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Microsoft may drag out layoffs for a year

Gregg Keizer | July 21, 2014
Long periods of uncertainty about who goes, who stays, can corrode a company's morale.

According to the state of Washington, Microsoft said it would eliminate 1,351 jobs in the state.

"I don't think it's a good thing to do," Wayne Cascio, a professor at the University of Colorado, Denver and an expert in human resource management -- specifically downsizing -- said in an interview about long layoffs. "It creates massive uncertainty and a big drop in productivity. People spend their work time on social networking and getting a resume up to date. And there's the very real risk that the company might lose the most valuable, and marketable, employees."

Anything company executives and managers can do to reduce uncertainty, which is the root of the disruption, is all to the good, Cascio added, for both those destined to receive a pink slip and those who will remain.

That uncertainty often leads to an often-overlooked phenomenon, said Cascio. "There's empirical research that has shown that a year after layoffs, the unanticipated turnover rate goes up," he said, of people who, although spared the hatchet, took initiative and left on their own for other jobs. "The larger the layoff, the more that rate goes up."

If a company normally has an annual turnover rate of 10%, it should expect a jump to 15% within a year following a layoff, Cascio said.

When asked whether companies take that into account when they plan layoffs, Cascio said, "I don't even think they know about this."

Cascio acknowledged that in some instances a long layoff stretch can't be avoided. "Microsoft may not know how many to let go," he said. Other factors, including regulations in foreign countries where a company operates, can come into play as well.

He characterized the Microsoft layoff, which aimed to cut 14% of the workforce, as "large." The average is 10% to 11% nationally, with anything over 20% considered an "extreme" downsizing.

"People wonder what's going to happen, but they don't know," said Carolina Milanesi, chief of research and head of U.S. business for Kantar WorldPanel Comtech. "Am I invested in the company or not? Is the company invested in me or not? There's a need for more clarity about what will happen."

"It's important that companies reduce the uncertainty, not only for the people laid off, but for those who remain," said Cascio. "Those who are staying will be looking for signals on how those laid off are treated."

 

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