Strategies for Managing Employee Surpluses and Avoiding Layoffs

Two more policy-oriented solutions to remedy overstaffing might involve (1) tying a greater portion of compensation to division or organization performance and/or (2) regularly staffing the organization at less than 100 percent and making up the difference with temporary employees or offering overtime.

The former strategy creates a flexible or variable pay plan to control costs because payroll expenses are directly related to the organization’s profitability, Therefore, overstaffing is somewhat less of a concern.

The latter strategy creates a flexible or variable workforce that can be expanded or contracted, to meet business needs and conditions. These strategies for managing employee surpluses are summarized in this article and the following table is given below.

Strategies for managing employee surpluses

As part of any layoff plan, the organization also needs to develop an appropriate strategy for managing the survivors. A key management challenge that is often overlooked is ensuring that the retained employees can adjust to the changes.

It should not be assumed that these individuals will automatically be relieved (and thrilled) to have retained their jobs during the layoff and will still be motivated and productive.

These individuals may feel less secure about the jobs they have retained; be asked to perform more work than previously.

Without a corresponding increase in pay; have lost long-term friends and coworkers; and may have damaged morale and fear that they are vulnerable to future layoffs. Consequently, they may be less loyal to the employer and have strong incentives to leave the organization.

The organization needs a separate strategy in addition to its layoff strategy to ensure that these retained employees remain committed, loyal, and high performers.


Strategies for Managing Employee Surpluses and Avoiding Layoffs

Retention of these employees and their level of productivity will probably determine whether the organization will survive.

Ironically, downsizing organization often ignores this critical fact and assumes that retained workers will be happy to still have their positions and work harder than ever. Reality has shown that nothing could be further from the truth.

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