IT Job Drain: Dire or Just Discouraging?

Ann All

There certainly hasn't been much positive news on the IT job front lately. Earlier this month, we shared reports that the computer sector became one of the top three industries eliminating workers in January. If there was a glimmer of hope in that figure, it was a San Francisco Chronicle reporter's contention that some of those cuts would come through attrition rather than workers actually getting pink slips.

 

That's exactly what is happening, reports InfoWorld, in an article republished on CIO.com. When tech vendors like Microsoft and Sun announce sweeping job reductions, they include currently vacant jobs that will remain unfilled and planned positions for which folks won't be hired. It's a common bit of "smoke and mirrors," says Forrester Research analyst Natalie Petouhoff, a way for companies to signal to their shareholders that they realize the need to cut costs.

 

Such announcements also typically reflect a worst-case scenario of the number of jobs a company thinks it may end up needing to shed. While Microsoft last month said it would cut 5,000 jobs over the next 18 months, so far it has laid off 1,400 employees. It could make up the difference "simply by not hiring in certain divisions," Gartner analyst Neil MacDonald tells InfoWorld.

 

It was a similar story when Yahoo announced sweeping job cuts in October, wrote Kara Swisher on All Things Digital. At that time, the company indicated it might have to eliminate up to 3,500 of its 15,000 employees. But Swisher wrote that industry observers expect the final tally to be about half that number.

 

I don't want to paint an overly positive picture. There's no question that tech companies are cutting jobs in numbers not seen in years. Still, some companies may look at history and try to trim costs elsewhere instead of simply eliminating jobs in a bid to win Wall Street's fickle favor. A recent BNET item highlighted a Bain & Co. study that showed laying off employees often hurts, rather than helps, a company's financial performance. Of the S&P 500 companies that laid off workers in 2000-2001, those that laid off more than 10 percent of their work forces saw their stock prices drop by 38 percent. Companies that laid off fewer employees fared better, with their stock prices remaining essentially flat.


 

That's what Cissy Pau, principal consultant for Clear HR Consulting, told me when I interviewed her in December for a story about how some companies are looking at alternatives such as shorter work weeks and pay cuts to avoid sweeping layoffs. She said:

 

Layoffs without any kind of corporate restructuring or efficiency improvement won't provide the long-term results you want. If you say "I need to cut the budget by $10 million" and lay off $10 million worth of people, how are you going to deal with the work? What about the expertise you'll lose? What about the stress of the people who remain? It's not a permanent solution. The corporate reorganization has to go hand in hand (with layoffs) or else you're just going to find yourself doing more layoffs.



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