It seems that a day does not go by without an announcement of a corporate lay-off.  Tuesday it was Wal-Mart, a corporate giant that many held up as recession proof. 

Let's examine the story.  The announcement sent shockwaves through Northwest Arkansas (where Wal-Mart is headquartered and where the majority of the cuts will be made). Only a week earlier, the company reported that store sales were up 2.1 percent for the month of January, a figure slightly above analysts’ expectations. 

Wal-Mart's executives explained that the lay-off of 700 - 800 employees was a “realignment” of the organizational structure to support the adjusted business plan.  The company’s 2009 business plans call for fewer new stores and for more relocations and remodels of existing stores.  As a result, the company requires fewer people on their real estate and development teams.  The company has not released any further details, but claims to have made the cuts with “careful consideration”. 

We have to wonder if talent management had any role in the "careful consideration" process.  For example:

• Did the company evaluate the capability profiles of the targeted employees to see if they might be a close fit for the relocation or remodeling team? (I imagine that there are many transferable management and functional skills in this field.)  Many organizations make the mistake of laying off high-performers in under-performing organizations, a problem we cite in our new research the Manager's Guide to Successful Downsizing.
• Did the organization truly consider the “high potentials” that may be located in unproductive staff roles? We hope so…but perhaps Wal-Mart, like many large corporations, is plagued by a lack of easily accessible high-quality data on employee performance and potential.  And as a result, there was no fast and reliable way to identify the true skills, potential, and opportunities for those affected - so headcount cuts were made across the board.  I always wonder, when layoffs occur, how many high-potential, high-performing employees are sent packing along with years of knowledge, experience, and contacts within the company.

Could Wal-Mart avoid this lay-off, find new roles for these people, and remain strong in this weak economy?  I do not know that answer, but I do know that companies that go through layoffs always suffer reduced retention, engagement, and productivity for many months to follow.

One thing we have learned:  talent management should not be considered a discretionary set of initiatives in this cost-constrained business climate.  Now more than ever, corporations need to understand how to best optimize current workforce investments.  Rather than use the economy as an excuse to “trim the fat,” organizations which use standard practices like strengths and capability assessments, profiling, and development planning can efficiently and effectively implement transitions without fear.

In today’s economy it is easy to announce a lay-off - the market expects it.  But as our research clearly shows, lay-offs can have long-lasting negative effects if not done carefully.  Organizations with sound talent management practices might be able to avoid this pain by using tools like job rotation, part-time work, and transition management.

I invite you to join me and a panel of seasoned practitioners at our annual IMPACT® Research Conference April 14 - 16, 2009 in St. Petersburg, FL. We will be discussing practical strategies to support business-driven talent management.