- Corporate restructuring is expensive. Those who are laid-off in the energy patch often get generous severance packages, pension payouts and job placement services. That costs the company big money. Productivity usually drops off a cliff during these restructuring events, the rumor mill runs wild and employees start searching the Work job ads, even if they were spared the axe. It can be many, many years before a company reaps any economic benefit from a corporate restructuring event.
- It’s not about improving productivity
The term “top grading” gets used often when making reference to mass layoffs. This is the misconception that companies will only keep the best and brightest, and let go of all the slackers on the bottom of the productivity scale. Nothing could be further from the truth. Mass layoffs are not always very well organized. The layoffs are generally left up to senior levels of management who single-handedly pick and choose who they want to keep and who they want to let go. Sadly, life isn’t fair. As the old adage goes, sometimes who you know is more important than what you know.
- Sometimes, it’s just about the shareholders
Ever wonder why a company would prefer to cut jobs before they cut dividend payouts to the shareholders? That’s because publicly traded companies are enslaved to their stock price. Senior management compensation is often very closely tied to the share price and the stock market is a good place to raise cash when required. When companies announce big layoffs, the stock price usually perks up. Shareholders like to hear that energy companies are getting serious about cutting costs, paying down debt and improving profitability. Whether they actually save any money or not from the corporate restructuring is very difficult to quantify. But it's the optics that count when it comes to share prices.
- Sometimes, it’s a housekeeping exercise with no strings attached
It’s legally very difficult for a company, especially a large company, to selectively fire employees they don't like. But mass layoffs during an economic downturn provides an excellent opportunity to clean house without worrying about HR policies. It’s almost impossible to sue for wrongful dismissal during a mass layoff. Once you’ve cashed in that severance cheque, you’ve signed away your rights to any legal recourse. After all, oil prices are down and many other people were terminated at the same time as you. Right?