Layoffs. Downsizing. Rightsizing. Job cuts. Separations. Terminations. Workforce reductions. Off-shoring. Outsourcing.
Whatever the term, getting rid of employees can be a necessary and beneficial strategic move for companies to make. Layoffs can signal that a company is reorganizing and moving in a more profitable direction and, as a result, give Wall Street a reason to cheer and improve the morale of remaining employees. But unless job cuts are handled and explained properly -- and are indeed necessary to achieve a thoughtful, overarching purpose -- the solution may cause as many headaches as the ailment it was meant to cure, according to Wharton faculty members and an outplacement expert.
Consider a recent move by Circuit City Stores, a big electronics retailer based in Richmond, Va. The company announced on March 28 that it cut 3,400 jobs, or 7% of its workforce, effective that day, because the salespeople were paid "well above the market-based salary range for their role." The company did not disclose specifics, but The Baltimore Sun reported that the laid-off workers, known as "associates," made 51 cents more per hour above what the company had set as market wages.
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