Not Much of a Reduction

Since word came out early this year that we’re “officially” in a recession, a lot of companies have implemented a reduction in force. That’s a nice way of saying they’ve downsized. The question is: did they set themselves up for more costs instead of less?

When the job market is bad, like it has been this year, there are more employment lawsuits. The unemployed need money and will try to find it any way they can. Yes, you are as likely a candidate to “fund” their unemployment as anyone else and we’ve seen a significant increase in lawsuits.
How can they sue? It’s so easy in California that this is a somewhat silly question. But, for our purposes here, we’ll take it seriously.

Let’s look at your methodology. How did you choose to terminate that employee over another one? Will they agree that it was based on fair and objective reasoning? What was your process in implementing the downsizing? If you provide benefits, did you comply with the new COBRA ruling about subsidizing the cost?

Did you really think through the whole downsizing concept to understand the long-term effects? Your employees now know you’re willing to throw them away when times are hard… what just happened to your retention rates? Statistics show it costs the equivalent of a year’s salary by the time you’ve hired and fully trained a new employee. What will be your cost to get your company back to the level it was before?

Downsizings are a financial decision. Just make sure you’re including all the costs, both short- and long-term.