In this article titled “Layoffs: A challenge to Corporate Ghana – Part I”, I briefly articulate the principal causes of lay-offs and its psychological effects on the employee who has lost his or her job. Job loss has become a fact of organizational life. This is as the result of the turbulent and dynamic nature of the contemporary business environment. The uncertainty and dynamism characterizing the environment more often than not compel corporate leaders to make decisions that impact on the job security of their organizational members. Plant closings, de-layering, downsizing, among others, are usually decisions in response to changes in the corporate environment which weakens the competitiveness of firms. These responses always come with job displacement of employees in one form or another. Why should we bother ourselves to talk about lay-offs? And why must lay-off be everyone’s concern?
The irony in this day and age and the current trend in vogue is that both management and non-management employees are affected by lay-offs. Closing a facility of a manufacturing company in one location may mean getting rid of everyone in that facility. As a result, discussions about job loss should be of concern to everyone. The new deal is that no body’s work is permanent if you are not self-employed and even in such cases the business can simply die due to fierce competition; in the event of an organizational decline, just about anybody can be displaced if doing so is considered financially prudent by the business owner or the board of directors. The days of long-term employment relation is history. Human capital or resources have become the most disposal asset of organizations for quick short-term fixes to corporate problems. To become cost efficient, the first target of management is its labor cost. Consequently, talking about job loss is to discuss what can happen to just anyone of us, managers and employees alike, in an event of massive job displacement. Think of the job loss that accompanied the sale of major state-owned corporations and the fact that downsizing (workforce reduction) is in vogue in the manufacturing and related sectors of most market-driven economies in the world of which Ghana, our dear nation, is a part. Have you ever wondered why the employees of Agricultural Development Bank of Ghana resisted the acquisition of ADB by Stanbic? Part of it could have been the possibility of the dreaded lay-offs that could have affected management and non-management employees. Whiles Bank of Ghana was talking about finance and efficiency ADB employees were naturally concerned about their well-being. I believe much of the agitation was due to the threat of lay-offs than most of the logical arguments made. Threat activates us to find ways to protect ourselves. There is an ocean of rich growing knowledge base on employee well-being and emotions in Industrial and Organizational Psychology. What is known in the corporate governance literature is that there is a take-over risk. This is the fear of management that they may lose their job in an event of mergers and acquisitions. And rightly so, the first thing the acquiring organization may do will be to change the management because it is assumed that, rightly or wrongly, their inefficiency has caused the decline that acquired organization suffered.
Though I am not a prophet of doom, I anticipate that Ghana’s struggle for middle income status will come with heavy job losses in the manufacturing sector which is the third largest industry after agriculture and trading in terms of the proportion of the national labor force it absorbs (according to the Fourth Round of Ghana Living Standard Survey) in response to a need for lean production system or the Toyota Way or just-in-time inventory system and things like that. My anticipation is based on the trend in industrialized world, current trends in corporate Ghana and informal interviews with some workers in Ghana. For the benefit of the readers and my fellow researchers, the methodology was more of a small-sample size and in-depth discussions. This will lead to redundancy of several jobs or layers or levels of management. Management will want to reduce the span of control or supervision (number of employees under a supervisor) due to shift from tall, hierarchical organizations with high labor cost in favor of flat and equally effective organizational structures. If you have seen small but effective organizations in Ghana, then that that is what it will be like. Another factor that makes discussing lay-offs worthwhile is a trend that is already under way in Ghana, particularly at Tema industrial area. Outsourcing of business activities is already trendy; outsourcing means contracting out a function or an activity that was previously done in-house or in-company to an outside agent or firm. Reason for that is always a need for efficiency. Such outsourcing comes with temporary working or working on contract with organizations for shorter periods of time. In most cases the situation is like this: Company A asks company B to perform activity X on its behalf at a fee both companies negotiate because activity X when done in-house is costly but can be done effectively by company B at a lower cost. So company B hires people to work for company A yet they are not employees of company A (they work for company A on behalf of company B); company A pays company B and management of company B deducts their operational costs and related cost items before they pay the workers. This usually brings the take-home pay down to around 30% of what they could have earned if they were employees of company A. Company A is able to avoid paying huge benefits as required by the law and company B also avoids that responsibility through signing contracts with its employees to work for shorter-period. Whenever there is no job to be done company B lays off the employees and asks them to re-apply when they have jobs to be done and this enables both company A and B to avoid having to pay employees when there is no work to be done. That is, waste has been removed from the labour cost. As examples, Ghana Commercial Ghana and Ghana Port and Habour Authority have both outsourced the function of ensuring security of its properties to private security companies. Despite this downside, it creates vacuum that entrepreneurs can fill.
Another trend is ensuring that the organization is flexible. Regardless of the nature of flexibility sought, numerical or financial, the bottom-line is that it involves increasing or reducing the number of employees in response to changes in the operational requirement or capacity at a point in time and/or profitability of the company. The requirement for a flexible organization is that management should have a small number of employees as a core of permanent workers with all the entitlements and benefits bestowed on them by the Labour Act 2003 and a larger proportion of the employees as casuals without such entitlements. This enables the company to hire more workers when the management knows or anticipates an increase in demand for its product and lays them off when they anticipate a decrease in demand to match the anticipated market demand. This is usually done by way of human resource planning – Markov analysis, multiple regression, etc. What is in this for the employer? It helps him or her save a lot of money that would have gone into paying huge benefits like social security and severance pay to the casuals. This makes them flexible to the extent that they are able to lay off employees without benefits at any time the management anticipates a long period of downtime (period during which employees are not producing due to things beyond their control such as when a machinery is stopped for repairs for months or lack of raw materials). Usually, a clause in the contract may say that you may be asked not to come to work again when management decides to do so or statements that have similar implications. This is commonplace in Tema. The other interesting thing is that because the Labour Act 2003 stipulates that after 6 months the employer must either make the worker permanent or causal but with entitlements, workers are laid off before they hit the 6-month mandatory period and asked to sign another contract with the company. This has kept some employees for working at least 5 years with companies without the status of a permanent worker. The National Labour Commission needs to look more into this. How do we ensure that the 6-month rule is not violated by employers?
In the light of this new circumstance within which businesses in Ghana operate and will continue to operate in the years ahead, job loss has become almost inevitable and consequently, an important organizational issue that HR policies and practices must be worked out to address. The Labour Act 2003 provides some framework but there is no manual for application. Laws are good but what management needs are tools for translating the laws into actionable programs. Knowledgeable specialists like Industrial and Organizational Psychologists and others are needed in this pursuit. I wish my readers to acknowledge that I don’t intend to discuss the downsides of some of these trendy management practices just to tell ourselves that they have their toll on the employees but to say that we shouldn’t have any illusions about lay-offs resulting from some of them and to get us and our employers prepared for it because at some times it may be the only way out of the problem. Notwithstanding, the author of this article is seriously working on a possible alternative to lay-offs as a response in such dire situations. Interested readers can every now and then shoot me emails to startle me into more action.
In the part two of this article, the psychological consequences of the layoffs will be discussed while suggesting what organizations can do to help the organizations.
Source: Seth Oppong
