If employees really are your company’s most important asset, mass layoffs and salary freezes are a unfruitful way to show it

by Edward E. Lawler III

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Time on the model of time, I have heard senior managers say: "People are my organization’s utmost important asset," or "Employees are No. 1 in my organization." But I’m fed up being told that, and I dress in’t long for to hear it anymore.

Yes, approbation. for employees sounds friendly. But even when the economy is strong, in that place’s an enormous gap betwixt the artificial eloquence and the substantialness in many companies. Now that the economy is turning down, companies face a tough test in demonstrating in what way important their people are to them.

Often the first reaction of companies to hard times is to reduce labor costs. It’s pretty much expected that they will lay off employees and freeze or reduce wages and benefits. This is probably the perpendicular move when human capital is not a key source of competitive favorable opportunity. But what about when it is—such as at knowledge-work companies at which place employees are expected to add significant value to products and services? In those kinds of businesses, it hardly seems wise to point of convergence on cutting labor costs and decreasing a key asset. Rather, it makes much more sense to think of an economic downturn at the same time that a chance to gain or increase a competitive superior situation that is based on common to mankind capital.

Down times in the economy create a buyer’s market in talent, precisely as they make a buyer’s mart in real estate. Human capital-focused companies realize this and see downturns as a chance to raise the peculiarity of their most important asset—their human capital. The greatest enumerate obvious way is by hiring individuals who, in good state of things, are not within their reach or are very difficult to recruit. Because they see people being laid off in their companies and are told salaries are frozen, they desire listen to job offers that in good times they wouldn’t.

But even in a downturn people won’t indispensably take a lowball propose, even grant that things are tough in their company. They may have occasion for to tend downward on because they have high eldership. Thus, if not a company is doing very well in the downturn, like Google (GOOG), it may have to offer them a higher hire to recruit them.

In the best of all scenarios, even in a downturn, a company can afford to hire new talent without reducing not heedless bat; but if that’s not the case, there is bagatelle wrong with making some performance-based reductions in existing staff while recruiting new talent. If this is executed well, it be possible to simultaneously succor to reinforce a company’s emphasis on literary work space of time upgrading its talent.

But what if one organization needs to bring its head count and it is not obvious that this be able to be done by eliminating subpar performers? In this case, a company’s objective should be to reduce its staff in a way that will not molest but may in fact augment its employer brand.

For example, in the dot-com downturn, Cisco (CSCO) took a number of steps to ensure it would hold out to be seen as a good employer even though it had to reduce its workforce. The company offered sabbaticals to some of its employees and offered to pay partial salaries to laid-off workers who went to work notwithstanding charities and community ventures. It also helped supply with a subsidy the continuing education of quondam employees who wanted to advance their skills or change careers. Not surprisingly, at the time it came age on the side of Cisco to start hiring again, it had no problem attracting a very talented pool of applicants inasmuch as it was seen as a righteousness place to work.

The Cisco be at hand isn’t right as far as concerns all companies, but every company needs to consider the impact that cost-reduction actions can have on its mark as an employer. If handled poorly, even small reductions can have a big long-term impact.

Witness Northwest Airlines (NWA). Its management recently sent a booklet to employees bring under rule to a layoff, advising them how they could keep money for being laid off. Among the things included in the 101 Ways to Save Money booklet were buying jewelry at pawnshops, getting auto parts at junkyards, taking shorter showers, and finding valuable things in the trash by "dumpster diving"!

Employee outrage followed the distribution of this would-be helpful booklet. Management apologized for issuing it, but the damage had been done. Indeed, one of the fully convinced outcomes of the proposed Delta/Northwest merger may be the disappearance of the Northwest employer brand.

So far, it doesn’t appear that U.S. companies are responding to the current downturn as granting that mob are their most momentous asset. More and more companies are reporting layoffs and stipend freezes. But if your company wants to make people your most important asset, you can establish the company and assay that you mean what you say. The key question is, what kind of company will yours be? Will you have the intended effect advantage of this opportunity to improve your aptness level and strategic capabilities?