I would like to call attention to our readers who have either been laid-off from their positions as a result of this nasty economic cycle, or remain as survivors of constant rounds of  such cutbacks, to a recent article that was published in Newsweek Magazine. This article, Lay Off the Layoffs was written by Jeffrey Pfeffer, professor of organizational behavior at Stanford’s Graduate School of Business.  It is not an academic’s dry view of business trends, but rather a sobering and powerful set of arguments regarding the impacts and lack of benefits to business from frequent layoffs. This article really resonated with thoughts that have been percolating in my mind for months, and perhaps you might have the same response.

Pfeffer outlines a number of strong arguments that layoffs are mostly bad for companies, very harmful for the economy as a whole, and devastating for employees.  The article rightfully notes that over the last two decades, layoffs have become an increasingly common occurrence of corporate life, in good times as well as bad.  While layoffs may well be justified in a dying business or industry, too often of late, shedding people has been the prescription to maintain or enhance profits when sales volumes are down. Pfeffer argues that whether you term the practice as downsizing, right-sizing or restructuring, the damage will linger well beyond a perceived recovery in business activity. While companies argue that lack of financial resources or credit preclude the ability to begin large scale hiring, they can still marshal the financial resources to perform a large acquisition.

From the Supply Chain Matters lens, we have commented on how various supply chain activities have been impacted during these past months.  Cost reduction mandates have been targeted squarely to supply and value-chain activities, and as we have pointed out all too often, senior management expects even more in process and product innovation.  Layoffs reduce morale and add to workloads, causing other activities to slip.  Surveys conducted specifically among supply chain professionals point to a disenchanted workforce, looking to make a move from their current employer as soon as the economy will allow.  The burnout rate is increasing.

That is skilled talent wasted and abused.

Supply chain risk has been severely elevated because of the fragile financial and staffing conditions among key suppliers in many industry segments.  It seems that incidents of product recalls and contamination have risen dramatically.  There is certainly ongoing debate as to whether Toyota’s latest recall debacles were motivated by too much of an emphasis on reducing cost at the expense of consumer safety. Pfeffer cites a recent Gallup finding that active disengagement, defined as working to sabotage the performance of your employer, ranges from 16 percent to 19 percent.  You can certainly read of all of the other effects in the article.

No doubt, some readers may react in a political or social context that implies that layoffs and right-sizing are a reality to today’s business, so suck it up and move on.  After all, if your skills are that good, you should have no problem in finding new work. But what about the future of any cogent manufacturing and supply chain capability that remains in the U.S.?

I subscribe more to what Jeffrey Pfeffer’s powerful observations imply. The immense pressure for short-term results and strong action that management feels from the financial media, analysts and industry peers has indeed made many blind to the cumulative effects of such actions.

Too many of today’s surviving managers believe that the TV game “Survivor” provides the key to that million dollar bonus.  Is it the effects of the game on people and process, or is it how you play the game to win that matters?

What’s your view?

 Bob Ferrari