When do companies downsize

You should also file for unemployment benefits as you start your job search. The federal government funds dislocated worker programs that provide job search and training support. Being laid off is very different from being fired because it is due to circumstances beyond your control.

Employers should be aware of this distinction when you apply for jobs. Include a clear statement somewhere in your application process in your cover letter, application, or during your interview that explains why you were displaced.

For example, you might explain that your position was eliminated when the company outsourced an entire department. Consider emphasizing the quality of your work while you were employed there. For example, you might mention in an interview your positive performance evaluations, or include in your application a recommendation from your former employer. Mentioning these things during the job application process will dispel any worries that you were fired due to issues with your performance.

This gives workers the opportunity to look for and train for new employment as they transition to new jobs. In the example above, the car manufacturer employs more than people, so they would be required to notify all workers at the plant at least 60 days in advance that they plan to close. Layoffs are not the only option for reducing costs during periods of crisis.

In some cases, employees are not fired, but instead become part-time or temporary workers to trim costs. Other times, employers may offer job sharing for some employees, cut back on employee benefits, or shorten the workweek in order to retain employees.

Accessed July 21, Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance.

Select basic ads. Create a personalised ads profile. Without a job, providing for yourself and those that depend on you is extremely challenging. Therefore, layoffs put former employees in a tough position and should never be taken lightly. It is expected for employees getting laid off to be upset and surprised. Upon announcing company layoffs, employers may experience backlash from employees. Although these are normal short-term reactions and consequences of downsizing, there are a wide variety of long-term effects companies can expect to experience.

Read the information below to learn more. Companies invest a lot of time and resources into hiring and training employees.

In theory, every employee should have the essential skills and knowledge base required to complete their job functions. Also, the longer an employee is with a company, the more information and skills they can acquire. In addition, downsizing companies typically do not hire new employees, which means there will be a void instead of a replacement. When companies downsize, gaps within the workload are created. This adds pressure to the remaining employees to not only complete their current job functions, but also to pick up additional work to compensate for the terminated employees.

The effects follow people throughout their lives. A few companies have been experimenting with better ways to handle their changing workforce needs. So far, the results seem very positive. An analysis of their experiences reveals that an effective workforce change strategy has three main components: a philosophy, a method, and options for a variety of economic conditions. A workforce change philosophy serves as a compass for senior leaders. A philosophy helps leaders answer the following questions:.

The philosophy of the French tire maker Michelin, for example, includes hiring people for their potential rather than for the job.

A workforce change strategy should anticipate three different scenarios. The company also has a defined approach to workforce change and restructuring.

Whenever possible, staff at the entities concerned and their representatives are invited to work together to seek and suggest solutions for restoring competitiveness and reducing overcapacity, which may open up an alternative to closing an activity or site. When restructuring is unavoidable, it must be announced as soon as possible and carried out according to the procedures negotiated with the staff representatives.

The ensuing changes on a personal level must be supported for as long as is necessary to ensure that the reclassified employees find a satisfactory solution in terms of standard of living, stability, family life and self-esteem.

When Nokia was contemplating that massive workforce reduction in , its senior leaders articulated a philosophy with four core values:. A company must communicate its intent directly without leaving any of them in the dark or piecing together scraps of information to figure out what the future holds. Having a clear methodology will allow companies to explore alternatives to layoffs, and if they cannot be avoided, minimize the harm they cause.

To establish one, firms need to address three questions:. As a result, Michelin integrated three planning processes—product planning, territory planning, and restructuring planning—into one. The product-planning groups project their anticipated production for the next five years, and then the territories identify which regions will have too much or too little production capacity and what technologies each factory will need.

The restructuring plans come out of the dialogue between the product and territory heads. For example, in October , Michelin determined that it would have overcapacity for truck tire production in its Budapest factory and decided to close it in mid Michelin has set up an accountability structure that clearly delineates who is responsible for what. It identifies factories that should be closed or downsized and directly oversees all European restructurings. Finally, Michelin establishes a committee for each factory that will be affected, consisting of regional and country executives who are responsible for implementing the restructuring plan.

Two senior executives at headquarters—a director of restructuring and a director of product planning—coordinate the entire process. Like any other good strategy, an effective workforce change strategy includes goals against which success can be measured. An example of these comes from Honeywell. As it turns out, the firm was able to improve substantially on all three measures. To monitor progress on the second goal, performance against competitors, financial data providers developed two measures: the percent change in operating income from the — peak to , and total stock returns in And at A workforce change strategy should anticipate three different scenarios: a healthy present, short-term economic volatility, and an uncertain future.

A healthy present. In the immediate term, senior leaders should practice disciplined hiring and use stringent performance metrics to build a strong organization that can weather change.

A lean approach to staffing will help companies avoid yo-yoing between overexuberant hiring during growth and damaging staff reductions when demand falls.

Before Cote began his turnaround in , Honeywell had a policy of hiring freely during good times and then cutting jobs in downturns. The drastic head count reduction of was too much for Cote, who responded by introducing hiring controls. Too often managers use layoffs as an excuse to avoid difficult discussions about performance. Lincoln Electric, an arc-welding products and consumables manufacturer headquartered in Cleveland, Ohio, has had a no-layoff policy in its U.

Part of the reason it maintains that policy is that it has a reputation for high-quality and efficient staff, thanks to very strict performance standards and a rigorous evaluation process. Employees are assessed twice a year in five areas. Performance is competitive within departments, and performance ratings are tied to a merit-based compensation system. Short-term volatility. Experienced managers develop a range of ways to reduce costs without resorting to destructive layoffs.

Three approaches implemented by Honeywell, Lincoln Electric, and Recruit Holdings, a Japanese human resources and advertising media conglomerate, demonstrate how much room there is for creative management during downturns. During the Great Recession, Cote used furloughs instead of layoffs at Honeywell. Having weathered three recessions when he was at GE, he had developed a sense for when a business cycle might run its course.

Two years before any sign that the economy was in trouble, he began to pull back on hiring. Once the recession hit, Honeywell furloughed employees for one to five weeks, providing unpaid or partially compensated leaves, depending on local labor regulations. I kept reiterating that point: There will be a recovery, and we need to be prepared for it. In , Recruit Holdings developed an innovative system, Career View, through which it hires employees with nontraditional backgrounds as three-year contractors.

The program targets rural employees who lack the education and experience to land a job at a major Japanese corporation, hiring them as sales associates for regional offices near their hometowns.