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[Tiktaalik]

Newsweek has posted a four page article about the extreme damage that layoffs have on a company and to the community and economy in general. Essentally the conclusion of the article is that the sort of layoffs that have become popular in corporate America, that is layoffs in response to a sudden drop in revenue, by every measure do more harm than good.

While reading the article the first thing that came to my mind was the video game industry. Even stretching back into the last gen it's been the common strategy of EA/Activision/T2 and just about every other western publisher to start layoffs at the first sign of trouble. The big western publishers draw in a ton of revenue, but a constant problem for them is their sky high costs. When you start to consider the costs associated with constant layoffs, it's very clear why the third parties' costs are so high.


I'll only post a few paragraphs from the article because it's quite long. Read the full thing here: http://www.newsweek.com/id/233131/page/1

On Sept. 12, 2001, there were no commercial flights in the United States. It was uncertain when airlines would be permitted to start flying again—or how many customers would be on them. Airlines faced not only the tragedy of 9/11 but the fact that economy was entering a recession. So almost immediately, all the U.S. airlines, save one, did what so many U.S. corporations are particularly skilled at doing: they began announcing tens of thousands of layoffs. Today the one airline that didn't cut staff, Southwest, still has never had an involuntary layoff in its almost 40-year history. It's now the largest domestic U.S. airline and has a market capitalization bigger than all its domestic competitors combined. As its former head of human resources once told me: "If people are your most important assets, why would you get rid of them?"

...

There are circumstances in which layoffs are necessary for a firm to survive. If your industry is disappearing or permanently shrinking, layoffs may be necessary to adjust to the new market size, something occurring right now in newspapers. Sometimes changes in technology or competitors' embrace of cheaper overseas labor makes downsizing feel like the only alternative. But the majority of the layoffs that have taken place during this recession—at financial-services firms, retailers, technology companies, and many others—aren't the result of a broken business model. Like the airlines' response to 9/11, these staff reductions were a response to a temporary drop in demand; many of these firms expect to start growing (and hiring) again when the recession ends. They're cutting jobs to minimize hits to profits, not to ensure their survival. As for firms that have no choice but to cut jobs, if your company is the 21st-century equivalent of the proverbial buggy-whip industry, don't fool yourself—downsizing will only postpone, not prevent, your eventual demise.

For many managers, these actions feel unavoidable. But even if downsizing, right-sizing, or restructuring (choose your euphemism) is an accepted weapon in the modern management arsenal, it's often a big mistake. In fact, there is a growing body of academic research suggesting that firms incur big costs when they cut workers. Some of these costs are obvious, such as the direct costs of severance and outplacement, and some are intuitive, such as the toll on morale and productivity as anxiety ("Will I be next?") infects remaining workers.

But some of the drawbacks are surprising. Much of the conventional wisdom about downsizing—like the fact that it automatically drives a company's stock price higher, or increases profitability—turns out to be wrong.

...

That research paints a fairly consistent picture: layoffs don't work. And for good reason. In Responsible Restructuring, University of Colorado professor Wayne Cascio lists the direct and indirect costs of layoffs: severance pay; paying out accrued vacation and sick pay; outplacement costs; higher unemployment-insurance taxes; the cost of rehiring employees when business improves; low morale and risk-averse survivors; potential lawsuits, sabotage, or even workplace violence from aggrieved employees or former employees; loss of institutional memory and knowledge; diminished trust in management; and reduced productivity.

There are a number of myths that have taken hold to justify managers' urge to downsize. Many of them aren't true. For instance, contrary to popular belief, companies that announce layoffs do not enjoy higher stock prices than peers—either immediately or over time. A study of 141 layoff announcements between 1979 and 1997 found negative stock returns to companies announcing layoffs, with larger and permanent layoffs leading to greater negative effects. An examination of 1,445 downsizing announcements between 1990 and 1998 also reported that downsizing had a negative effect on stock-market returns, and the negative effects were larger the greater the extent of the downsizing. Yet another study comparing 300 layoff announcements in the United States and 73 in Japan found that in both countries, there were negative abnormal shareholder returns following the announcement.

Layoffs don't increase individual company productivity, either. A study of productivity changes between 1977 and 1987 in more than 140,000 U.S. companies using Census of Manufacturers data found that companies that enjoyed the greatest increases in productivity were just as likely to have added workers as they were to have downsized. The study concluded that the growth in productivity during the 1980s could not be attributed to firms becoming "lean and mean." Wharton professor Peter Cappelli found that labor costs per employee decreased under downsizing, but sales per employee fell, too.

Another myth: layoffs increase profits. Even after statistically controlling for prior profitability, a study of 122 companies found that downsizing reduced subsequent profitability and that the negative consequences of downsizing were particularly evident in R&D-intensive industries and in companies that experienced growth in sales. Cascio's study of firms in the S&P 500 found that companies that downsized remained less profitable than those that did not. An American Management Association survey that assessed companies' own perceptions of layoff effects found that only about half reported that downsizing increased operating profits, while just a third reported a positive effect on worker productivity.

Layoffs don't even reliably cut costs. That's because when a layoff is announced, several things happen. First, people head for the door—and it is often the best people (who haven't been laid off) who are the most capable of finding alternative work. Second, companies often lose people they didn't want to lose. I had a friend who worked in senior management for a large insurance company. When the company decided to downsize in the face of growing competition in financial services, he took the package—only to be told by the CEO that the company really didn't want to lose him. So, he was "rehired" even as he retained his severance. A few years later, the same thing happened again. One survey by the American Management Association (AMA) revealed that about one third of the companies that had laid people off subsequently rehired some of them as contractors because they still needed their skills.

On this last bolded point this happens at EA constantly.

From my own experience I know two people who were recently laid off from EA only to find themselves being courted by EA a few months later wanting to rehire them. My friends could have accepted the offer and rejoined for more money, but instead they vowed to never work for EA again and so EA lost that talent. With that example there's two different ways that EA has lost out due to the layoff. Firstly if they had hired those guys back they'd be paying more for the same talent, plus the severance those guys got, and secondly when those guys vowed to not come back EA lost on talented employees and they lost institutional memory.

The issue of institutional memory I think is a very significant point. We've all seen earlier this week the abandoned projects from EA, and we're all famililar with Tiberium, another huge failed project. Everyone, including Nintendo, works on projects that eventually get abandoned. The difference between Nintendo and EA however is that with EA's mass layoffs, the memory of the lessons learned is lost completely, and so EA is more likely to repeat the same mistakes over and over. I think this is a key reason for Nintendo's continued success in the video game industry, and why 3rd parties often make these mistakes which seem so stupid and obvious in retrospect.

Consider this example: An EA team releases an game and it's a failure. The upside is that during development the team learns an incredible amount of positive things about the system hardware, game design, the technical challenges and best management practices. EA however simply finds that the team's game under performed and so they can the studio and lay off all the team members. Suddenly a year or so down the line EA finds that it wants to make another game in the same genre or for the same system and so EA has to create a new team or studio to do the project. None of the lessons learned from the first team are there since everyone split up and the same mistakes are made again. Unsurprisingly this second game also does not live up to expectations. The cycle continues.

With Nintendo I think you see a much higher institutional memory and they do not seem to lay off people en masse. This allows them to avoid mistakes made in the past or to shorten R&D time in the future. Looking at Starfox 2 as an example you can see that the experiments in 3D open word camera and movement for the on ground segments very quickly found their way into Mario 64.

If the third parties are going to be able to stop the bleeding they're going to need to adopt a different approach to how they handle their employees and they'll have to start treating failure as a positive thing.

 

[Sadist]

That's pretty insightful.

What I don't understand is why EA for example can't see this pretty obvious flaw?

 

[daycru]

That's pretty insightful.

What I don't understand is why EA for example can't see this pretty obvious flaw?

It's a kneejerk reaction to appease stockholders who only understand kneejerk reactions.

 

[Tobor]

This is would be relevant if EA wasn't shifting it's overall focus. That article is referring to companies who made widgets before downsizing, and will continue to make the same widgets afterwards.

 

[Tiktaalik]

That's pretty insightful.

What I don't understand is why EA for example can't see this pretty obvious flaw?

Not really sure. It might be pressure they get as a public company from business media, analysts and investors. The conventional wisdom among American CEOs seems to be that you need to show a profit every quarter or your stock drops.

Apple and Google basically ignore everyone and do their own thing and they're incredibly successful. More companies should probably take that approach.

 

[Flachmatuch]

With Nintendo I think you see a much higher institutional memory and they do not seem to lay off people en masse. This allows them to avoid mistakes made in the past or to shorten R&D time in the future. Looking at Starfox 2 as an example you can see that the experiments in 3D open word camera and movement for the on ground segments very quickly found their way into Mario 64.

Yep, and that's not just because they don't lay off people. It's also because they don't expand by buying up other companies. Layoffs are just one part of the structural problems with this new type of "capitalism" :-/

Layoffs are "good" mainly because they increase labour market "flexibility". Add to this the reliance on formalised work processes that rely less and less on individual knowledge and capability and is more and more technologised and relies more and more on replaceable, deskilled workers (this goes as far as teachers and doctors), and you get the crap economies are in now .

It's a kneejerk reaction to appease stockholders who only understand kneejerk reactions.

Maybe, but it often has less to do with owners than managers.

 

[ShockingAlberto]

Not really sure. It might be pressure they get as a public company from business media, analysts and investors. The conventional wisdom among American CEOs seems to be that you need to show a profit every quarter or your stock drops.

Apple and Google basically ignore everyone and do their own thing and they're incredibly successful. More companies should probably take that approach.

Apple and Google have kinda hit that point where they're above questioning. Investors won't bail no matter what crazy shit they do.

EA isn't that lucky. Or competent. Either or.

 

[sn00zer]

Whats happened is that companies who were laying off people before the crash (Ford) were getting a ton of flak pre-crisis. Now after the economic downturn, because companies were not previously laying off employees they are now forced to cut out huge percentages of their workforce, while companies that have been cutting employees for years are doing "okay".

 

[Tiktaalik]

This is would be relevant if EA wasn't shifting it's overall focus. That article is referring to companies who made widgets before downsizing, and will continue to make the same widgets afterwards.

That's partially true as EA has been shifting to more of an online/mobile focus, but EA certainly has done the sort of things that this article has listed as well. For example EA laid off a lot of people when the recession hit seemingly as just a gut reaction so they could say they were doing something. As well EA's Vancouver downtown Blackbox studio was shut down in a reaction to ho hum sales of the latest Need For Speed iteration.

 

[flyover]

On this last bolded point this happens at EA constantly.

Consider this example: An EA team releases an game and it's a failure. The upside is that during development the team learns an incredible amount of positive things about the system hardware, game design, the technical challenges and best management practices. EA however simply finds that the team's game under performed and so they can the studio and lay off all the team members...

I totally agree. That's much like the experience I had when I was a developer there (working primarily on what was, admittedly, a massive failure). It lead to this...

From my own experience I know two people who were recently laid off from EA only to find themselves being courted by EA a few months later wanting to rehire them...

Same here. I just couldn't take the job. And this was seven or eight years ago. Everything really is cyclical at EA.

I agree with posters who say that the companies should take an Apple-type approach, where they stick with its long-term plans, regardless of the short-term stock impact.

Unfortunately, without an untouchable CEO like Steve Jobs running the show, the execs are forced to act like head coaches (worrying about this year's record to keep their jobs secure) instead of like general managers (worrying about the long-term health of the franchise, even if it's at short-term expense).

I also hate the conventional corporate wisdom that cutting costs (particularly through layoffs) is a way to restore profitability. In general, it just slows losses. But without the staff to produce new product, the potential for more profits is also often lost.

 

[Deku]

That reads like an insert in a business management textbook you'd find in any university offering a commerce/business degree.

The problem is that theory often do not translate into action. When I was getting my BA in business, we went through a ton of case studies and 'best practicies' cases, that single out companies like GE (yeah GE was flying high as late of 2002) , Sun for how to do things.

But then you exit school, get a job, and realize your management haven't got a shit fucking clue whats going on. So you lay low and and hope your not next on the chopping block.


So in short, it's nice to say layoffs are bad in theory. But management, will ALWAYS trim labour costs to save money, because its usually their largest single line item on their balance sheets.

Of course, they do sort of mean it when they say people are their assets. People are assets as long as they don't have to fire them.

 

[Sadist]

Not really sure. It might be pressure they get as a public company from business media, analysts and investors. The conventional wisdom among American CEOs seems to be that you need to show a profit every quarter or your stock drops.

Apple and Google basically ignore everyone and do their own thing and they're incredibly successful. More companies should probably take that approach.

Well that makes everything prefectly clear.

I always wonder why these companies really listen to those people, because in general they don't know what EA's actually does. Or don't understand it. If anything, this generation shows that analysts and business media aren't the ones they should take advice from.

 

[Slavik81]

I think your cause and effect is broken. They were doing poorly for quite a while before they started layoffs.

 

[flyover]

So in short, it's nice to say layoffs are bad in theory. But management, will ALWAYS trim labour costs to save money, because its usually their largest single line item on their balance sheets.

Urgh. I hate that you're right.

Depressing how the execs and managers -- who're often making a few times what any of the devs make -- always seem to be the ones who dodge the axe, though.

 

[mugurumakensei]

Not really sure. It might be pressure they get as a public company from business media, analysts and investors. The conventional wisdom among American CEOs seems to be that you need to show a profit growth every quarter or your stock drops.

Apple and Google basically ignore everyone and do their own thing and they're incredibly successful. More companies should probably take that approach.

Minor fix though it does matter a lot... It's not just about making more profit. As we've seen from reuters/bloomberg articles on Wii sales in November and October, you have to be doing more than making a profit. You need to sale more and make more profit in order for a business article to be positive for you. I imagine it's true that analysts and stock brokers need to see more than just profit to recommend a company for buying.

 

[faridmon]

wait isn't the other way around in the much troubled gaming industry?

they keep laying off their workers because third parties are doing badly

 

[Monroeski]

Saying that companies in enough of a financial hole to start firing people don't usually end up crawling out of said financial hole does NOT necessarily mean that they aren't better off than they would have been without the firings.

I mean, it's all well and good to look back at these companies after the fact and see that layoffs didn't turn them completely around, but when you're the guy sitting there staring at your financial statements as they drop month after month, quarter after quarter, sometimes you need to make some hard decisions.

I agree that many companies could stand to have a bit more of a long term outlook than they do, but when you have to cut costs it makes sense to do it on your largest expenditure. Breaking contracts with your suppliers or selling/breaking leases with your office space has man of the exact same "hidden costs" that firing people does (but of course that doesn't make as good of a headline).

 

[Tiktaalik]

I agree that many companies could stand to have a bit more of a long term outlook than they do, but when you have to cut costs it makes sense to do it on your largest expenditure.

What this article points out though is that this always fails. In video games it's especially true since the largest expenditure by far is the largest asset, that is, people. When you start laying off people you're cutting out the part of your company that is the driver of its success. It'll simply end in a slide to failure.

How are we going to get ourselves out of this hole? Let's dig our way out!

Doesn't work.

 

[Chairman Yang]

I agree that many companies could stand to have a bit more of a long term outlook than they do, but when you have to cut costs it makes sense to do it on your largest expenditure.

The research in the article says otherwise.

 

[loosus]

This sounds nice, but I would be interested in seeing if there is a true positive correlation between companies that keep workers through hard times and companies doing well.

For example, is Southwest Airlines doing well because it didn't lay off people? Or, are there other factors at play that just so happened to work out that way? If this is indeed the case, then why aren't all companies who are not laying off doing well?

Also, how long do you have to keep people on payrolls before you just say, "Well, we're out of money! We're closing the doors!"? That is, your company is unprofitable month after month; what is the cut-off point for layoffs? Or, do you simply let people stay on indefinitely and let the ground sink beneath the company?

 

[Phife Dawg]

This sounds nice, but I would be interested in seeing if there is a true positive correlation between companies that keep workers through hard times and companies doing well.

For example, is Southwest Airlines doing well because it didn't lay off people? Or, are there other factors at play that just so happened to work out that way? If this is indeed the case, then why aren't all companies who are not laying off doing well?

Also, how long do you have to keep people on payrolls before you just say, "Well, we're out of money! We're closing the doors!"? That is, your company is unprofitable month after month; what is the cut-off point for layoffs? Or, do you simply let people stay on indefinitely and let the ground sink beneath the company?

There is no universal truth. Here in Germany when we were in the slump in the 80s/90s a lot of companies would lay off people and face problems getting talented and experienced staff afterwards. Through this lesson learned companies right now are more reluctant to lay off a lot of people (plus it ain't that easy here because employees are somewhat protected by labour law).

That being said this only makes sense if you expect the market and your company to regain past strength so you actually need these people in the future. In the case of EA I'm not too sure that's the case.

 

[oracrest]

This sounds nice, but I would be interested in seeing if there is a true positive correlation between companies that keep workers through hard times and companies doing well.

For example, is Southwest Airlines doing well because it didn't lay off people? Or, are there other factors at play that just so happened to work out that way? If this is indeed the case, then why aren't all companies who are not laying off doing well?

well, 9/11 is an incredibly powerful and rare circumstance that could impact the situation heavily, but EA has been fucking up as far as developers are concerned for years. When I was in school, pre EA spouse, they were known as the company that thrived on hiring fresh students from school, burning them out over a few years, and then just hiring more later. Business is business, but EA seems to go out of it's way to treat staff like a commodity.

I heard a story once about the guys that left EA to start infinity ward that when Call of Duty was coming out, they rented advertising space of the sidewalk benches in front of their old offices, essentially as a fuck-you gesture to their former employers. EA excels at alienating people....

It doesn't help either that they rarely add anything innovative to the table. The habit is to throw enough money at independent studios, and then ride their original ideas into the ground as fast as possible before moving onto the next studio to feed off of for a few years.

 

[gutter_trash]

employees are not the only ones who can burn bridges...
employers can burn bridges too (EA)

if they layoff too much talent too often... those brains will vow to not return to the same company when they come back begging to re-hire... the employees will most likely go someplace else

if they land someplace safer that don't do many layoffs and remain their for job security reasons

 

[jaundicejuice]

If it wasn't for EA constantly laying off people or being such a horrible employer the gaming industry would not be what it is today in Vancouver.

 

[Brobzoid]

Problem is short sightedness on the stock holders behalf. They want all profit, all the time. A privately owned company, say valve or 1C are in a better position to take care of their employees at a time like this, or like someone mentioned earlier a company with a strong almost brand-like CEO like Apple has.

EA isn't getting out of this loop anytime soon.

 

[dreamcastmaster]

And Activition are probably a week away from announcing layoffs.

 

[avatar299]

Right off the bat, I'm tired of this bullshit that companies that don't focus on the short term just magically succeed.

No one does this. Not Google, not Apple, no one Every company sets and follows short term goals. Whenever a CEO says differently, he is lying to you. He (or she) is trying to justifying not hitting their short term goals.

To say that layoffs are universally bad is pretty weak, and the OP's example is proof of that. South West kept it's workers. Great, but there is no proof that this correlated to their success. After 9-11 a lot of airliners changed their strategies and focused on cheaper, shorter flights. A strategy that would benefit Southwest in their position. It was the consumer demands that propelled SW, not retaining workers. If British Airways retined their workers and continued to focus on international flights, would they make a profit?

EA is losing money not because they are losing workers. Most devs are immediately replaceable. They are in their position because they changed their strategy from last gen away from focusing on multi-platform development and licenses to creating their own IP's, many of which have failed on multiple fronts. EA is not unified anywhere, and thus they can't compete in acquiring must have properties and developers like Blizzard.

 

[Version 3.0]

Much of this article is stuff I've been preaching for years, to anyone who would listen (which, among people in positions to make decisions, has been ~nil). But there's quite a bit of new material there as well. Thanks for posting it. I'll incorporate it into my spiel.

...now somebody quote my tag, please.

 

[Slavik81]

What this article points out though is that this always fails. In video games it's especially true since the largest expenditure by far is the largest asset, that is, people. When you start laying off people you're cutting out the part of your company that is the driver of its success. It'll simply end in a slide to failure.

How are we going to get ourselves out of this hole? Let's dig our way out!

Doesn't work.

You're also cutting out the part that is the driver of its failures. Employees are responsible for both. You can't take credit for success without accepting responsibility for failure.

Nor are employees a monolithic entity. The workforce is composed of individuals. Some of those individuals will be contributing to success. Some of those may not be.

Employers should be careful and carefully think over layoffs. Sometimes they may not be appropriate, but it's ridiculous to dismiss them out of hand.

 

[Version 3.0]

Right off the bat, I'm tired of this bullshit that companies that don't focus on the short term just magically succeed.

No one does this. Not Google, not Apple, no one Every company sets and follows short term goals. Whenever a CEO says differently, he is lying to you. He (or she) is trying to justifying not hitting their short term goals.

To say that layoffs are universally bad is pretty weak, and the OP's example is proof of that. South West kept it's workers. Great, but there is no proof that this correlated to their success. After 9-11 a lot of airliners changed their strategies and focused on cheaper, shorter flights. A strategy that would benefit Southwest in their position. It was the consumer demands that propelled SW, not retaining workers. If British Airways retined their workers and continued to focus on international flights, would they make a profit?

EA is losing money not because they are losing workers. Most devs are immediately replaceable. They are in their position because they changed their strategy from last gen away from focusing on multi-platform development and licenses to creating their own IP's, many of which have failed on multiple fronts. EA is not unified anywhere, and thus they can't compete in acquiring must have properties and developers like Blizzard.

1. The article doesn't say layoffs are "univerally" bad. It says, in a nutshell, nearly so. It even has tips for how to minimize the negative effects of a layoff.

2. Plenty of companies value long-term goals over short-term ones. Videogame companies, even the poorly run ones (maybe especially those) may explicitly state this to be the case at the beginning of every console cycle.

3. The Southwest Airlines example was just that: an example. It was followed by quite a large amount of data. Did you read it? Because it sounds as if you didn't.

4. You also sound angry and defensive. Were you perhaps on the other side of a layoff?

5. Define "immediately replaceable", please. Because it's a term I've heard many times, and it's just as much of a myth as the other points this article debunks. Yes, you can easily hire another employee at any time. But even if that new employee is just as qualified as the old one, that doesn't give them the knowledge and experience that are specific to that job (as opposed to that profession). Would you say Steve Jobs' departure and later return to Apple had no effect? Of course not. Any employee at any level who leaves will have a similar effect, though of course it scales with the responsibilities of the job.

 

[avatar299]

1. The article doesn't say layoffs are "univerally" bad. It says, in a nutshell, nearly so. It even has tips for how to minimize the negative effects of a layoff.

No, but it heavily implies such, as this thread proves..

And their tips are common sense solutions that have more to do with managment than the nature of layoffs.

2. Plenty of companies value long-term goals over short-term ones. Videogame companies, even the poorly run ones (maybe especially those) may explicitly state this to be the case at the beginning of every console cycle.

And these companies are.....?

Every company has some long term goals, but few if any value them over short term profits. Long term goals don't mean much if you are neck deep in debt or you can't attract shareholders because you can't hit a quarterly goal.

3. The Southwest Airlines example was just that: an example. It was followed by quite a large amount of data.

They never proved SW position was solely due to keeping staff, and lot of their solutions are not marks against layoffs or short term goals, but just incompetence managers have at making staffing decisions. You wouldn't have to pay severance and rehire them if you never fired them in the first place, true but that is a mark against managers not knowing who truly contributes.

4. You also sound angry and defensive. Were you perhaps on the other side of a layoff?

If i sound angry to you than that is your problem.

5. Define "immediately replaceable", please. Because it's a term I've heard many times, and it's just as much of a myth as the other points this article debunks. Yes, you can easily hire another employee at any time. But even if that new employee is just as qualified as the old one, that doesn't give them the knowledge and experience that are specific to that job (as opposed to that profession). Would you say Steve Jobs' departure and later return to Apple had no effect? Of course not. Any employee at any level who leaves will have a similar effect, though of course it scales with the responsibilities of the job.

Define "immediately replaceable", please.

Someone else can pick up where you left off. Not every position is Steve Jobs. Not every position is individualized to so far an extent that they can't be replaced.

Can Steve Jobs be replaced, No. Can Q&A tested be replaced. I believe so.

 

[Version 3.0]

No, but it heavily implies such, as this thread proves..

And their tips are common sense solutions that have more to do with managment than the nature of layoffs.

And these companies are.....?

Every company has some long term goals, but few if any value them over short term profits. Long term goals don't mean much if you are neck deep in debt or you can't attract shareholders because you can't hit a quarterly goal.

They never proved SW position was solely due to keeping staff, and lot of their solutions are not marks against layoffs or short term goals, but just incompetence managers have at making staffing decisions. You wouldn't have to pay severance and rehire them if you never fired them in the first place, true but that is a mark against managers not knowing who truly contributes.

If i sound angry to you than that is your problem.


Someone else can pick up where you left off. Not every position is Steve Jobs. Not every position is individualized to so far an extent that they can't be replaced.

Can Steve Jobs be replaced, No. Can Q&A tested be replaced. I believe so.

If it's not layoffs themselves that are bad for a company, but poor management, then I would venture that it's poorly managed companies that are doing most of the layoffs. If that's your stance, I won't say you're wrong, but it really amounts to the same thing in all practicality.

As for me personally, here's my experience: I was layed off (terminated during a merger, actually) several years ago. And I was hired back 4 months later, after what was effectively a nice, long vacation on the company's dollar. Less than a year after that, I quit. In neither case did they find someone to "pick up where I left off". I heard for quite some time how hard it was with me gone (again). Now I do a similar job elsewhere, and if I were to leave, it would be a huge blow to the department--something I hear word-for-word all the time.

Now, my job is hardly unique, nor is it high level. But nevertheless, I am productive and I have knowledge and experience that make it impossible for me to be replaced without a lot of lost efficiency. In time, yes, but not quickly, no matter how qualified the replacement is. And I maintain that's the same for any job, even the simplest, although in those cases the gap of lost efficiency may be very brief.

 

[Grampa Simpson]

4. You also sound angry and defensive. Were you perhaps on the other side of a layoff?

I've been in that position twice. Both cases were where the corporation in question decided to move the work out of California. Anger is definitely a linked emotion.

 

[Tiktaalik]

Can Steve Jobs be replaced, No. Can Q&A tested be replaced. I believe so.

You're looking at the two ends of the spectrum. How about the middle? Can highly trained programmers and artists be replaced? Yes and No. It'll cost you a ton either way.

The article states that one of the side effects of layoffs is that it lowers morale and it'll make even your best employees, ones that aren't laid off, consider moving on. Then you'll have to pay more to keep them on.

There's nothing wrong with identifying employees that aren't meeting standards and letting them go, but this article isn't about that. This article is about mass layoffs as gut reactions to bad financial news. Those sort of layoffs don't make sense and are very damaging. Those are also the sort of layoffs that the gaming industry has been engaging in.

 

[dionysus]

There is adverse selection going on in this study. Bad companies need to lay off employees because something is wrong with their business model. Thus, it is not surprising that the companies that are doing the worst continue to do the worst.

Another way of putting this is companies with financial trouble do worse than companies without financial trouble, obvious!

You can see this in their southwest example. Yes, the whole industry was struggling but SW was doing much better than their competitors. So they continue to succeed relative to peers. It is not because they refused to lay off employees, it is because they were already doing better!

Layoffs are a necessity when revenue shrinks and your single biggest cost is employee compensation. This is the case in the game industry. Other industries can often avoid layoffs because employees may not be the biggest cost. For example, any business that is capital intensive can have a bigger impact on the bottom line by curtailing investment (in the short term) than in laying off employees. Like say, drug companies.

 

[Malio]

It's a kneejerk reaction to appease stockholders who only understand kneejerk reactions.

/thread

 

[Tiktaalik]

Layoffs are a necessity when revenue shrinks and your single biggest cost is employee compensation. This is the case in the game industry. Other industries can often avoid layoffs because employees may not be the biggest cost. For example, any business that is capital intensive can have a bigger impact on the bottom line by curtailing investment (in the short term) than in laying off employees. Like say, drug companies.

This is the key bit here that is the crux of the problem. What if your single biggest cost is your single biggest asset? That is highly trained, expensive workers. You think you're saving money when you eliminate workers, but at the same time your cutting into biggest asset and impairing your ability to do well.

Some managers compare layoffs to amputation: that sometimes you have to cut off a body part to save the whole. As metaphors go, this one is particularly misplaced. Layoffs are more like bloodletting, weakening the entire organism. That's because of the vicious cycle that typically unfolds. A company cuts people. Customer service, innovation, and productivity fall in the face of a smaller and demoralized workforce. The company loses more ground, does more layoffs, and the cycle continues.