Cutting staff leads to disaster: lessons for municipal politicians

Post by Eric Mang in

2 comments

Laid off
Packed up and not getting much done

Last week, my colleague and friend, Daniel, posted a piece on Vancouver City Manager Dr. Penny Ballem’s alleged comment that layoffs do not result in cost savings. A feisty debate followed.

I have a tremendous amount of respect for Daniel and count him as one of my good friends, which is why, in the spirit of intellectual exchange, I am supporting Dr. Ballem’s comment (assuming she made this remark as noted by CUPE 391 President Alex Youngberg).

Let me start with an anecdote. A few years ago I worked for a for-profit company. We were experiencing a lull in work, high rental rates, and higher expenses while shouldering massive salaries for senior staff (and paying entry level employees little more than subsistence wage, natch). The solution, which was nothing more than an illusion, was to “increase” revenue by firing staff. That is, less people to (under) pay, so our bottom line looked fatter. Except we were losing good people, employees who could carry the company into the future, employees with institutional memory and skills, and dumping piles of work on to the desks of those remaining.

I watched a once-great firm crumble because short-sighted decisions and the amount of work, despite enduring a lull, were causing some to burnout and walk away. That company is now toast, swallowed up by a bigger fish.

Jim Stanford, one of Canada’s top heterodox economists, offers some perspective on what firing people actually does to companies.

Here he is talking about GM:

“Yet, the more GM responded to tough times by shrinking, the worse things got. Fixed costs (for engineering and design, capital, marketing and retirees) got bigger per unit of output, not smaller - making it all the harder to develop and manufacture competitive products. GM's experience proves forcefully that you can't dig your way out of a hole - yet, Mr. Obama's task force tells GM to keep digging. Soon a point of no return is passed, below which the company's critical mass (its ability to design and manufacture innovative products) is destroyed.”

And on Air Canada:

“Air Canada's workers and other stakeholders lived through this same horror movie six years ago. It didn't work then, and it won't work now - for the same reasons why GM's continuing cutbacks are also doomed to failure. Despite sacrifices from employees, Air Canada's unit costs (excluding fuel) increased slightly since exiting bankruptcy protection in 2004. Why? The negative impact of shrinking capacity on unit costs outweighs the savings extracted from the hard-pressed work force.”

This same shrinkage of capacity and the resulting problems could inflict governments. But governments serve the people and employees must have the tools to do their jobs. Many Canadians complain (and sometimes quite rightly) when they can’t get a passport quickly or a driver’s license or a day care space. Delivery of these services, whether at the federal, provincial or municipal level, requires people. Indeed, the City of Toronto is hiring more staff, such as TTC drivers and welfare case workers; services which are needed now more than ever.

We cannot simply cut jobs and hope that government services will be delivered efficiently or equitably.

But if I put my tinfoil conspiracy hat on, maybe destroying the public service gives politicians of a certain ideological bent the “evidence” they need to hire more of their corporate supporters. Then the corporatization and privatization of government can be justified, because those lazy (read: burnt and overburdened) bureaucrats couldn’t get the job done. This foul strategy is not outside the realm of possibility.

2 Comments

What a bunch of drivel. You are talking about governement like it's an actual company.
If the governement can't offer services at a reasonable cost, then maybe we are offering too much governement.

To compare GM and Air Canada to a small engineering firm is so ridiculous.

The problem with the company in your example is that the senior people felt they were too important to take a pay cut.
This is the problem with government right now. If every civil servant making 100k+ took a 20% paycut, all the problems would be solved.

The problem with government right now is that "internal/external communications shrills" make $130k. These are $55k/year jobs in the private sector.

ACK! What a load, Eric.

Sigh. Interesting how civility flies out the window when one posts anonymously.

Do you really think a simple pay cut would resolve "all the problems"? I'm afraid that's a rather simplistic idea and I bet you don't believe that either.

And no, the problem in the firm I cited was not merely that senior people wouldn't take a pay cut (did you read what I wrote before dismissing it as "a load"? If not, please contain your anger and try again. Also, I didn't work at a small engineering firm. Try another Google search).

Government provides services. Of course it's not exactly like GM or Air Canada but in all cases the most important factor is human resources. Chip too heavily into jobs and you lose the capacity to provide service. Fairly universal concept.

Finally, your notion of "too much government" is based on heavy normative notions that I can't be bothered to rebut in this space.

Finally, finally, comms "shrills" [sic] can get paid far more than $55k in the private sector. It depends on what level/position and at what company, but >$130k is not at all unusual.

Eric

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