A recent report from the Center for Human Resources at Wharton suggests that deep job cuts at corporations in the US and around the world are not the direct result of the tanking economy, but rather reflect operational and strategic issues that companies have effectively hidden over time. The onion-peeling effect of collapsed capital markets has brought these inefficiencies to light, and companies which reduce workforce in order to meet the next quarterly financial forecast may suffer more in the long run by not incorporating workforce planning into their recovery strategies. The report goes on to state that historically, corporate layoffs have a terrible track record, and contribute to future declines in overall performance. 

One insight from this report is that companies may assume that workers are a "just-in-time" resource that can be ramped up in a heartbeat. Let 'em go today, bring 'em back tomorrow. (Curiously, this was a fundamental plank of the UAW business model; amazingly, up until a few weeks ago, idled UAW workers were being paid by the industry for not working.) 

Wharton's supposition leads me to believe that those companies which accomodate this approach are actually increasing the chances for future operational issues and inefficiencies. Workers are not like engine parts, which can be manufactured to maintain a just-in-time inventory process. Here's a perfect example: the call center business.

In a call center, bodies-in-chairs is the fundamental objective. This has to be done within budget, while maintaining service levels and quality control. Since most call centers experience a turnover ratio in excess of 20%, managers, in effect, are re-tooling their resources at least 20% of the time. Assuming that new hires require a minimum number of hours (weeks) of product, service, systems, process, and customer management training, managers actually hire ahead of the attrition rate- if they wait for openings to occur, service levels and quality will tank, and both clients, the customer and the company, will lose out. The fact that somewhere around 20-30% of new hires wash out before they even get in the chair adds to the problem.

How do these managers get around this issue? They forecast: hourly call volume, workforce shrinkage, average call length, and a myriad of other factors which occur, including operations and system issues, new product releases, recalls--anything that will cause a customer to pick up the phone and call. 

This is an area where companies need to bring more discipline. Their strategic planning may not effectively forecast business conditions for the necessary re-tooling of the workforce. Just as they create a queue heading out the door, they should keep the incoming pipe open, particularly as it relates to quality. Now is the time to pick the market for the best and brightest. Essentially, re-tooling does not necessarily mean just layoffs, and companies which are not currently forecasting to incorporate workforce improvements into their recovery plans will again contribute to the next cycle of inefficiency and workforce reduction.