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Redundancy may not be the answer for retailers

Technology & Data

Redundancy may not be the answer for retailers


Latest report from The Australian Centre for Retail Studies (ACRS) shows:

  • Redundancies can cause lasting damage to businesses
  • Direct and indirect costs of redundancy can harm long-term revenue, and
  • Employees more likely to quit jobs in environment of repeated downsizing.

The value of redundancies as a cost cutting measure is queried by the Australian Centre for Retail Studies in a timely report titled Redundancies: A less than optimal strategy?.

The report argues that while many organisations view redundancies as the best way to cut costs, it is particularly difficult to calculate the impact of redundancy on the knowledge drain, plunging employee morale, loss of trust in management, and the voluntary turnover that follows such a move.

“While redundancies may seem like a good way to cut costs in the short-term, the direct and indirect costs of downsizing can paralyse your company’s long-term revenue generating streams,” said Dr Sean Sands, research fellow at the ACRS.

“There are alternatives that can work in favour of the organisation. Companies should consider pay cuts, reduced benefits, unpaid leave or incentives for voluntary departure as an alternative to redundancy,” said Sands.

The effect of redundancy on employee morale is highlighted as a key issue, with the report suggesting that organisations can use the current economic climate as an opportunity to enlist the support of employees as a united force, fostering creativity, generosity and loyalty.

“Difficult times can be used to strengthen a company. If redundancies are required, leaders must become transparent, accept responsibility, over communicate and express compassion and empathy. People want to feel a sense of belonging and control over their future”, said Sands.

The report sites recent measures made by Holden such as changing production arrangements, altering shift allocation and slashing penalties for its workers as a good example of an alternative to redundancy when attempting to cut costs.

Sands believes that successful retailers will continue to provide higher levels of training and engage staff in strategy development.

“A climate of trust works both ways – employees appreciate and respond to empowerment and opportunities to learn and contribute, particularly in hard times.”

The full report can be downloaded from http://www.buseco.monash.edu.au/centres/acrs/research/whitepapers/redundancies.pdf.


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