Layoffs have been the primary cost-cutting tactic for corporations since the 1980s. Yet those force reductions have also resulted in costs that are either underestimated or not included in executive decisions.

Layoffs occur in times of stress, so it’s understandable that the impact on remaining employees’ productivity and engagement would not be top of mind. The question is how to ensure that labor costs can be controlled without sacrificing growth and capacity. 

Supply chain-centric companies are uniquely positioned to handle this challenge. Layoffs are typically a result of a supply-demand imbalance. Supply chains live and die by the quality of their integrated business planning (IBP) processes. We would hope these firms would detect shifts in demand better than the average employer, and take steps to shape capacity without having to make drastic changes on short notice.

In 2023, companies continue to monitor an uncertain economic climate. Those destined to succeed will enact reductions in force in a way that aligns with a growth mindset, while preserving company culture and engagement.

All evidence suggests that companies are looking to tighten their belts. The year started off with a bang, as the tech industry reduced force by about 200,000 jobs. This created quite a stir in the labor market, especially regarding the way in which a lot of those layoffs took place. E-mails, Zoom calls and other hyper-impersonal methods left a bad taste with a lot of people. Cavalierly disrupting someone’s life in this manner isn’t the most compassionate way to do business.  Employee confidence in leadership is diminished when immediate managers and second-level bosses are unaware or not involved in the decision.

As we move into the third quarter, more layoffs are likely. Forbes reports that major U.S. companies such as Robinhood, KPMG, Uber, Oracle, Grubhub and Spotify will be shedding employees. Gap and Whole Foods are also reducing forces, extending the layoff trend beyond tech, media and finance. 

Even as layoffs proceed, distribution centers are being built, and plants are being expanded. So how can companies juggle these seemingly conflicting priorities while increasing revenues and ensuring profitability?

There are ways to maintain a growth mindset while controlling for costs. The best employers have rigorous processes to vet capacity additions and investments in technology. In addition, those with a strong talent-management strategy rely on IBP routines to acquire an early awareness that demand might be slowing in the months again, so that they can slow or stop external hiring. Or they might stop backfilling on openings as employees move on. The simple step of filling openings from within can allow a firm to mark time and determine whether downward trends will continue. These same employers will have succession planning in place, and know where both top talent and underperformers are in the organization. They will also shape training and development to focus on key strategic skills.

How can employees lessen their chances of being laid off? Always be adding value:  That’s the best way to ensure job security. Managers want workers who get things done, act as leaders and follow through on commitments. As a wise mentor once said, “You interview for your next job every day.”

Employees that proactively seek out mentorships and ways to sharpen the saw are worth investing in and keeping around. They’re aware of their shortcomings and always striving to address them. They go beyond delivering on current responsibilities to creating new capabilities. They are indispensable elements in a results-driven culture.

The outlook for the remainder of the year isn’t all doom and gloom. Unemployment remains low, and inflation just fell for the 12th consecutive month, to 3%. Job creation is strong, and manufacturers continue to reshore and friend-shore production, which bodes well for economic expansion.

At the same time, companies are still recovering from the effects of too much expansion in the COVID-19 era. Many will continue to “right-size” for the balance of the year. Hiring has begun to slow in a lot of sectors, and we’ll continue to see a steadying of the ship as more businesses cope with growth and capacity builds. It’s all about holding the line and not over-correcting in either direction, while relying on the right experts to help guide the way.

Chris Gaffney is a consultant and adviser at SCM Talent Group.