What are the potential problems associated with headcount reductions?

Question

What will be an ideal response?

Answer 1

Several potential problems can occur with headcount reductions. First, regulatory requirements make it difficult to make targeted cuts. Second, workforce reductions, especially if not handled well, can harm employee relations. Third, organizations that make greater (involuntary) workforce reductions also experience greater voluntary turnover. Fourth, RIFs, while reducing costs over time, are very costly in tangible terms up front due to increases in unemployment insurance tax rates, disruption of work processes and serving customers, and administrative costs of handling exits. Fifth, some companies have learned to run so lean, and have controlled hiring so successfully, that there may be little room to cut headcount. Finally, where cuts can be made, if the cuts are too deep, an organization will be poorly positioned to generate revenue if business picks up again.