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Earlier this yr man plot about former Nintendo CEO Satoru Iwat it went viralposthumously praising him for taking a 50% pay cut as a substitute of shedding employees.
Why is a story from 2013 suddenly making headlines? Probably because it was such a stark contrast to current trends in North America, where job layoffs have reached levels not seen since the dot-com crash of the early 2000s.
The technology sector is particularly hard hit. According to NPR2023 was “a bloodbath for the tech industry, with over 260,000 jobs lost.”
The cuts were blamed on post-pandemic job growth and high inflation, which depressed consumer demand. However, the layoff trend will proceed into 2024. According to NPR, tech firms laid off a total of about 25,000 employees in the first 4 weeks of this yr.
While some layoffs are inevitable because of fundamental economic cycles of recession and growth, they seem to increasingly be a method used by CEOs to please shareholders by providing small, short-term increases in company performance.
I consider this is a short-sighted approach that limits employees to data points and budget items while ignoring the value of retaining employees over the long run, even in difficult economic times.
As Iwata said shortly after announcing his pay cut, “If we reduce headcount to achieve better short-term financial results, employee morale will decline. I sincerely doubt that employees who are afraid of being fired will be able to create software titles that can impress people around the world.”
The reflective instinct of many modern CEOs seems to go back to Jack Welch management brand from the 80’s. Welch, CEO of General Electric from 1981 to 2001, was known for his relentless pursuit of profit and his preferred approach to achieving it: firing employees. According to profile in The New Yorker, “no executive in history has fired as many people as Jack Welch.”
He was a pioneer “rating and jerking off“, in which he developed an worker evaluation scale and fired the bottom 10% of his employees each yr. His ruthless style was respected at the time. His legacy, nevertheless, is mixed, with most of his success attributed to financial fraud.
While his management style ultimately lost favor in the late 2000s and early 2010s, CEOs’ push to trim their workforces for short-term relief appears to be gaining latest momentum.
But does it improve the company’s financial performance in the long term? Even small cuts can quickly change a company’s culture, causing employees to go into self-preservation mode stifling innovation and creativity.
I know all too well how costly it may possibly be to lose long-term, loyal staff because of extreme circumstances. Like countless other businesses and nonprofits, my charity had no alternative but to put off employees in response to the COVID-19 pandemic. This was one of the hardest decisions I have ever made because I know the value that employees at all levels can bring to an organization and the impact it’s going to have on the lives of those employees.
And this is a decision that rarely pays off in the long term. According to the report in Timelayoffs can often hurt a company’s bottom line over time. They do not consistently increase profits and can result in lower worker engagement and customer support quality.
Conversely, although it could not all the time show on the balance sheet, there are many advantages to creating an environment where employees feel protected and valued and need to stay with the company for the long run.
Most of my team has been with our organization for over a decade, with many of them between 15 and 20 years old, and I see the advantages of this dynamic every day. Employees who feel emotionally protected in their job perform a difficult role that is critical to decision-making and have a loyalty to their organization that may only be gained through mutual trust.
Strong employees work harder because they are invested in long-term results. They know they might be here long enough for their contributions to bear fruit, not just for a yr or two before they give the impression of being for one other job.
They are also not afraid to take risks and introduce innovations. Too often, firms achieve a level of success by becoming complacent and risk averse, which ultimately leads them down a path to failure. That’s why loyal and dedicated employees are so essential. They have the confidence to challenge leadership to proceed to innovate and influence, or to talk up when they see their leaders making potentially bad decisions.
A stable workforce also fosters higher relationships with customers and suppliers, creating continuity and consumer trust. An organization that is consistently cutting and adding jobs cannot successfully maintain these relationships or conduct effective long-term business planning.
Maintaining an engaged workforce is especially essential in the era of “quiet exit,” where disengaged employees do minimal work to remain employed. This trend is not surprising provided that so many employees fear they may very well be fired at any time. This uncertainty may fuel employees’ tendency to take on additional jobs that may give them a softer landing if they are laid off.
But don’t just take my word for it. Data shows that worker retention results in: higher productivityreduced turnover and training costs and the employees who achieved it higher morale and you miss fewer business days, and all of them are like that good for the organization’s financial performance.
Instead of consistently reducing the workforce to generate short-term growth, business owners—large and small—should consider the advantages of investing in employees and providing a protected, stable workforce. Finding other ways to trim budgets and keep the workforce intact is a decision you won’t ever regret.