Bricks and Clicks: Layoffs are Shortsighted

BOSTON (06/12/2000) - In an effort to shore up its bottom line a couple of weeks ago, IBM Global Services sold itself short In the hottest economy in decades, with an average U.S. unemployment rate below 4%, at a time when IT jobs at just about every company are going unfilled, IBM Corp. announced it's laying off 1,000 specialists in Y2k and other projects that are no longer active.

Hewlett-Packard Co. also has plans to turn over 5% of its workforce (on purpose, presumably, not because of attrition, which is what's happening to every IT shop in the country right now). Ernst & Young laid off 5% of its consultants a couple of months ago, too.

The reason for the layoffs, according to analysts, is that high-end consulting companies have to stay current. That means hiring people with the right skills - not teaching old dogs new tricks.

The problem with that is it's wasteful - of talent, of experience and of money.

Layoffs always hurt morale, which drives off the employees you actually want to keep, especially in a worker's market like this one. As a result, IBM and HP could find themselves short-staffed and spending a fortune trying to replace the workers they sent packing.

The Information Technology Association of America (ITAA) claims there are 800,000 unfilled IT jobs in this country and that the number will double by year's end. Assuming the ITAA's even half right, the trend is going to make hiring even tougher than it is now.

Computerworld's own hiring research shows the average time it takes to hire a new body has gone up from two months a couple of years ago to three months. And the cost of filling a position is also on the way up.

Plus, once you talk a good prospect into considering a switch, it will cost a hefty sign-on bonus and an average 20% jump in pay to get him on board.

So even for consultancies that need the hottest skills, it makes sense to spend some time and money to retrain the people they already have rather than spend money on layoff packages, then more money on recruiters, then more money to hook new prospects who will spend six months just learning where the bathrooms are.

Human resources consultant David Foote, talking about the IBM layoffs, told Computerworld two weeks ago that only about 5% of IT workers can really be retrained to fill other roles.

That my be true, when companies offer employees the opportunity to take on extra training only while doing their current jobs.

But if you devote some exclusive time for training and make it clear to employees that in six months you're going to be laying off people with their skills, you'll see how motivated they are to learn the new stuff.

In Fiddler on the Roof, Tevye says, "When a poor man kills a chicken, one of them is sick!" With the economy and job market the way it is, the same thing is true of technical managers who lay off their technical workers.

If there's not a job-related reason to get rid of them, hang on tight, even if it requires retraining.

Don't sell yourself short by losing the people who actually understand your business while pursuing 23-year-olds whose strongest recommendation is the ability to spell XML.

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