Is Corporate America Addicted to Layoffs?

Many of the nations' companies are in a recessionary frenzy and workers are the ones getting screwed.

Corporations are cutting thousands of jobs and slashing benefits but is there any real rhyme or reason to the employee bloodbath.

Just today, Dow Chemical Co. said Monday it will slash 5,000 full-time jobs and Post-It makers 3M Co. announced cuts of nearly 1,800 positions in the fourth quarter. This follows last week's string of big layoffs at major companies like DuPont Co. and AT&T Inc.

The media is covering all these workforce reductions as if they all make sense. No one is even asking if cutting thousands of workers right now is a good idea for employees, the firms themselves, or the economy at large.

Are these corporate managers making the right moves during tough economic times, or are they shortsighted and dumb? Sometimes the crazed downsizing measures by employers make it seem like they are junkies looking for the next fix.

There's a host of stupid cost-cutting measures I've been hearing about from the readers of my MSNBC.com column and my blog, www.CareerDiva.net:

One company decided that anyone who wants to take their accrued vacation will only get 75 percent of their pay for the time off. Another just pulled the plug on all tuition assistance even if workers were still taking classes. And another did away with sick time.

3M has an interesting strategy. According to the Associated Press today, the company is ordering some of its workers to take vacation or unpaid time off the last two weeks of the year.

Many employees across the nation are desperate and bewildered, and you can't blame them.

Right now, there are a few hundred workers staging a sit in at a Chicago factory because their former employer, Republic Windows and Doors, won't pay them the severance and vacation pay they're owed.

Suddenly, companies are so broke they're taking a chain saw to operations and can't even cover benefits they promised. What the heck happened?

Did all the money in corporate coffers just vanish over night?

"There's a certain amount of panic going on because of widespread economic conditions," says Arizona-based business consultant Jamie Showkeir, coauthor of Authentic Conversations: Moving from Manipulation to Truth and Commitment.

"Part of the problem is the way businesses have been organized and managed," he says. "In tough times, laying off people seems like a viable option. We view people like overhead as opposed to flesh and blood human beings that show up everyday and make contributions."

And, he says, American business has become almost like "modern day feudalism where senior executives live in the palace and the rest of us live outside the walls."

Indeed, even though companies are slashing workers and benefits, CEOs seem to think there's money to burn.

The head honcho of Merrill Lynch, John Thain, thought it made sense to ask for a $10 million bonus from the board members of his company, a firm that was in such a hole earlier this year it had to quickly agree to be sold off to Bank of America. The board is pondering this payout request today.

This at a time when analysts are predicting as many as 30,000 jobs could be slashed as a result of Bank of America's takeover of Merrill.

It's a downsizing free-for-all and businesses everywhere have to take a deep breath before this economy ends up in even worse condition.

Eric Patton, a professor of management at Saint Joseph's University who researched downsizing during the economic downturn of the early 1990s, says what we're seeing now is mainly "a knee-jerk reaction to cut costs and keep profits up."

Workers, he says, have a big bulls eye on their backs in this mad dash to jump on the expense-cutting bandwagon. If one company cuts workers and benefits today, tomorrow its competitor will feel pressure to do the same or risk having a crummier bottom-line.

Based on his research, he says downsizing can have detrimental effects on workers, companies and the economy. "Downsizing of the 1990s," he explains, "created a lot of cynicism and it broke the psychological contract people had with their employers."

Maybe it's time for Congress to hold some hearings on whether mass layoffs should get a holiday reprieve to give Corporate America some time to take a economic Valium and chill.

Follow Eve Tahmincioglu on Twitter: www.twitter.com/careerdiva

Comments

[ImmanuelGoldstein]

Layoffs are one of those tragedy-of-the commons things where individuals doing what is in their personal interest leads to a situation that is against ALL their interests.

Sure an individual company can improve it's own bottom line with layoffs. But when they do that the people out of work spend less which diminishes demand.

Diminished demand leads to overall loss in profits, which causes other companies to layoff, which diminishes demand further, which leads to more layoffs and so on and on....

Hey am I raving, or are we watching exactly this happening right now......

[marijam]

To keep profits up? It's to increase the company's stock price, that's all. That's the only thing that happens these days. The profits may not even be there, but it doesn't matter because the stock price went up as soon as the announcement was made.

Based on his research, he says downsizing can have detrimental effects on workers, companies and the economy. "Downsizing of the 1990s," he explains, "created a lot of cynicism and it broke the psychological contract people had with their employers.­"

It also broke pensions and health benefits, and it created the permanent "temp" job with no benefits. If the definition of a good risk is " a person with long-term job prospects", then 40% of the population isn't a good risk. It's systemic. I may be overstating the 40%, but I know the percentage of people forced to go from temp job to temp job is high and getting higher all the time.

[spinns17]

there doing this to keep the free choice act to be made law .if they put presure on the companies .there going to use the loss of jobs as an reason not to pass the law.they will say if it passes it will lose more jobs for america.re­al scumbags running companies in america today.thes­e companies that screw the american workers ,and send companies overseas .should lose all there rights as a american company.

[johnsopinion]

It never ceases to amaze me that when times get tough, companys look to laying off employees. Rarely do they look at themselves or their product or how they do business.

My mini-crusade has been that products on the shelves at the grocery store are overpriced, and not because of the profit margin of the grocery chain. Its simply because of 'coupons' that appear by the ga-ga-millions in flyers across the country. Take that coupon to the store, look at the price of the product on the shelf, deduct the amount of the coupon and you have the price that the product should be every day, 24/7.

To the manufacturer of the product, cut out the costs of printing, mailing, distributing coupons, cut back on money spent running tv commercials (the auto industry supports our local stations), cut back on advertising banners on buses, taxis, lobbies, etc., and the price of the product can settle down to a point of attractive­ness--resu­lting in more sales, resulting in more income.

But management sees a half empty glass that "appears" about to spring a leak. Not a half full glass
with 'form and content' already paid for. The mind-set to lay off doesn't create anything except concern
by everyone of the possibility of a company about to go under and the consumer being unable to find
replacement parts or repairs to an already obsolete product, further jeopardizing the company.

Yet America wants to buy!

[Konnie]

It's the only crayon in the corporate box.

and its all for show! just to make sure the stockholders and the trolls on wall street
see they are doing SOMETHING. ANYTHING.

problem is the cuts should start a little higher up the food chain - like the corporate office
where the income and benefits cut would really help the bottom line!

years ago, my long deceased mother used say the bastards were trying to break the
spirit of the american workers, to the point where we would simply beg for a job, any job,
at any wage. and be happy to live in a "box" - what she called apartments. hmmmmm.

[TrooAmerican]

They're ALWAYS shortsighted and Dumb because their policies are driven by shareholder demands for instant profits, and immediate 10x payback regardless of how that is acheived, consequently resulting in illegal, immoral, indecent acts as executives, which are almost always totally contradicting a sound long term growth and stability plan of a business model.

You can see it in almost every single big business that isnt dependant on Long term Consumer addiction to get sales.

[JScott]

'Are these corporate managers making the right moves during tough economic times, or are they shortsighted and dumb?'

Shotsighted and dumb!!!

[Chavez08]

My company is laying off the most talented in bulk because they are the highest paid. They're replacing them with kids straight out of state colleges at half the salary. They send out bi-monthly emails bragging about the "talent" that this Supply Side hell is affording them.

The product has never been worse, our competitors are taking our market share but the useless elitists at the top of the management team and the dillusional CEO can't stop circle-jerking.

This company will fail and, anymore, I hope it does.

[marijam]

Sounds like Information Technology (IT) where everything is a project now and people are hired per project and then let go. No wonder no one wants to go into IT anymore.

[ImmanuelGoldstein]

I have a couple of personal friends who were 'techies' but went into technical sales because they got sick and tired of the constant hire-fire cycle. Whenever there was an economic downturn the first thing they did was fire some IT people. The pay looked good on paper but actually sucked because you had these constant gaps where you had no income and had to live on savings while you did yet ANOTHER job search.
Interestingly, although companies have done everything they can to turn them into disposable, just-in-time workers they STILL looked sideways at anyone with a spotty resume as though they expected working at the same place for 20 years was the norm, AMAZING!
Of course I'm amazed ANYONE still goes into IT when the government has a program specifically designed to cut them off at the knees...(H­1-B , I'm looking at YOU!).

[AContrario]

America is awakening painfully to reality: her supposedly champions of american values are the ones
hell-bent on destroying slowly and quietly the very fabric of this society. Year after year,day after day
all solidarity and common sense of belonging have been meticulously destroyed or repressed by the
last governments and their allied, corporate business. Money has been marketed as the ultimate sign
of accomplishment and anything standing in the way of making a quick buck is evil, human life
included.

[ran6110]

Well, here they are facing a major down turn. They see their executive bonuses drying up so they need to do something to show 'cost savings' so the investors and board will see how much they saved the company and let them have the money.

All that matters is a few lame and lazy assed executives get their multi-million dollar bonuses and the major share holders (along with the board) can save a little of their stock value.

Of course Congress doesn't care, they just want to make sure their rich friends are taken care of so they can get the consulting or lobbyist jobs they were promised for the underhanded deal they passed as a law.

The taxpayer gets an unemployment insurance extension of thirteen weeks (but only if your state has more than 6% unemployment) while a lot of already very rich people get handed all the money they want with no conditions.

[joebaggadonuts]

The title to this article is odd. It's not that they are addicted, it's that they are not smart enough, nor do they care enough to think of any other thing to do with their workers besides make them the government's problem. And after all, isn't the government paying these corporations to stay in business, bailing them out (with the SSI taxes to boot, eh)? Why should they think of something to do with them if they don't have to?

It's not any wonder that we have lost so much productive capacity in return for soon to be overvalued government IOUs.

We DO need change. And it is here.

[joebaggadonuts]

I meant, "Change is here. Believe it or not."

[Rule Of Law]

"created a lot of cynicism and it broke the psychological contract people had with their employers.­"

It broke, and breaks, far more than that. Just as the knee jerk reaction of government­--Federal, State, and local--is to cut Social Benefits Programs first when confronted with budget shortfalls, so do Corporations cut the working person first when their mismanagement finally becomes apparent.

You notice in both instances the first to pay are those with the least ability to. And the least powerful in this classist society. This is, and always will be, Class Warfare. And the enemy is both the government sworn to protect us, and the Corporations to whom we rent our bodies as tools! The casualties are blue collar, working poor, who lose their jobs and their benefits endangering entire families and creating severe social dislocation, and Union members as they are fired first in order to finish the work begun by NAFTA and other Globalist strategies.

The New Feudalists don't want contracts with their workers--they want willing and obedient slaves.