Category Archives: Downsizing

What do the cuts really cost you?

In times like these, all we are hearing about is how many people have lost their jobs in Australia or overseas and we all know someone who has been affected. With rising unemployment rates, there are still organisations who will be making cuts in the future.

How much do these cuts really cost you though?

I know that the aim in reducing staff numbers is to lower costs for the organisation, however I’m not sure that many people take into account the full cost of letting someone go. Of course there is the obvious redundancy payment to take into account, but what about outplacement and support/counselling services, and associated administration costs? These services can be quite expensive per session and the amount of overall administration that goes into laying someone off can be huge depending on how many staff are being made redundant.

Interestingly, CLC published an article this week which featured the graph below from the Chartered Institute of Personnel Development.

Costs of downsizing

The key thing that sticks out for me is the loss of productivity when you downsize your staff. Often we focus on the people who are leaving and we give them as much support as possible because it’s the obvious thing to do. But how well do you manage the ‘survivors’?

These ‘survivors’ can respond in a variety of ways to the changes. Some will be less productive while they deal with negative emotions about the change, you might find an increased amount of absenteeism and others will just leave.

This leads to increased costs in terms of productivity (which impacts the bottom line) and the costs of replacing people can be well into the thousands when you think about advertising, administration, and the training for the new employee.

I’m really interested to know- has your business taken into account the real costs of cutting staff before it happened?

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Filed under Downsizing