Connect with us

Economics

New scientific analysis of downsizing shows smart companies still make a dumb mistake

Published

on

Share this:

“For example, a performer in the bottom 15 percent of the organization is actually losing their employer 40 percent of what they are paid.” In real-world numbers, that’s an employee being paid $50,000 per year for $30,000 of work.

Especially during economic downturns like the one the world is experiencing with the Covid-19 pandemic, companies turn to layoffs to survive. But the way organizations are downsizing is ultimately costing them up to hundreds of thousands of dollars in future losses, according to a workforce development expert and organizational psychologist.

“The research shows us that bottom performers lose companies money with every paycheck,” in a statement released alongside the research. “For example, a performer in the bottom 15 percent of the organization is actually losing their employer 40 percent of what they are paid.” In real-world numbers, that’s an employee being paid $50,000 per year for $30,000 of work.

“A performer in the bottom 15 percent of the organization is actually losing their employer 40 percent of what they are paid.”

Prior to the pandemic, the labor market was seen as the tightest it’s been for years. The rate of Americans who had a job or were looking for one hit a more than five-year high last year, . That left organizations with roles they couldn’t fill for two to three years, Caselli said. Now that things have shifted the other way, it gives companies a chance to move weak employees out and replace them with better performers, who she said is worth up to 140 percent of what they are paid.

“Now is the opportunity to shrink costs intelligently, by removing the poor performers companies have had to put up with during the tight labor market that ended in March of 2020,” Caselli says. “But the data I’ve collected shows a continuing trend in outdated, non-strategic termination practices, leaving companies in a weakened position.”

Share this:
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *