Why eliminate more expensive and experienced, older employees? They have more knowledge and skill and make fewer mistakes. In my career, at one time, the cost of hiring, training and covering mistakes of a new employee was approximately $250k.

I worked at a high technology company for a while that was being headed and acquired by a company and management that ran looms and clothing factories in the Carolinas as well. This was forty years ago and that industry no longer exists I expect. But my unit was a different story entirely; part of a different industry.

Their mentality was to hire to the demand, layoff to the demand and the most money would be saved by laying off the highest paid workers. And maybe for a clothing mill that made sense and worked though I have my doubts. At any rate when the textile sector went down the idiots who ran this company would do layoffs in the high tech products area as well. “It’s your turn” they told my boss when he laid me off. Their view of employees especially line workers was to see them as low value, easily replaced units.

What happened in the unit where I managed a field force of 35 people in four locations servicing extremely complex products used in semiconductor manufacture was a disaster. The least trained and experienced made many mistakes. Forcing them work 14 or more hours overtime per week to supplement the lack of numbers made them tired and even less capable; at one point I ordered them all to stop overtime — not to save on wages but we were spending half the day reworking the prior evenings’ mistakes. Customers were very angry at the lack of quality. Within six months of being hired to create and manage the service operation I got laid off.

And in my mind that was a blessing because I could go look for a company that appreciated what people do.

In my experience the cost of replacing a worker in any of the high tech industries I worked was outrageously high. Fortunately I had been doing my job for twenty years before I had to lay off anyone and in that case it was a necessity, we were not bringing in the revenue needed but I had been brought in to turn around a failing organization (in a failing company that needed to be turned around) and I used this as an opportunity to drop people who simply didn’t have the ability to do the job we wanted. Staffing went down and productivity went up. Morale improves when you lay off the right people; people who aren’t capable and worse people who didn’t really care about their work. Those people have to be replaced.

Now I would think $250K is at the extreme high end of the range but twenty years ago it would have cost $30–50K to replace people at some of the places I managed. Add for inflation and shortages of suitable candidates. I worked at places where the products were so unique there were effectively no competitors and we could not find people except to look at previous employees.

Companies that succeed are those that recognize nothing gets imagined, designed, built, sold, packaged, shipped or fixed without quality dedicated employees. You need customers and employees if you are going to do anything and you won’t get or keep customers (who pay for everything) without good people. Of course you have to look at the costs and make sense when revenues are limited but hiring and keeping the right people is a major success factor — or failure factor if you do it wrong.