Technology and Business Layoffs, The Silent Dance of Productivity
By Ken Dulaney
Can businesses expect layoffs in the near future?
At a recent Aragon Research event I sat with a few of our technology vendor executives for a nice chat during dinner. They had all tamped down hiring and there was some trepidation about the impact of the financial downturn we are experiencing. Most said some layoffs were bound to happen and the news recently has confirmed this is some sectors.
I fully expect that layoffs will be coming but not broadly across all technology and business sectors and not in all departments. Engineering and customer service areas personnel demand will likely remain strong.
Eventually the economy will turn around and businesses will recover and grow. Some areas will experience consolidation and retrenchment and other new areas will emerge.
But will mainstay business and technology vendors return to the hiring patterns of the past?
I don’t think so and here’s why:
Years ago, at the advent of computer technology, buyers would justify the investment in hardware or software through an analysis that often included a replacement of the workforce personnel by technology.
The question was asked, “How many workers can we eliminate with this investment.”
Over a short period of time this became an unacceptable rationale for tech investments because of negative impact on the workforce. Technology became an enemy of labor who feared loss of jobs. So, enterprises changed the rationale for such investments to a proper rationale based on productivity or cost savings increase using metrics like Return on Investment (ROI). But I believe that the labor reduction (employee layoffs) impact of these investments remains silently in force.
Technology investments are made continuously by most businesses.
And while there are unique ROIs for each investment, at the aggregate level they can be viewed as a linear growth curve rising at some slope over time. Yet often organizations rarely spend the effort to measure the actual benefit against the investment.
The technology works – it streamlines processes and reduces errors among other benefits – but few know precisely where the benefits appeared. For most, why bother? You certainly wouldn’t remove what you just installed. But any post-mortem analysis of the effector would certainly call out labor savings of some sort, however miniscule. Embedded in any automation effort is some form of labor savings since automation at its inception was a labor-saving invention.
The labor-saving element, no matter how small, builds over time but is often not extracted until an economic event forces labor cuts.
Labor cuts rarely come linearly to match these technology investments.
They come in jumps, sometimes minor and sometimes steep. Those cuts initially cause hardship, and that hardship persists for some portion of the period of the downturn. Yet in many cases, organizations never re-staff to the level prior to the layoffs. And they continue to function and grow. We believe that this is possible because the hidden labor-saving advantages attributed to the continued technology investments have realized an organization productivity improvement that permits the organization to continue at its previous level of efficiency.
This theory may never be proven through broadscale analysis because it would have to rely on metrics that are not often kept, And for most organizations those records would have to have shown proven elements of unrealized labor savings. But we can see the effects of technology investment in the aggregate as we watch enterprise labor actions through the downturn and recovery.
So, what happens to labor as it gradually is removed from business activities?
Retraining is the primary alternative. Low-level jobs suffer the biggest hits, leading to the conclusion that labor must move upward to more complex job functions. Yet many who follow this path will never complete the retraining. Workers are not always that flexible. There will be an increase of unutilized labor, something the State will have to address through benefits, a poor choice for society. Eventually the issue will become acute, if it already hasn’t, and governments will come up with solutions.
I am not certain of any choices, but I can offer some parameters around a solution:
Keeping an employee on the payroll in some fashion is far more efficient than being taxed to support socials services that are passed through another organization (the government) before they reach the recipient.
Retraining should be expanded, not necessarily through paid services that are delivered through a bricks and mortar institution, but through online services that much of the world now uses to educate themselves. These services would be much less expensive and offer the exited employee the ability to quickly try various career paths quickly.
Most importantly job recruiting and education must be interlinked along with services that can most expediently deliver the job application to the future place of work (transportation and housing).
The bottom line:
It is time to recognize this issue is rising in importance and begin to create solutions before workers are left wanting and society suffers the consequences – whatever those may be.