Lay-offs are both a solution and a problem, depending on the context and how they are handled. When managers use lay-offs as an excuse for poor planning and poor management of resources, they create problems. Employees lose trust in management, become cynical, and the firm enters a vicious cycle of failure. But, when lay-offs are strategically conceived, they may be used to reduce costs and focus the firm on how to organize, compete, and win. Strategically using lay-offs means that leaders figure out where they are taking the firm and then allocate resources to move the firm forward.
There are often many steps one can take before resorting to lay-offs. These include: Retraining employees, relocating employees, contracting employees for work, hiring subcontractors who are a buffer workforce, outsourcing some work and then securing long-term employment for employees who are insourced, helping employees find other job opportunities, sharing a short-term decline in employment, etc. However, at times, lay-offs may be required and if they are well targeted and well accomplished, they can help the firm go forward.
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