For better or worse, corporate downsizing has become standard business practice in corporate America, particularly in this current decade. And it's likely to remain so in the future, experts say.

"Corporate America remains extremely volatile," said Business Professor Kenneth De Meuse of the University of Wisconsin-Eau Claire, co-author of the recently published book, Resizing the Organization. "Many, many companies are skittish... they're trying to survive... Uncertainty is a constant theme."

Yet, before jumping onto the workforce reduction bandwagon it's important for any company facing tough economic times to really evaluate the pros and cons of layoffs. Is it necessary to make those cuts or are there other, more effective alternatives? If workforce reductions are absolutely needed, how deep should they go — and when? What's the best approach with employees who are going to be terminated and with those who remain? (See side story.)

By the 90s, an average of a half million workers were laid off yearly in the U.S. In the new millennium, that figure has shot up to an average of about two million per year, and it looks as though 2003 will be par for the current course. In fact, De Meuse and his co-author, independent consultant Mitch Marks, prefer to use the term "resizing" rather than "downsizing" because it better describes the on-going fluidity and nimbleness they believe corporate America will pursue even during prosperous times.

"Resizing has become part of our American fabric," De Meuse said. "Even during the booming 90s, corporations used layoffs as a regular corporate strategy. My prediction is that even when we get back to good, prosperous times, they're not going to disappear."

De Meuse and other experts agree, however, that layoffs should really be a last resort. Indeed, a 2001 survey of 572 HR professionals by the Society for Human Resource Management (SHRM) showed that, despite the growing trend towards layoffs, most employers first seek alternatives.

"Layoffs are disrupting and difficult for everyone and most organizations are taking steps to avoid them if possible," commented then-SHRM President and CEO Helen Drinan, SPHR.

The surveyed HR professionals cited declining profits, restructuring and the national economy as the main reasons behind their companies' decisions to lay off workers. Most had also taken preventive steps before resorting to layoffs.

Those steps included attrition, an employment freeze, not renewing contract workers and encouraging employees to take unpaid vacations or furloughs. And there are other steps many companies are also considering as a way to avoid cutting workers:

• Giving extra assignments to existing workers (and training them for those additional duties) rather than hiring new employees to perform those tasks.
• Asking employees to work longer hours.
• Opting for a four-day work week.
• Eliminating bonuses.
• Throwing cheaper holiday parties and other company celebrations.

It's also important to factor in the significant down-side of downsizing. Research shows, for example, that although layoffs may please some shareholders in the short run, effectiveness is minimal in the long run. They tend to create only a very small lift (less than 1 percent) in relative stock-price performance. Companies that lay off 15 percent or more of their workforce perform significantly below average in the following three years, according to one study, and companies that announce repeated layoffs do even worse.

In addition, downsizing can have a negative impact on customer loyalty. Customers of downsized companies tend to be faced with lower quality products or poorer customer service from remaining employees who may be disgruntled by seeing their friends lose their jobs or worried about their own. Some of a downsized company's most marketable (and often therefore the best) employees who survive downsizing may also opt to jump ship at the first opportunity. Finally, if a company develops a reputation of binging and purging employees, it may be difficult to attract good employees in the future once things begin to turn around.

All that said, however, sometimes a company is forced to implement layoffs.

"To my mind, the only real justification for layoffs is survival," De Meuse said. "Indeed, sometimes companies are put into a financial situation in which they don't have a choice — they have to cut costs and they have to do it immediately.

"To use a metaphor, if you discover you have cancer in one of your kidneys, you might not relish the idea of having your kidney removed," he said, "but if that's your only alternative, you'll have that surgery."