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How analytics could end layoffs

Rob Enderle | Sept. 5, 2016
By using analytics wisely, columnist Rob Enderle writes, layoffs could become obsolete.

Collateral damage from a layoff includes the migration of key skills to competitors, anger and disloyalty both in the people the leave and stay, and often a level of animosity that can tarnish the firm’s image and do long-term sales damage. Laid-off folks often become or have relatives or friends who are corporate buyers who then avoid the firm’s products, badmouth the firm on social media, and can torpedo executives from the firm who they held accountable long after those executives leave the company.

As a side note, the vast majority of CEOs who accept layoffs as a business option have never been fired or laid off themselves. They lack an understanding for any of the related problems and just see the tactical financial benefit.

One current layoff has a package that is surprisingly good, but now everyone wants to leave and those that don’t are seen as stupid so they may be managed out later. Reminds me a bit of a CEO who commented that his results would be far better if he could just get rid of the damned sales people. (He was fired shortly thereafter). It never ceases to amaze me that the CEOs who use layoffs never truly understand them.

Analytics to the rescue

Done right, analytics capture all elements of a pending decision and render them mathematically. In the case of layoffs this would not only include the initial financial benefits, but the massive collateral damage. In addition, analytics can also provide a high level of granularity so that employees being laid off are just those who aren’t worth the salaries they are being paid, both is contribution and in potential damage later on.

For instance, you could have some old guy who isn’t contributing much, but who knows every disgruntled customer you have. It would be far cheaper to keep him then to let that person, and information, pass to a competitor. In fact, it would likely be far more beneficial to find a way for him to contribute to fixing the customer satisfaction problem.

Analytics also provides a far better picture of the market, company and environment meaning the kind of financial surprises that typically lead to layoffs are far less common and adjustments can be made in a more measured fashion. Both making the firm more resilient to market changes and the CEO more effective as a decision maker.

The end of layoffs

That’s my hope -- bad practices like forced ranking and layoffs should have become obsolete decades ago. However, layoffs still exist largely because the full impact of them hasn’t historically been captured and, as a result, the damage they do is rarely captured in time to avoid a bad decision. Analytics, if properly implemented, should be able to help a company avoid the kind of crisis that causes layoffs and realize that doing a layoff often makes it less likely the firm will ever recover.  


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