Be responsive at all times to avoid layoffs at firms

Cost-cutting measures are commonly introduced when a company's revenue and profits are threatened, in the belief that they equate to productivity and bottom-line gains, given the cost savings achieved.

These measures come in various forms, including wage freezes, wage cuts, recruitment freezes, delayering and voluntary or forced retrenchments ("Retrench? Take heed of long- term costs" by Mr Edmund Khoo Kim Hock; June 8).

It is the chief executive's responsibility to decide which measures to take but some lack the courage and gumption to do so, instead spending millions of dollars on engaging consultants to justify such measures.

Even with the recommendations of the consultants, usually reflecting the thoughts of the CEO, the latter has to adopt a hard-nosed approach in implementing them.

This is necessary as it is common for savvy division heads to justify and defend their respective manning levels, arguing that downsizing will have a negative impact on productivity and performance quality.

And when it comes to delayering - a process to flatten the organisational structure - division heads are inclined to remove a layer but move the incumbents to another layer, which results in overall employee numbers remaining intact.

The outcome may be that the cost savings achieved do not justify the high consultancy fees.

Hence, unless there is a sudden downturn in business, CEOs need to constantly monitor the company's revenue, profitability, costs, manning level, and changing business environment, so that adjustments can be made along the way - so as to avoid massive and painful layoffs.

Lawrence Loh Kiah Muan

A version of this article appeared in the print edition of The Straits Times on July 06, 2015, with the headline 'Be responsive at all times to avoid layoffs at firms'. Print Edition | Subscribe