Alternatives to Layoffs (Originally published October 2008)

The economic crisis is causing many organizations to consider reductions in force as necessary cost cutting measures. Mounting research shows that companies that terminate a significant portion of their workforce fail to outperform their competition. Most often, the long-term costs of layoffs outweigh any initial savings. What's more, layoffs increase an enterprise's vulnerability to lawsuits, acts of retribution, and drops in productivity and morale.

But a bigger problem is looming on the horizon. Layoffs will cut off talent pipelines during a time when employers face unprecedented demographic shifts in the labor market. Drops in 401K values will only stave off the retirement of Baby Boomers temporarily. When they do begin to exit organizations the subsequent labor shortage will result in a talent vacuum. Reductions in force now will put organizations at a serious disadvantage in retaining top talent and transferring knowledge in the future. Many companies will never recover. To weather the storm, consider the following alternatives to layoffs:

  • Temporary unpaid leave of absences - Encourage employees to take time off from work while maintaining their employment status
  • Job sharing - Decrease immediate headcount by allowing 2 people to share 1 job and retain benefits
  • Reduced hours & pay cuts in exchange for stock - Avoid layoffs and increase loyalty by trading a percentage of an employee's salary for company stock
  • Telecommuting - Reduce overhead by eliminating the need for office space
  • Layoffs with hire back bonuses - When layoffs are unavoidable, position yourself for a quick turnaround by offering hire-back bonuses to anyone willing to be rehired within an 18-24 month period

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