12 November 2008

Four major British employers including Yell and Virgin Media have announced plans to axe over 5,000 jobs this week, as businesses fear the recession. I have found myself contemplating the implications of panic sacking. Will companies actually benefit from this move?

Personally, I think not.

Companies that make their employees redundant to save money over the period of recession may be able to balance their books but they don’t think of the long term consequences. The downturn isn’t going to last forever and when in a year or so the economy regains its strength, these companies will have whittled down their pool of talent.

Apart from this, companies that have grown and been successful until this period of economic slowdown also face losing valued members of staff. Team members that have helped the company grow and move forward in the past. Ask yourself – if you lose these staff will you be able to drive your business at the same rate? What is the potential for damage to the company culture?

When organisations choose to batten down the hatches and cut spend they stop focusing on their forward growth and start talking themselves into doom and gloom. All the talk of the failing economy simply allows managers to make allowances for the company’s poor performance – once again causing slower growth. The long term result of this is one of deeper recession, caused by the businesses themselves.

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