MBA 745 – Reflections on Module 3 Concepts

In mature organizations, there is quite often a need to reduce labor surpluses. What would you suggest as other means by which to accomplish this objective rather than with layoffs?

One of the frequently used methods is to try and take advantage of natural attrition. When an employee is let go due to poor performance, a person quits their position, or someone retires, the company can choose to not replace the outgoing employee. This can cause additional workload on remaining employees, but if managed properly, this can become an efficient method of cost cutting without mass layoffs.

If by chance your mature organization established a “no layoff” policy, what advantages would this provide the company? Are there disadvantages? Which would you advocate and why?

No layoff policies may be great at improving morale. The challenge is that something of this nature can hinder the company when push comes to shove. Not having the ability to layoff employees may require cost cutting measures in other areas that could affect quality. It could also require complete termination of positions. I think that companies should not create such a bind as this policy would create. They should look at methods of incentives for employees to keep them besides guaranteeing them no layoffs will take place.

We know that fast growing companies need more working capital than those growing more slowly or not at all, as in mature companies. What strategy would you use to ensure sources of cash as incoming cash flow is delayed, and fixed costs continue, and paydays come every week?

Companies that are well established are often in strong cash positions and low in debt. It is possible that the company might establish short term debt instruments in order to maintain payroll or paying suppliers when cash flow runs low. The best position is to try and establish a cash position that will always meet operational overhead expenses for at least one to two months. This allows for customer invoicing to be received and replenish the cash hoppers.

September 2, 2007 | Filed Under MBA 745 

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