Swinging the axe

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In times such as these many firms seek to reduce staff. The Economist has an article on whether this will be done wisely.

Reducing staff is never a pleasant undertaking, but I am convinced that often it is not done appropriately. Consequently, the inevitable negative impact on those remaining is magnified. In addition, if not handled sensitively the market impact may be considerable especially if those directly impacted are not treated sensitively.

The Economist commented upon the discussions taking place on this topic at Davos, noting:-

The politicians are primarily concerned with restoring demand enough to reverse the rising trend in unemployment; for many of the corporate leaders, ensuring the survival of their firms takes precedence over saving jobs. The difficult decision they face is not whether to cut, but how to do so in a way that strengthens their competitive position in the medium term rather than seriously damaging it.

Therein lies the problem. Unfortunately for many senior managers in times like these and indeed even in good times managing staff levels for competitive advantage and long term survival is the necessity. As if the firm does not survive then the likely economic hardship will fall on the many and not on the few. Another problem is that in many instances firms make their cuts in an unwise manner. If cuts must be made they should be made carefully and with planning.

There are a number of useful tips in the article. I was struck by the comments in the two concluding paragraphs though:-

Governments can play a useful role or a harmful one, depending upon their attitude to companies, says David Arkless of Manpower, an employment-services firm. If they focus on working with firms to smooth the movement of labour to where the future work will be, for example by providing skills training and financial incentives to workers in transition, then the economic downturn could be less painful than now seems likely. (A quick recovery in lending to small businesses, the main drivers of job creation in most countries, would also help.) But if governments try to prevent firms from making the changes to their workforces that they want, the result is likely to be prolonged gloom.

It is to be hoped that governments have this in their mind. It will be useful to see where the NZ Zealand government goes in this regard for example. Though there are initial favourable signs, but more can be done.

Although Mr Obama’s support for strengthening the ability of unions to enter workplaces is arguably a worrying sign, the American economy is far more accommodating of flexibility in employment than many European countries. Mr Arkless, for one, says that without a dramatic change of attitudes to job-cutting in Europe, “there is no doubt that American firms will come out of this downturn better than anywhere else in the world, due to their flexible employment model.” This will provide no comfort to anyone facing the prospect of unemployment, but it is a message that politicians would do well to take to heart.

This last paragraph is telling. Suggesting as it does that flexible employment model countries are likely to come out of this better placed. In that regard I am concerned that Australia and New Zealand would for example be classed as having employment models more in line with the Europen than the American. Will our employment laws work against our economic interests in this instance?

At the end of the day what is required is leadership, by politicans, by managers and by workers.


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