Wednesday, October 3, 2012

Dealing with Layoffs

Having worked in the private sector throughout my career, I’ve seen my share of rounds of layoffs. Even the most successful company will eventually stumble and not have enough revenue to pay all of its employees. What amazes me about large layoffs is that employees are unable to see them coming and do little to prepare themselves.

Businesses have owners who invest their money to make a return. If a business misses its profit target, owners will be unhappy. A common remedy to improve profitability is to lay off employees. So, employees who see their company missing profit targets should immediately expect that layoffs are a possibility.

But most employees are shaken when they learn that layoffs are planned, despite the seemingly obvious clues. They go from feeling safe and happy to feeling afraid for their futures. If their finances can’t withstand unemployment, it makes sense to be fearful. The part that doesn’t make sense is having felt safe and happy before the layoffs were announced.

A feeling of financial safety should come from having sufficient assets to withstand a long period of unemployment, not from a misguided sense that one’s employer seems stable and isn’t planning any layoffs.

At the inevitable company-wide meeting after a round of layoffs is complete, a common question is “are there going to be more layoffs?” This question is usually pointless because its answer depends on whether future revenues improve or get worse. The people who ask this type of question tend to see layoffs as arbitrary rather than as a direct consequence of poor financial results.

I expect most readers of this article who are employed in the private sector to react with brief unease followed by rationalizing that there won’t be any layoffs at their company. A much more useful response would be to cut personal spending and build some savings. Fat bank accounts and investment portfolios are the best reason to feel financially secure.


  1. You are so right. When you have a cushion of savings behind you and a plan for how you could cut back and still manage on less, the current downturn in the labour market is much less disturbing. The fact that you have the latest gadget or clothing won't seem nearly as important without a job as it did when you had one.

  2. @Anonymous: Well said. It's amazing how little of the stuff in my house is truly important.

  3. @Promod: You make a good point. I think people should both work to make themselves employable and save money. The danger of focusing on just being employable is that the world changes. It seems obvious now that print newspapers are dying, but this was not obvious years ago. Being a young person skilled at various jobs related to printing newspapers used to be an excellent career path, but isn't so good today for the now aging worker.

    1. The comment above is a reply to Promod's comment:

      How about investing in developing marketable skills? I'm amazed (disappointed) at how few bother. There's so much free information available online.

      Building and nurturing a network is also worthwhile. LinkedIn makes the process easy.

      We can't predict the future but can certainly take steps to protect ourselves.