Five Reasons Why Layoffs Are A Bad Idea

Dr. Wayne Cascio is a professor of management at The University of Colorado at Denver. He is the past chair of the Human Resource Division of the Academy of Management and was the past president of the Society for Industrial and Organizational Psychology. In 1999, he received the Career Achievement Award given by the Human Resource division of the Academy of Management.

Here are his five reasons why downsizing is simply wrong:

a. Reason #1: Downsizing does not automatically make a company more profitable nor perform better.

Research done over the last eighteen years, along with surveys done by the American Management Society and Society for Human Resources Management, show that only one-third of companies that downsize end up being more profitable. A remaining one-third report no change from before the downsizing, and the final one-third actually fall even further after downsizing. Meanwhile, stable companies (meaning companies with less than 5% staff fluctuation in any given year) outperformed companies that downsized in almost all cases."

b. Reason #2: Layoffs are a quick-fix solution to a long-term problem.

Layoffs represent a “band-aid” approach. Any benefits are purely temporary and do not address the long-term issues. Long-term problems need long-term solutions. These long-term solutions include figuring out how to attract new customers, what new products and services to offer to consumers, and what potentially profitable new markets should be expanded into. Long-term solutions require long-term thinking, not focusing on what can fix the problem for right now.

c. Reason #3: Layoffs do not capitalize on the "share-the-pain" philosophy that bonds employees as friends.

Employees have often worked for many years with each other and see each other more than they even see their families and relatives, so it is inevitable that they will also be friends. Survey after survey shows that employees would make individual sacrifices (such as reduced hours, job-sharing, pay cuts) to avoid their co-workers being laid off.

d. Reason #4: Firms often find that they wind up hiring back at least some of their laid-off employees as consultants -- at higher salaries

The companies wind up hiring back laid-off employees at much higher consultant fees than they were making previously as employees. This "re-hiring" happens because management realizes too late that they lost institutional memory and valuable skills in laying off people.

e. Reason #5: Too many decision-makers don't ask the all-important question first: "How will downsizing allow us to serve our customers better"?

If decision-makers cannot answer this question definitively, they have not thought the matter through carefully. Customers are income, and if downsizing does not allow for better service that will result in higher income, it's best not to go there in the first place.

The Top Five Communique Articles of 2008

As reflected by the sheer number of people who clicked on the links and wrote in about the features:

1. Publisher Judith Regan fired over the OJ If I Did It book amidst accusations of pandering to tabloid controversy. Apparently no one had a problem with the Scott Peterson book though.

2. Apple's CEO Steve Jobs disses Amazon's Kindle as a flawed concept. Apparently God was wrong.

3. Bestselling author Ishmael Beah defends himself against allegations that parts of his memoir were fabricated. Beah remains utterly credible when compared to the fake memoir of Black ghetto life by a White woman who never ventured out of suburbia, and the false autobiography of a holocaust survivor's marathon journey to freedom across 3,000 miles of Nazi-occupied Europe (turns out she isn't even Jewish).

4. Entertainment Weekly releases its list of The One Hundred New Classics: The Best Reads from 1983 - 2008. Despite not being included in the list, ex-Beverly Hills 90210 star Tori Spelling's autobiography still hits #1 on the New York Times bestseller list.

5. The Berrett-Koehler Author Bill of Rights, emphasizing greater responsibility on both the author's and BK's part is released to the public under a Creative Commons license for all publishers to (hopefully) adopt. Various industry blogs pick up the document as a new model for collaboration.

Was your favorite story from 2008 one of the articles listed above? Was there one that should have been up there? Write it in below - it's what blogs are for!

Five Ways to Handle Your Fear of the Economy

Bill Treasurer knows how to handle fear, he's been doing it all his life. Here are Bill's five tips for handling your fear of the current economic crisis:

1. Refocus on your work. Fear is the enemy of productivity. Get clear on what needs to be done - right here, right now - and go about the business of doing it. If you're not contributing, you may be in danger. Stop being in denial. Know your job, and then do it.

2. Stop playing it safe. Ditch the herd. While everyone else is hiding, you can stand up and stand out, getting noticed for your talent and contributions. It's easy to follow the herd. It takes effort to lead.

3. Form a posse. Create an inner circle - a small group of co-workers who you can trust and turn to when the going gets really tough. Take turns being "the positive one" and injecting a daily shot of courage.

4. Find a productive distraction. What makes you feel better - a little stronger or braver? U2 on your iPod? A can-do mantra? A long run at lunch? Identify that one little thing - your own personal "fear buster" - and use it early and often.

5. Just say "no" to the pity party. It's tempting to commiserate with co-workers. Don't do it. It will stoke your fears and shake your confidence even more.

What are your suggestions for handling the fear? Write them in below (no login/security clearance required).

Better Ways to Spend a Trillion Dollars

Author Rob Simpson gives you five creative ways to spend a trillion dollars (and five ways to be outraged at the way it was spent on the war). Many more suggestions can be found in his book:

1. Send every high schooler in America to a four-year college. We'd have the most educated workforce in the world.

2. Create a retirement account for every child born in America -- shortly after the child's birth. That child will be a multimillionaire come retirement age. If they don't touch the account, they will never have to save up for retirement for the rest of their lives.

3. End ALL homelessness in America.

4. Rebuild New Orleans -- completely. This means bring back all displaced families, build new housing for everyone who needs it, repair all damage, reinstate businesses, create new incentive programs for businesses, restore wetlands and counter environmental damages, and pay for an ongoing, aggressive tourism plan.

5. Buy everyone in the world an ipod. It may not be the latest, cutting-edge model, but it still means we'll be rocking the Casbah, not blowing it up.

Five Reasons Why the Bailout Was A Bad Idea

Larry Mitchell is a leading scholar in the field of finance and corporate law and a professor at George Washington University Law School. He gives us five reasons the bailout was a bad idea for us all:


1. The bailout was structured by a Wall Street investment banker for Wall Street investment bankers to be run by Wall Street investment bankers. First they make a mess, then they give Congress a plan that saves themselves above all others. What is the logic here?

2. Trickle-down economics doesn't work and we know that now, so why are we attempting a trickle-down bailout? The claim was that by saving Wall Street they’d save Main Street because they are loosening up credit to help the innocent victims of high finance. If they really wanted to help the victims, the bailout would have been a targeted economic stimulus plan for the real economy as well as targeted individual aid. Seven hundred billion dollars could provide a lot of relief.

3. The bailout is based on free market principles. Nothing wrong with that, unless you consider that one of the main reasons for the economic collapse was thirty years of deregulation based on free market as religion. It didn’t work then. Why would it work now? One of the clinical definitions of insanity is doing the same thing repeatedly hoping to get a different result.

4. How do you put a value on mortgage-backed securities ? One significant reason for the panic that led to the collapse was that Wall Street couldn’t value them. There is probably a way to figure out how much they’re worth, but Congress should have made some effort to do this before deciding to allow $700 billion to be spent on them.

5. There’s no administrative infrastructure to handle the bailout because overseeing this takes an entire government department to make sure it's done right. Right now, the U.S. Government is the investment banker to the world. Hiring a few guys from Goldman Sachs doesn’t help to administrate the world's biggest social welfare program.