06/11/08

Permanent Link - Don’t Lose Your Head When You Tighten Your Belt 08:52:33 am by Alice Snell

Don’t Lose Your Head When You Tighten Your Belt

We all know that cost cutting is a reflexive way to balance a reduction in revenue. But leading companies that put talent first are looking at creative solutions before immediately resorting to layoffs. Consider these:

While HR Might Face Cuts, Talent Remains a Top Priority reports on an Institute for Corporate Productivity (i4cp) study that found while 88% of corporations plan cost-cutting programs, they will look at other categories first before slashing headcount. More than a third would look at HR.

Companies Shy Away From ‘Slash and Burn’ covers a Towers Perrin report with similarly positive numbers. They say 60% of companies are looking towards growth with 40% expecting layoffs. And the issues around reducing headcount are further explored in Recession: Handle With Care.

For some companies, layoffs can appear to be an attractive short-term financial fix. But they may actually do more harm than good in the short and long terms.

In downsizing, firms often lose more than they bargained for cites a study in the Academy of Management Journal and notes that downsizing can set in motion a dynamic that can affect even the employees you want to retain. The numbers back this up: downsizing 0.5% increases the overall turnover rate momentum to 13%.

The Harvard Business Review’s article Halting the Exodus After a Layoff bears this out by succinctly equating layoffs with voluntary turnover. They also recommend increasing awareness around communication programs and benefits to stem the tide. Layoffs are clearly stressful to company culture. Some even consider hiring interior decorators to transform the empty space!

Even though the human capital budget line is the largest category of spend for most companies, there’s no need to lose your head when you tighten your belt in a down economy. Remember, the intellectual property of your talent is your greatest performance differentiator and powers innovation regardless of the economic season.

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Taleo Blog - Talent Management Solutions

Taleo's Talent Management Solutions Blog is about developments in Talent Management - from its definition and practices - to the latest research in the field.

Alice Snell
Vice President, Taleo Research

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