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November 21, 2001
When Employees Leave, So Do Customers
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ty-nine percent of executives who recently reduced their staffs report being worried that the layoffs will encourage the remaining employees to look for new jobs, according to a new survey.

The survey, conducted by InsightExpress, an online market research firm, also found that 62 percent of company executives who have laid off staff said the reductions would decrease customer loyalty and encourage business customers to seek other suppliers.

"Wall Street views layoffs as good for the bottom line, but not if they cause a loss of future revenue or profits driven by the exodus of key employees," said Lee Smith, chief operating officer of InsightExpress. "When faced with company layoffs, employers need to act proactively to employee concerns. Otherwise they risk losing key employees to the competition.

In addition, companies that reduce staff in areas such as sales and customer service should ask themselves how this will impact their relationship with customers. Most companies don't know the impact until it's too late."

Executives from 500 small to large companies were surveyed by InsightExpress between October 19-24 to measure their concerns about the impact of recent staff reductions at their organizations on sales, customer relationships and employee turnover.

Of the companies who have reduced staff in the past six months, 46 percent have reduced staff in operations; 37 percent have reduced staff in administration; and 28 percent have reduced staff in customer service. Other areas of staff reduction include:

  • Accounting/Finance (22 percent)
  • Sales (20 percent)
  • Human Resources (19 percent)
  • Marketing (17 percent)
  • Engineering (16 percent)
  • Product Development (17 percent)
  • Technology/IT (13 percent)
  • Other (14 percent)

In response to these staff reductions, 42 percent of all companies indicated they plan to reallocate company resources, including human capital, asking employees to be more efficient, contribute more, and work longer hours to meet the needs of their customers.

"While employers have the upper hand in the job market today, they still need to pay attention to employee concerns. When a key employee leaves, so do customers - and that's money out the door," summed up Smith.


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