Walk into any boardroom or office lunchroom and you’re bound to hear people asking:
- "How safe is my job?"
- "What can I do to safeguard my job?"
- "How can our company keep great people and leverage talent?"
- "Is downsizing an effective organizational strategy?"
- "Do massive reductions in workforce truly benefit shareholders and the organization?"
- "What is the real cost of downsizing in tough economic times?"
The Full Cycle
After ten years of a Nasdaq tech boom in the 1990’s, the "dot com" bubble burst in the spring of 2001, leaving thousands of employees out of work. Employees went from being the most sought-after to unemployable for as many as five years. In the hi-tech downturn nearly a decade past, educated workers with special technical skills could not find jobs to match their experience and education. Twenty percent of the 1.9 million workers, who were left unemployed for six months or more, were former executives, professionals, and managers. But the vast majority—four out of five of the unemployed workers—were under-trained, under-educated, and unskilled. They were mostly "jobbers," a large corps of workers who performed repetitive tasks, lacked mastery, and failed to work in professions or trades that directly contributed to the company's profits.
American industry inched its way out of the recession by growing productivity (fewer people doing more) at an average rate of 5 percent a year. But in the last four months of 2008, industrial growth ground to a resounding stop. "Growth" and "record profits" were replaced with words like "collapse," "failure," "bailout," "poisoned assets," and "foreclosure." Newspapers and television sets are filled with economic gloom and doom. The banking industry is failing. American car manufacturers are on the ropes threatening massive job losses. Retailers are closing all their stores...and the list goes on.
How Safe Is Your Job?
TAKE THE QUIZ
American industry has responded to the failing economy through massive numbers of layoffs and disappearing jobs. Ask yourself the following questions:
1. Is your job crucial to the organization's purpose and mission?
2. Is your job close to the customer?
3. Is your job directly related to income and the bottom line, and not seen as overhead?
4. Do changes in technology make your job more important for the success of the organization?
5. Do key people in the organization know the contribution your job makes to the bottom line?
6. Would it be difficult to outsource your work?
7. Have you achieved mastery in your profession? Are you seen as irreplaceable?
8. Have you acquired the skills necessary to keep pace with changes in your industry?
If your answers were YES to most of the questions, chances are very good that your job
is relatively secure. If your answers were NO to many or most, your job may be at risk.
Is Downsizing An Effective Organizational Strategy?
I believe that treating workers as a cost rather than as an asset is a mistake. Whatever the term used, "layoffs," "outsourcing," or "downsizing," they all break the bonds of trust linking employers to employees. When employees feel the company no longer values them, morale, engagement, and innovation is replaced by fear—and fear is counter-productive and debilitating.
In her book, "One Foot Out the Door," Judith Bardwick, insightfully writes, "After years of downsizing—most of today's workers have concluded that [companies] no longer value them. So they, in turn, no longer feel engaged in their work or committed to the company. The reality of mutual co-dependence between employees and organizations, and the advantages gained from long-term mutual commitment and engagement has been lost." She writes that three quarters of all employees are either looking for another job or are just going through the motions when they show up for work.
Dr. Bardwick believes that employees are afflicted with a condition she calls "Psychological Recession." She defines Psychological Recession as "an emotional state in which people feel extremely vulnerable and afraid for their futures. It is especially relevant in the business world because chronically fearful people are too exhausted to be creative and innovative. They expect the worst to happen, so they see no reason to give their all—The prolonged, sustained fear that is characteristic of a Psychological Recession assures that good news will be discounted while bad news is accepted as the stuff of reality—In this way, Psychological Recession is self-fulfilling."
When employees are committed to their work and are highly engaged, companies benefit from high levels of employee retention, higher levels of customer satisfaction, higher levels of customer retention, and increased levels of profits and share prices. But when employees are fearful of losing their jobs and mutual trust and engagement are lost, companies are plagued with high turnover rates, customer dissatisfaction, customer losses, and plummeting sales, profits, and share values.
What Can You Do to Safeguard Your Job?
Take a job and work for a day. Master a profession or a trade and work for a lifetime.
This sums up why knowing the profession or trade you are in and mastery of that profession or trade is critical to stability in unstable times.
Of course, other factors weigh in as well. In the last few decades, "filling jobs" has taken precedence over mentoring and developing mastery in a field. Many workers have lost incentive or hope of becoming great at their work or making innovative contributions to their organizations. They do whatever is expedient to hold onto their jobs. In a volatile, changing workplace, people’s natural desire to become good at something has taken a second seat to keeping their job. Individuals are frequently assessed on a set of disembodied competencies sometimes purchased from outside vendors. Frequently, they have little to do with the core competencies required to succeed in the core professions. People become “jobbers” and use only a few of the essential skills required. These are the workers who will become obsolete and outsourced.
First and foremost, individuals must recognize their profession. Workers must understand and assess where their profession (and the level of mastery they have achieved in this profession) fits into an organization. You can best safeguard your job if you choose a profession that is crucial to the organization's mission, directly related to the bottom line, not held hostage to technical innovation, and difficult to outsource. If management recognizes the contribution you make to the company and you have achieved some degree of mastery in your profession, you will probably be seen as irreplaceable.
Do Massive Reductions in Workforce Truly Benefit Shareholders and the Organization?
There is evidence that layoffs do not always result in an immediate improvement in profits. Surveys of companies conducting layoffs suggest that a reduction-in-workforce is not a sure tool to increase profitability. The American Management Association studied companies that had reduced their workforce and found that only 45 percent had profited from the layoffs within the first year, and one-third of those companies reported a decline in employee morale.
Employees' psychological wellbeing and emotions are tied to customers' behavior, decisions, and most importantly, to revenues. In 1988, Sears Roebuck engaged consultants to determine if there was a causal connection between employees' attitudes, customer satisfaction, and profitability. The seminal study revealed that every 5 percent increase in employee commitment produced a 1.3 percent rise in the level of customer satisfaction and a 0.5 percent increase in the store’s revenues.
Since 1988, hundreds of studies have causally connected employee emotions with quantitative results including explicit financial outcomes. When employees feel secure in their jobs and treated well, they tend to be more engaged. When workers are treated as an asset rather than a cost, they will respond. Respecting and valuing employees produces significantly higher levels of engagement, customer service, and competitive advantage.
What Is The Real Cost of Downsizing in Tough Economic Times?
When organizations engage in strategies of massive layoffs in hard times, many employees cease being involved in the organization's work and they are no longer committed to the organization’s success. They simply stop caring. Judith Bardwick cites one recent Gallup survey in which 17 percent of the employees interviewed were trying to subvert the company’s mission or were completely disengaged; 54 percent were passively disengaged; and at least half of the employees were looking for a job or career change.
She writes that laying-off employees produces fear. "People who are afraid tend to work [only] as hard as necessary to keep their jobs...The cost of lost knowledge, leadership, and creativity will always be too high." It is certain that lay-offs foster fear and employee alienation. Studies reveal that a third of those alienated employees, who remain after layoffs, actively seek other jobs within two years. Half the workers alienated by cutbacks will find new employers within five years. The cost of replacement to the organization can range from twice the annual salaries for executives to 50 percent more for hourly wage earners.
The importance of human capital cannot be overstated. Workers are the key stakeholders when organizations try to recover from hard times. Organizations listed on "Best Companies to Work For" consistently generate higher levels of revenues, profit growth, and greater share values than industry competitors. For example, publicly traded corporations on Fortune's 2007 "100 Best Companies To Work For" consistently outpaced the market over the prior ten years. Mutual trust between employees and management is connected to the bottom line.
Industrial growth has come to a resounding halt. Knowing the profession or trade you are in, and mastery of that profession or trade, is critical to feeling stable in unstable times. While American industry has responded to the failing economy through massive numbers of layoffs, there are guides to help judge the safety of your job. Treating workers as a cost rather than as an asset is a mistake. Layoffs break the trust linking employers to employees. When an employee feels the company no longer values workers, morale, engagement, and innovation is replaced by fear—and fear is counterproductive and debilitating. Surveys of companies conducting layoffs suggest that a reduction in workforce is not a sure tool to increase profitability. Employees' psychological wellbeing and emotions are tied to both employee and customers' behavior, decisions, and most importantly—to revenues. When employees feel secure in their jobs and treated well, they tend to be more engaged. Respecting and valuing employees produces significantly higher levels of engagement, customer satisfaction, and profits. The importance of human capital cannot be overstated. Workers are the key stakeholders when organizations try to recover from hard times.
Caela Farren, Ph.D., is president of MasteryWorks, Inc. in Falls Church, VA. She has been a consultant, entrepreneur, and educator for more than 30 years. Her practice and company builds strong links between changing trends in industries, changing strategies of organizations, and the talents and aspirations of individuals. Farren aims to help client discover their passion, their mastery path, and bring renewed contribution and high performance to their organizations. For more information, visit www.masteryworks.com.