Lay Off the Layoffs
|By Jeffrey Pfeffer, Newsweek|
|Monday, 08 February 2010 15:05|
n Sept. 12, 2001, there were no commercial flights in the United States. It was uncertain when airlines would be permitted to start flying again - or how many customers would be on them. Airlines faced not only the tragedy of 9/11 but the fact that economy was entering a recession. So almost immediately, all the U.S. airlines, save one, did what so many U.S. corporations are particularly skilled at doing: they began announcing tens of thousands of layoffs. Today the one airline that didn't cut staff, Southwest, still has never had an involuntary layoff in its almost 40-year history. It's now the largest domestic U.S. airline and has a market capitalization bigger than all its domestic competitors combined. As its former head of human resources once told me: "If people are your most important assets, why would you get rid of them?"
It's an attitude that's all too rare in executive suites these days. As the U.S. economy emerges from recession, Americans continue to suffer through the worst labor market in a generation. The unemployment rate dipped in January, from 10 percent to 9.7 percent, but the economy continued to lose jobs. There are currently 14.8 million unemployed, and when you count "discouraged workers" (who've given up on job seeking) and part-time workers who'd prefer a full-time gig, that's another 9.4 million Americans who are "underemployed." While the pink slips are slowing as the economy rebounds, the lack of jobs remains the most visible - and politically troublesome - reminder that despite what the economic indicators may tell us, for much of the population, the Great Recession hasn't really gone away.
But some of the drawbacks are surprising. Much of the conventional wisdom about downsizing - like the fact that it automatically drives a company's stock price higher, or increases profitability - turns out to be wrong. There's substantial research into the physical and health effects of downsizing on employees - research that reinforces the seemingly hyperbolic notion that layoffs are literally killing people. There is also empirical evidence showing that labor-market flexibility isn't necessarily so good for countries, either. A recent study of 20 Organization for Economic Cooperation and Development economies over a 20-year period by two Dutch economists found that labor-productivity growth was higher in economies having more highly regulated industrial-relations systems - meaning they had more formal prohibitions against the letting go of workers.
Pfeffer is a professor of organizational behavior at Stanford University's Graduate School of Business, and the coauthor (with Robert I. Sutton) of "Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting From Evidence-Based Management."
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