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"Creative Destruction" - How to Manage Headcount in a Recession
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"Creative Destruction" - How to Manage Headcount in a Recession
Lately, I am being asked by Clients, how does one manage employee headcount in an economic downturn?
The answer is, "Manage your organizational headcount the same – regardless of economic downturn or prosperity."
The management of employee headcount requires that each team member`s contributions are understood and reconciled against their economic cost or burden. In other words, if an employee team member is not creating as much or more benefit than they are costing, help them seek employment elsewhere.
Ever wonder why there are layoffs during an economic downturn? The short answer is economics. A more emotional answer… Quite often people allow economic inefficiencies to continue during good times that become economic liabilities during an economic downturn.
Perhaps you are seeking a more "scientific" answer… During an economic downturn, a phenomenon described as "Creative Destruction" is particularly evident. Coined by a famous economist by name of Joseph Schumpeter, "Creative Destruction", describes the reallocation of resources toward their next best use.
In other words, if a resource is not bringing an appropriate return on investment, "Creative Destruction" removes that economic resource and reallocates it to its next best use.
Think of your business model. Are you aware of any team members who are not "paying their way" or not covering their salary and support through their daily work activities? I bet you can. Do not worry… You are not alone.
But... You better do something about it right now.
Think of it this way… Let`s say "Fred", a low performer, is making $35,000 a year but only brings in $25,000 in benefit to the company. If the company is aware of this inefficiency, Fred may be laid off and a new employee hired who has the potential to deliver more than $35,000 salary in benefit to the company.
The problem with this thought process is that the employer often economically looks the other way when a "Fred situation" becomes evident. Why do they do so? For many reasons... A popular reason would be because Fred has been a "good long-term employee" and "loyalty should be rewarded".
The reality is that this type of loyalty is actually quite costly to an organization and the team members it employs. This type of loyalty actually has the potential to seriously impede a company`s economic viability.
Source:
http://www.hrresource.com/blog/view.php?blog_id=708
The answer is, "Manage your organizational headcount the same – regardless of economic downturn or prosperity."
The management of employee headcount requires that each team member`s contributions are understood and reconciled against their economic cost or burden. In other words, if an employee team member is not creating as much or more benefit than they are costing, help them seek employment elsewhere.
Ever wonder why there are layoffs during an economic downturn? The short answer is economics. A more emotional answer… Quite often people allow economic inefficiencies to continue during good times that become economic liabilities during an economic downturn.
Perhaps you are seeking a more "scientific" answer… During an economic downturn, a phenomenon described as "Creative Destruction" is particularly evident. Coined by a famous economist by name of Joseph Schumpeter, "Creative Destruction", describes the reallocation of resources toward their next best use.
In other words, if a resource is not bringing an appropriate return on investment, "Creative Destruction" removes that economic resource and reallocates it to its next best use.
Think of your business model. Are you aware of any team members who are not "paying their way" or not covering their salary and support through their daily work activities? I bet you can. Do not worry… You are not alone.
But... You better do something about it right now.
Think of it this way… Let`s say "Fred", a low performer, is making $35,000 a year but only brings in $25,000 in benefit to the company. If the company is aware of this inefficiency, Fred may be laid off and a new employee hired who has the potential to deliver more than $35,000 salary in benefit to the company.
The problem with this thought process is that the employer often economically looks the other way when a "Fred situation" becomes evident. Why do they do so? For many reasons... A popular reason would be because Fred has been a "good long-term employee" and "loyalty should be rewarded".
The reality is that this type of loyalty is actually quite costly to an organization and the team members it employs. This type of loyalty actually has the potential to seriously impede a company`s economic viability.
Source:
http://www.hrresource.com/blog/view.php?blog_id=708
