We know it’s bad practice to bid low just to stay in business and keep working. A contractor can go bust if the job goes bad, profits don’t materialize, and bankers desert the firm. But keeping people employed through the thin times is on the same level as honoring agreements, sticking to ethical codes and maintaining a safe, discrimination-free workplace. A number of companies report that by using work sharing and other methods, they are able to avoid layoffs.
On the other hand, recent scholarly research suggests that layoffs are self-defeating. Jeffrey Pfeffer, a professor at Stanford University’s Graduate School of Business, recently wrote that after counting all the costs—severance, vacation, sick pay, unemployment- insurance taxes, low morale and risk aversion by remaining staff, loss of productivity, diminished trust in management and loss of institutional memory—the long-term benefits of layoffs are an illusion. Rather than amputation, layoffs amounted to bloodletting, “weakening the entire organism,” Pfeffer wrote.
Although occasionally lay-offs are unavoidable–especially in a cyclic business such as construction–it’s true that some managers use them as a first resort rather than a last one. You always lose something in a lay-off, a part of your human capital that is difficult if not impossible to replace.