Some costs of savings

Recently, it seems that hardly a day goes by without reading or hearing about job cuts. If it's not a reduction that makes the news, then it's a friend, or acquaintance, or fellow employee who has been let go in the name of saving money. And in the majority of cases, the cuts are probably "necessary.

06/01/2001


Recently, it seems that hardly a day goes by without reading or hearing about job cuts. If it's not a reduction that makes the news, then it's a friend, or acquaintance, or fellow employee who has been let go in the name of saving money. And in the majority of cases, the cuts are probably "necessary." Yet one has to wonder whether management might not be trading short-term results for long-term problems.

While the old admonition that "no employer can afford to lose good employees" sounds wise, reality suggests that companies can afford to get rid of good employees. They do it all the time. Unfortunately, there's really no way to put a price on knowledge, or creativity, or experience. And those are the kinds of values people are talking about when they say they "can't afford" to lose good employees.

To be sure, no business can operate for too long if it continues to employ people it doesn't need. Yet history shows that many cutbacks are short-lived, while their adverse effects may continue for years — long after the lost workers have been replaced.

Of course, decisions to lay off workers are never easy, and they're not made in a vacuum. Yet, I fear the decisions are too often made with a bias to short-term goals and an eye for how much the layoffs will save as opposed to how much they'll cost.

We've all been exposed, I'm sure, to the scenario of good workers being let go only to be rehired or replaced a few months later. The reasons vary from changes in business conditions to realizations that the work those people were doing was pretty important after all. Regardless of the reason, such scenarios can end up being much more expensive in the long run than the quarterly balance sheets reveal.

Consider, for example, the cost of hiring these days. The Saratoga Institute Human Capital Report for 2000 shows that for 991 surveyed companies, the total cost per hire averaged $4588. For exempt employees, the total cost per hire averaged $12,032; for nonexempt, $989. Now, add in the costs for training new hires, which can easily run into the thousands of dollars per employee, and the costs of lost productivity due to inexperience, lack of knowledge, etc., plus the costs of severance packages, and the totals mount up rapidly.

Before another round of cuts comes, you might want to delve into how much they cost, as well as how much they save.





No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
2016 Product of the Year; Diagnose bearing failures; Asset performance management; Testing dust collector performance measures
Safety for 18 years, warehouse maintenance tips, Ethernet and the IIoT, GAMS 2016 recap
2016 Engineering Leaders Under 40; Future vision: Where is manufacturing headed?; Electrical distribution, redefined
SCADA at the junction, Managing risk through maintenance, Moving at the speed of data
Safety at every angle, Big Data's impact on operations, bridging the skills gap
The digital oilfield: Utilizing Big Data can yield big savings; Virtualization a real solution; Tracking SIS performance
Applying network redundancy; Overcoming loop tuning challenges; PID control and networks
Driving motor efficiency; Preventing arc flash in mission critical facilities; Integrating alternative power and existing electrical systems
Package boilers; Natural gas infrared heating; Thermal treasure; Standby generation; Natural gas supports green efforts

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This article collection contains several articles on the vital role of plant safety and offers advice on best practices.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
This article collection contains several articles on strategic maintenance and understanding all the parts of your plant.
click me