April 1, 2009

Cut, cut, cut won't work

Management gurus warn that wholesale job reductions can cause more problems than they solve.

By Mark B. Solomon

The exhibit floor at the 2009 ProMat conference and exposition was filled with equipment and technology that promised to automate processes and cut labor costs all in the name of efficiency. Yet at the same time those purveyors were strutting their collective stuff, several management gurus were cautioning attendees to be judicious in reducing head count, warning that indiscriminate job reductions will cause more problems than they solve.

One of them, Jim Tompkins, head of Raleigh, N.C.-based consultancy Tompkins Associates, said that while it's often essential for companies to reduce capital and operating expenses, they should be careful not to lay off experienced workers needed to maintain cost-effective operations. Too many companies blindly cut costs without weighing the impact of their actions on long-term strategic directions, Tompkins said. "Lots of companies cut, cut, cut. That's an action, not a strategy," he said. "You have to have a strategy first."

The consultant also took a hard line on labor force reductions aimed at meeting return on investment (ROI) metrics. ROI assumptions are nothing more than flawed predictions that are especially vulnerable to error in a weak, uncertain economy, Tompkins said.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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