In a byline in Swedish technology and magazine NyTeknik, Stefan Bergmark, PA strategy expert, explains why job cuts are not necessarily the most effective action for businesses to take during economic downturn.
Stefan says: “Recession leads to a wave of dismissals across the Swedish business community. But the decision to make an employee redundant is often premature. Swedish business leaders should think a little longer. The economic situation may seem intimidating but, in all probability, it would be better to prepare the company and employees so they can act quickly when the economy recovers.”
Referring to figures suggesting that tens of thousands of jobs have been cut in Sweden in recent years, Stefan writes: “Falling demand may cause the board and management to see a need to quickly reduce costs. But labour is often a big investment from a yield perspective and should be considered for the long term. It is particularly important in knowledge-intensive industries. It would be better to try to get through the downturn with fewer cuts and instead invest in product and service development while streamlining production.”
Stefan continues: “The book Managing Uncertainty, published by the Economist in partnership with PA Consulting Group – and informed by interviews with 200 leading executives from around the world – revealed that companies that made drastic cuts were often less able to benefit during the upswing. That shows that management should stick with the long-term strategy even in a recession. These companies will, however, need to be open to finding new ways to make it through difficult times when demand is low and revenue has decreased.” Stefan goes on to give the example of a company that introduced a shortened working week for employees with proportionately less pay. He also alludes to organisations that invest in product development in cooperation with customers by relocating R&D to their customers, instead of keeping it within their own operations.”
Stefan Bergmark is a strategy expert at PA Consulting Group
To read the full article in Swedish, click here.
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