Layoffs Downsize Vital Human Resource

Before Anand Sharma shows your company how to streamline operations, he will extract your pledge that any employees whose jobs are cut as a result of his work will be reassigned, not fired.

“Layoffs are exactly the wrong thing to do with skilled workers when orders are slow,” the efficiency expert said. “Instead, we should be using all those freed-up minds to help us get our manufacturing operations ready for the next uptick in demand.

“What I’m worried about specifically,” Sharma said, “is the danger of worker layoffs as a cost-cutting device in response to the normal fluctuations in the business cycle.”

Sharma is not alone in his outlook.

Labor Secretary Robert Reich said in an August Training magazine interview that instead of downsizing, management should be “relying on the work force as a source of innovation and quality.”

Corporations that don’t, warns outplacement authority John Challenger of Chicago, will only be worse off. With layoffs in the first half of the year at 270,513, running 28% ahead of the first half of 1995, Challenger says:

“With each new layoff, corporations lose more of their memory . . . to solve problems, sell products and services, interact with customers, develop new technologies or design marketing campaigns.”

Yet, according to a new survey by the Society for Human Resource Management, in Alexandria, Va., 23% of corporations surveyed reported that they laid off workers due to “poor economic conditions” and 22% were due to a “profit decline.”

Sharma, president of TBM Consulting Group of Durham, N.C.--which utilizes efficiency methods pioneered by Japanese auto maker Toyota Motor Corp.--said financially strapped businesses have an alternative. “I don’t tell a company to have a no-layoff policy and harbor all the mediocre and nonproductive people,” he said.

“I am telling them that, unlike equipment and buildings, the human resource is the only investment that you can make that appreciates over time.”

Since machines “don’t reinvent themselves” but human beings do “by adapting to changing conditions,” Sharma calls it “dumb” to replace them with robots.

He should know. His firm consults for some of the stars of the industrial world: Allied Signal Aerospace, Chrysler Corp., Pitney-Bowes and Mercedes-Benz in Sao Paulo, Brazil.

Four years ago, Sharma showed stretch-wrapping manufacturer Lantech of Louisville, Ky., how to build the same machine with 20 fewer people in just three days instead of a month, using continuous improvement methods pioneered by Toyota’s Taiichi Ohno.

Sharma’s “no layoff” policy inspired employee cooperation. “If you are extremely good at making this machine,” he told them, “you will be assigned to teach other workers what to do.

“So the reassignment is taken as a reward, not a punishment,” he said.

The 20 workers were reassigned “to find a project they were thinking of, or a new product, or to team up with engineers to develop new products better and faster,” Sharma said. “The word got out that they were making more machines, not dead on arrival.”

Lantech’s sales of $40 million in 1992 climbed to $60 million last year and are expected to exceed $75 million this year, company Chairman Pat Lancaster said. “The impact they had on us was tremendous, particularly shortening the cycle time needed to create a new product from four years to nine months,” Lancaster said.

Sharma added, “They still have the same 300 people, and they are doing almost twice as much work as they were doing when we started with them, and there has not been a single layoff.”

Another plus: Lantech “has started sharing in terms of bonuses and improved working conditions with the employees,” Sharma said. “Many people have been promoted into higher positions, so everyone has gained.”