How and Why do Companies Conduct Lay Offs?

As the economy stagnates, companies are meeting their budgets. It is not to say that they are not earning revenues. The difference exists with the fact that companies have set higher goals with higher budgets. However, as the cost of resources (i.e. overhead costs) increase, and less money is being earned, companies are barely breaking even. Another issue is that since budgets are set slightly higher than the previous year, and cannot make that money, then costs outweigh the profits.


For example, let's say your manager set the following goal for 2012:
2011 Expected EBIT: 200,000
2011 Actual Revenues earned: 250,000
2012 Expected EBIT: 400,000
2012(YTD): 175,000

The example listed above further illustrates a simple case of what was earned before taxes in 2011 was 200,000. The actual revenues earned was 250,000. The company in 2011 earned $50,000 more than expected. Therefore, since the company  had a decent year, in 2011 when creating its budget it doubled its goal to $400,000 EBIT in 2012. The goal doubled and in hopes of achieving goals, companies will cut overtime, benefits such as picnics, bonuses, etc. The closer the year comes to an end in 2012 the company realizes that its costs are higher than expected. Overhead costs alone (not including marketing, etc) have tallied up to $300,000. Now the company realizes that it has spent more than it has even earned thus far. The economy is also stagnating. So what is next? It doesn't look good. Companies are going to begin laying off its employees. Why? Because it needs to cut costs, and the highest costs are the salaries and benefits.

How do companies decide to lay off its employees. Well some companies begin at the top of the ladder by evaluating the performance of the executives, mid line managers, and first line managers. If these managers are working inefficiently and have high salaries, then most likely some of the members will be cut. Companies will also begin to cut at the bottom of the totem poll. Employees who do the minimal and work strictly from 9-5, do not go the extra mile, and are not team players will also be cut. Why? Well because these employees are draining. They have bad attitudes, do not want to work and just do enough to get by. So these type of people are cut. Also, I have seen older aged employees laid off because they cannot work as fast as the young employees. So is this age discrimination? Of course it is but companies are allowed to do this legally.

Signs that lay offs are coming vary from company to company. But as companies begin to initiate cross training, this is the first sign that lay offs or "changes" are coming. For more information on cross training, please see the blogs listed earlier (Part 1 and 2).

So what can you do to ensure that your job is secure? Well learn everything you can. Do the work that no one wants to do. Volunteer to help out managers and other team members (going the extra mile). Be fast and thorough in your work. Provide the best customer care possible (going the extra mile) and every time you receive a compliment from a customer, print it out and keep it with you (can be useful in your evaluation). Remember companies want to maximize their employees. Do not waste time chit chatting. Be a good employee and stand out. Do not get involved in gossip. Managers do not like this. Do not gossip with managers.Remember, always stay positive. No matter how bad the situation, always say that there is a light at the end of the tunnel. This illustrates a positive attitude.