Knowledge@Wharton asks what the strategy is behind recent layoffs in an article on their site. More than half a million jobs have been lost since September outside of the financial services world, the article estimates. The author says that the job cuts "highlight operational weaknesses and strategic issues that have been lurking under the surface for years." And now the downturn has brought those issues to the surface.
 
In the recent MDM Webcast, "Manage the Panic of 2009: New Rules for New Economic Realities, Evergreen Consulting’s Brent Grover told participants that managing cash is key right now, and one of the largest and most important parts of distributor expense control is people. He broke it down this way:
 
In looking at where to make cuts, if that is the direction you must go, focus on keeping the A and B performers. A performers are those who if they left the business, customers and fellow employees would miss them. B performers are those that have the potential to be A performers.
 
C players on the other hand are interchangeable, and if D performers were gone, everybody would be glad. They tend to be a drag on business goals. In looking at cost-cutting initiatives, do everything you can to hold onto A and B.
 
In his MDM Webcast, Grover makes an argument against across-the-board salary reductions or freezes that risk losing A and B for the sake of being fair to C and D. “The philosophy is that you’re better off with a small cadre of outstanding, experienced, trained and dedicated experts than a large group of slugs.”
 
Knowledge@Wharton looks at alternatives to layoffs in a separate article, saying that it is possible to slash salaries, hours and other benefits and hold onto morale. One professor quoted said that conventional wisdom used to be that doing the above would mean losing some of a company’s best players; to the contrary – more people than you might think are eager to help the company (and keep their jobs) by making such sacrifices.
 
Besides, this professor says, layoffs can cause morale problems, unemployment premiums can skyrocket, severance packages aren’t cheap, and litigation is a possibility. Avoiding layoffs if possible can be in a company’s best interest. Not to mention avoiding significant disruption in work flow/projects.
 
Comment below. What are your experiences/thoughts on making these tough decisions?
 
You can still access the Brent Grover Webcast from MDM. Click here to learn more or to order.”