The Myths
Companies that have no hesitation laying off surplus workers do better
than companies that go to great lengths to keep their workers employed; people who feel
secure in their jobs become complacent; young people today are much less concerned with
job security than were previous generations
The Findings
The authors of The Enthusiastic Employee contend that the way
many American companies now seem to operate, by essentially using downsizing as a
strategic maneuver rather than as a last resort compelled by economic necessity, is
largely misguided and self-defeating. It violates a fundamental need of workers and,
in so doing, severely damages the sense of equity that's necessary for effective organizations.
Some people urge that this argument is old-fashioned. They say that a "new generation" of workers has entered the American workforce, young people who readily move from company to company and for whom job security is a low priority. This view of American workers' priorities became popular in the late 1990's, a boom time for the economy and a period of plentiful job choices.
But the high technology sector then imploded and the country experienced its first economic downturn in a decade. Hundreds of thousands of workers were laid off and, once again, the media were filled with tales of high anxiety in the workplace. Surveys clearly showed that job security rose to its usual high position on the list of worker concerns.
The authors ask their readers not to believe for a moment that stable employment -- the predictability, not just the size, of a paycheck -- is ever a trivial issue for workers. For most people most of the time, the employment stability that a company offers is critical. When a company downsizes, it's a major event and, for many employees, it is traumatic, even if they have not been laid off (at least not yet).
The research evidence on the impact of downsizing on business success (not just on employees) is quite surprising and not at all in accord with "common sense." Yes, a layoff often results in a short-term spike in a company's stock price. However, the impact on the long term can be quite different. The authors show that there is now a mountain of evidence that casts doubt on the efficacy of downsizing for many companies as a cost-reduction strategy. Research done in the mid 1990s discovered that downsizing companies outperformed the S&P only slightly during the 6 months following news of a restructuring, then lagged badly, netting a negative 24 percent by the end of 3 years. The theory of keeping a company "lean and mean," then, may really be only "mean." Another study found that, on average, a 10 percent reduction in workers resulted in only a 1.5 percent reduction in costs. Among the highest performing companies in America are those that go to great lengths to preserve employee job security, companies such as Federal Express and Southwest Airlines.
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