No Pain No Gain From Layoffs, Survey Finds

May 7, 2001 ( - Layoffs are necessary to revitalize troubled companies, according to 73% of respondents in a poll taken by the Turnaround Management Association (TMA).

Results show that 84% of TMA members’ companies have either experienced or are projecting layoffs.

Other survey trends included:

  • over 60% of companies have eliminated up to 25% of their workforce
  • only 17% anticipated reducing between 25% and 50% of their employees
  • approximately 25% of the respondents believe that company layoffs are too low
  • 4% viewed the layoffs as excessive.

Survey Explains Cutbacks

When asked for reasons behind the cutbacks:

  • just over 40% said that there were too many employees for the company’s size
  • 22% cited a reduction in plant/retail locations
  • a lack of capital to cover payroll was noted by18%.

Two-fifths of respondents said that support staff is first to go, followed by middle management.

That supports the observation that senior management employees are usually only considered after the other levels of employees in a distressed business have been evaluated.

On the Grapevine

The effect of rumors of restructuring on employees was smaller than expected in 70% of cases. Nevertheless:

  • about a third of respondents reported that employees made compensation-related demands to remain on the job
  • a third experienced lower productivity
  • about 25% reported increased staff turnover
  • unethical or illegal employee conduct was noted in 12% of the companies
  • almost a third noticed no negative repercussions
  • about 5% said rumors of layoffs actually increased productivity.

It was also noted that regular employee meetings and retention programs are increasingly being used to reduce turnover and increase productivity.

In fact, 80% of respondents said that distressed companies took proactive steps to keep essential employees. Actions taken to accomplish that goal include:

  • regular meetings with key employees, cited by half of respondents
  • creation of severance and retention plans cited  by 35%
  • creation of bonuses or other incentives cited by 30%.