Future Focus

By Jun 13, 2008
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HR Magazine, June 2008 Not a Time For Layoffs?

Recent employment reports show signs of the early patterns of a recession, and therefore many economists are forecasting an increase in layoffs during the coming months.

But some labor-market experts aren't so sure. They say employers may be less likely than they were in the past to use layoffs as a cost-cutting strategy. One reason, they say, is that companies already were operating with fairly lean payrolls as the economy began to slow. Also, some experts have observed that the decline in the number of young people working in the United States has begun much sooner in this downturn compared with previous recessions.

In addition, employers across industries appear to be increasingly concerned about labor and talent shortages. According to a recent survey of nearly 5,000 executives in 83 countries conducted by the Boston Consulting Group, the World Federation of Personnel Management Associations and the Society for Human Resource Management (SHRM), talent management is the most urgent priority for U.S. employers and for companies virtually across the globe. Company leaders in nations with aging populations express concern that they will soon be losing large numbers of their most experienced workers to retirement.

Also, the use of even small layoffs can affect an organization's future ability to hang on to its most valued employees, according to some research findings. A recent study of 200 organizations, reported in the Academy of Management Journal, found that even modest downsizing in a company triggered an upturn in job seeking by its most valued employees.

Although softness in the labor market appears to be easing recruiting difficulties somewhat, the SHRM/Rutgers recruiting difficulty index shows that many HR professionals are finding it increasingly hard to recruit candidates for the jobs of most strategic importance to their organizations.

In an environment of growing concern about the availability of skilled job candidates, any actions that might lead to the loss of highly valued and experienced employees are likely to be approached with caution. As a result, employers may be more wary of introducing layoffs than in previous recessions and could also be more likely to weigh the potential long-term impact that layoffs could have on future organizational talent strategies.

Although economists disagree about whether labor-market conditions will deteriorate or revive during the coming months, HR professionals appear to be in agreement that talent shortages are likely to be an on­going problem for many years to come. They are adapting to this new reality by prioritizing efforts to recruit and retain a diverse workforce from multiple generations, by emphasizing succession planning and the development of talent from their existing labor forces, and by considering the long-term implications of using layoffs to cut labor costs.

Jennifer Schramm is manager of the Workplace Trends and Forecasting program at SHRM.

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SHRM web page: Workplace Trends and Forecasting home page

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