Downsizing is bad for business.

• Author: Challenger, James E.

Layoff may be doing permanent damage to the workplace because of the fears and upheaval they cause. Companies are losing their competitive advantage, and employees are increasingly insecure and no longer trust the companies for which they work.

With each new layoff, more corporate memory is lost. Firms that do not recognize the value of corporate memory and fail to take steps to retain it are losing assets not easily replaced.

Corporate memory is not a leather-bound compilation of a company's legacy, though such a history can teach newcomers about their working lives. It is the collective business experiences, dramas, visions, successes, and failures of real people who work for a company. Individuals draw on corporate memory's lessons each time they solve problems, sell products and services, interact with customers, develop new technologies, or design marketing campaigns. It is the knowledge, nuances, and intuition brought to day-to-day decision-making. A little bit of this invaluable corporate memory disappears each time an individual is laid off. For instance:

* A southeastern chemical company engineer is let go, and with him goes unique knowledge a new product design.

* East Coast bank manager, a survivor of earlier layoffs, struggles to handle increased roles and responsibilities. Return phone messages pile up, correspondence is delayed or ignored, and personal acknowledgments to customers stop.

* Insurance company field agents complain of reduced home office support. It takes longer to complete quotes or settle claims. Customer dissatisfaction appears to be on the rise.

* Leading technology manufacturer struggle to produce new products. Sales and service staffs are cut, and some customers complain that critical technical support is slipping.

* A nationwide retail chain, one of many struggling to survive, finds its customer satisfaction index dropping. It no longer fields the depth of trained, experienced sales personnel who understand not only the mechanics of selling, but the critical people factor as well.

That some corporations needed to trim down to be more competitive can not be argued. However, the soundness of many of the radical layoffs must be questioned.

Isn't corporate memory valued? Of course it is. For evidence, consider the growing use of contractors and consultants. Who are these contractors and consultants? Many times, they are the same employees who have been laid off.

Former workers who return as contractors or employees cut right to the issue of corporate memory and do not have to be re-acclimated to the specifications, problems, and nuances of the job. They do not chew up valuable time climbing the learning curve. They already are on top of it, especially if they are recent former employees.

Corporate memory lessons are not "plug and play" skills. It is not possible, for example, to retrieve and catalog laid-off workers, experiences and lessons during exit interviews so they can be reviewed later like last year's financial reports.

Layoffs will continue. With each one, more of the texture, drama, and lessons of corporate...