Personnel layoffs increasingly become a topical subject in the light of the deepening tendency of Bulgarian employers towards reduction of labor costs. But they could have many serious negative effects upon the satisfaction and productivity of the remaining personnel. The present article examines some of them.
Keywords: layoffs, personnel, productivity, satisfaction.
The deepening economical crisis in Bulgaria provokes a continuous drop in the activities and earnings of business organizations, which presses them to search ways for reduction of their expenses, including the labor costs. One of the most actual strategic decisions in that direction is the personnel reduction. Actually this directly unburdens the organization in financial aspect, but at the same time if the staff cuts are not properly done they could cause enormous damage upon its effectiveness and profitability in short-term, as well as in long-term.
Policy of carrying out layoffs in Bulgarian organizations
During the last years personnel layoffs in Bulgarian organizations have turned into an element of the corporative culture. According to many investigations and publications almost all of the organizations (except the smallest ones) have written procedures for selection of employees in cases of staff cuts. Nevertheless it turns out that in most cases the employees are not clear about the criteria for selection of the discharged or perceive the choices as a result of the personal negative attitude and biases of the managers towards certain subordinates.
The layoffs are a painful subject and have a high economic and social price for the discharged, because the job loss directly worsen their well-being and life standard. At the same time taking care for easing their consequences is an expression of socially responsible behavior, as well as a legal engagement on behalf of the employer — paying compensation at least four times higher than the last monthly gross remuneration is regulated by the labor legislation . Most of the Bulgarian employers compensate the discharged in this amount, but there is no practice to demonstrate recognition and respect through organizing activities with ceremonious character, such as official “Good bye” party of giving some present, for example.
The forthcoming staff cuts and the necessity of them are not discussed with the employees. Also there is no practice to notify the discharged in advance — they are informed through presenting a written order, which has absolute character, is not a subject of discussion and comes into operation immediately.
Effects of the layoffs on the remaining staff
Any wrong policy for making lay offs has the potential to affect extremely negatively the satisfaction, and hence — the morale and productivity of the remaining personnel.
First of all the employees are not always sure that the staff cuts are excusable and really necessary. Although the crisis inevitably leads to a drop in the activity, often according to the employees it does not need so great cuts in the staff. This is a precondition for doubt arises and lack of confidence in the competencies and good intentions of the upper management. Since the necessity of layoffs is not discussed with the employees, the mass protests against them often happen.
In most cases the employees do not accept the selection of the discharged as fair. Although justice is very vague and subjective concept, this result is a logical consequence of the lack of knowledge about the selection criteria.
Quite often the layoffs lead to significant changes in the work situation and especially to work load increase (because of combining several previous job positions), which not rarely corresponds with longer working time and shorter leaves. This overloading creates stress, predisposes to mistakes and worsens the quality of work.
Satisfaction is quite complex and abstract concept, but in most cases it could be considered as influenced by the perceptions of justice in the received attitude, as well as by the degree of satisfaction of the personal needs. It turns out that practically after the layoffs the satisfaction of almost all basic human needs in the five-degree hierarchy of Maslow is prevented :
- physiological needs — in most cases the rewards of the employees keep their amount after the layoffs. On one side the lack of salary reduction is good for the physiological needs of the employees. But on the other side the lack of salary increase is a precondition for dissatisfaction.
- safety needs — almost always the feeling of safety decreases after the layoffs. The employees foresee new staff cuts, which is understandable, since in most cases they are realized on waves, not at once. The high levels of uncertainty and anxiety always influence negatively on the productivity, satisfaction, moral and loyalty to the organization. For this reason most employees don’t feel concern and engagement towards their employer.
- social needs — the atmosphere in the organization considerably worsens after the staff cuts, becoming more tense and hostile. This disfunctional climate affects unfavorably the opportunities for satisfaction of the social needs and the need of belonging.
- needs of recognition and respect — the employees do not think that their “survival” after the layoffs is a gesture of acknowledgement for their skills and the efforts they put in their work. Just the contrary — the impressions for disparaging and neglectful attitude towards personnel and especially towards elderly predominate.
It turns out that the layoffs, currently so actual for Bulgarian organizations in most cases have a very high price. On one hand, discharging the employees on the basis of irrational criteria deprives the organization of the most skillful and quality work force, which strongly worsens its competitive advantage and its ability to survive and overcome the crisis period. On the other hand, the consequences of the layoffs upon the remaining personnel usually so much lower its productivity that absolutely neutralize and even exceed many times the positive effects of the reduced labor costs. The worsened productivity inevitably reflects in income decrease, which is very likely to provoke new waves of staff cuts for the sake of savings. All this creates a “vicious cycle”.
1. Labor Code. 2012. Available at: http://balans.bg/
2. Maslow, A. 1954. Motivation and Personality. Harper and Row, New York.