Downsizing

Layoffs That Don’t Break Your Company

Better approaches to workforce transitions

by

Sandra J. Sucher

and

Shalene Gupta

by

Sandra J. Sucher

and

Shalene Gupta

From the Magazine (May–June 2018) · Long read

Manuel Atienzar/Getty Images

Summary.

Today layoffs have become companies’ default response to the challenges created by advances in technology and global competition. Yet research shows that job cuts rarely help senior leaders achieve their goals. Too often, they’re done for short-term gain, but the cost savings are overshadowed by bad publicity, loss of knowledge, weakened engagement, higher voluntary turnover, and lower innovation, which hurt profits in the long run.

This article looks at better ways to handle changing workforce needs that make sparing use of staff reductions and ensure that if they do happen, the process feels fair and the affected parties have a soft landing. Most successful approaches begin with a philosophy that spells out a firm’s commitments and priorities, establish methods for exploring layoff alternatives (such as furloughs, retraining, and reassignments), and determine options for three scenarios: a healthy present, short-term volatility, and an uncertain future.

As firms like AT&T, Michelin, Honeywell, and Nokia have learned, thoughtful planning helps organizations address workforce transitions and cope with a shifting economic landscape far better than layoffs do.

In Brief

The Situation

Automation and fierce competition are forcing many companies to resort to frequent rounds of layoffs.

The Problem

All too often, layoffs done for short-term gain damage employee engagement and actually reduce profitability.

The Better Way

Some companies have developed workforce change strategies that make sparing use of staff reductions and ensure that when they do happen, the process feels fair and the company and the affected parties are set up for success.

Two great forces are transforming the very nature of work: automation and ever fiercer global competition. To keep up, many organizations have had to rethink their workforce strategies, often making changes that are disruptive and painful. Typically, they turn to episodic restructuring and routine layoffs, but in the long term both damage employee engagement and company profitability. Some companies, however, have realized that they need a new approach.

A version of this article appeared in the May–June 2018 issue (pp.122–129) of Harvard Business Review.

Sandra J. Sucher is a professor of management practice at Harvard Business School. She is co-author of The Power of Trust: How Companies Build It, Lose It, and Regain It (PublicAffairs 2021).
Shalene Gupta is a research associate at Harvard Business School. She is co-author of The Power of Trust: How Companies Build It, Lose It, and Regain It (PublicAffairs, 2021).

Layoffs That Don’t Break Your Company

In Brief

The Situation

The Problem

The Better Way

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