising signs in the economy, including increased confidence among consumers and businesses. However, until there is actually an increase in spending by these groups, the economy will continue to struggle. Even if the situation stabilizes, we could continue to see heavy monthly totals in excess of 100,000 job cuts,” says Mr. Challenger.

“We cannot quite see the end of the tunnel, but a turnaround is inevitable. Companies need to remember that when they turn to layoffs to cut costs. It is an unfortunate situation to be in, but the way companies handle it – particularly the way they deal with surviving employees – can make it significantly better or worse,” says Mr. Challenger.

“You cannot simply tell employees to ‘do more with less.’ There must be a back-and-forth dialogue to address employees’ concerns and fears. They must be an active part of the problem-solving process. And, in any situation, honesty is the best policy; employees deserve up-front communication when it comes to the state of the company and their jobs,” he says.

It appears that most companies try to do this. According to the survey, 58 percent said they had department supervisors meet directly with surviving employees to discuss any changes occurring as a result of the downturn and/or layoffs. However, only 12 percent provide post-layoff counseling and about one in ten did nothing at all to address post-layoff issues faced by survivors.

“The worst thing a company can do is nothing. The survivors of a layoff are dealing with a lot of emotions and, in many cases, increased workloads as they pick up the duties of their former colleagues,” says Mr. Challenger. “Many of those who remain after downsizing are stricken with survivor’s guilt. Others are filled with an enormous amount of anxiety, assuming that it is only a matter of time before the other shoe drops. The result of doing nothing in this situation will be low morale, low productivity and, eventually, high turnover.”