Layoff comes at a huge price

Off-late job cuts, particularly in the major global tech companies, are being piled up. In some cases, the decision of laying off employees was taken so hastily that it not only drew the attention of the media. Policy-makers and people were also concerned.

In one of the instances, half of the total workforce of a popular micro-blogging and social networking company was forced to leave overnight and the way it was executed was quite disgraceful for the employees – least to say. The obvious reason, as said by these companies, for downsizing employees was their depressing financial performance.

Why have all these reputed companies had to take such massive downsizing decisions suddenly?

The coronavirus pandemic, which broke out in early 2020, came as a blessing for tech companies as the world rapidly moved to online platforms. Many investors and analysts envisaged that this transformation would continue even after the pandemic is over.

Thus, huge investments were made in this sector that unfortunately did not pay off as online commerce returned to the pre-pandemic trends. The Russia-Ukraine war had further aggravated the situation as many major economies of the world are struggling because of recession. Consequently, digital advertisers are cutting back on their budgets and rising inflation has curbed consumer spending.

Traditionally, job-cut has been considered as one of the quickest and easiest ways to slash costs. Companies do sometimes take abrupt decisions based on short-term financial results without being mindful about future prospects. There were companies that trimmed their workforce in one year, and in the very next year, they recruited more people they had laid off.

Businesses must keep in mind that layoff does come with huge prices like tumbling employee morale, weaker retention and productivity, and a skills gap due to the loss of years of experience that will affect the company's bottom-line and success in the long run. Attracting talents would also be a key challenge.

So, how could companies avoid layoffs?

First and foremost is to move away from an obsession with fast growth. They should rather focus on sustainable growth. Taking two steps forward today and then three steps backwards tomorrow is detrimental to everyone, be it shareholders or employees.

During crises, companies may practise furlough and unpaid time off to manage costs. Senior executives can sacrifice their bonuses and pay rise and thus, contribute to curtailing expenses. Salary increments, in general, can be halted for the time being. Employees, especially who are well-paid, can agree to lower their payoffs during a difficult period.

In case the layoff is inevitable, companies must approach this with the utmost empathy. Companies will have to make sure all stakeholders, including the trade union, are on board, proper communication is done, all options are being exhausted, and employees are compensated in the best possible manners.

Any abrupt approach may backfire and cause employee unrest, social protests, and even consumer boycotting the products and services that would be the last nail in the coffin.

More importantly, management, the board and the shareholders must be sensible and empathetic to their employees who are undoubtedly the best assets and the driving force for the sustained success of any organisation.

The writer is managing director of BASF Bangladesh Limited. Views are personal.