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HUMAN RESOURCES

Why Some Companies Retrain Workers, and Others Lay Them Off

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Until the 1990s, retraining ruled at companies like IBM. Big Blue, which promised lifetime employment to its workforce, moved its employees every few years and when it did, taught them new jobs.

But when IBM's traditional dark suits and white shirts gave way to knit shirts and khakis, the company's commitment to lifetime employment -- and thus retraining -- waned. Under former Chairman Lou Gerstner, the formerly paternalistic employer laid off tens of thousands of employees.

Why did the computer maker scotch retraining for workforce "churning" -- that is, laying off employees with obsolete skills and replacing them with workers offering newer skills? It was simply bowing to the temper of the times, according to Wharton management professor Peter Cappelli, who says such an approach is increasingly common in today's workplace.

"In the economy now, change is faster, and the odds that your skills will need to be updated have increased," Cappelli says. "The question becomes, is your employer going to reinvest in you or move on to someone else?"

As director of the school's Center for Human Resources, Cappelli wanted to know why a few companies have in fact remained committed to retraining, even in the new ramped-up business climate. "The question seems central to understanding why some employers and some jobs are 'good' while others are not," Cappelli notes in a recent paper entitled, "Social Capital and Retraining," forthcoming in the journal Industrial Relations.

In the contemporary context, Cappelli explains in his paper, "corporate restructuring has become the main driver of job insecurity." He cites an American Management Association survey in which 66% of the employers responded that "downsizing in their companies during the 1990s was driven by internal restructuring and reengineering, in contrast to more traditional explanations that relate job loss primarily to business cycles. And roughly a third of all companies reported that they were hiring new workers during layoffs in order to get the new skills they need to accommodate their restructuring plans."

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Last updated: Jan 30, 2003




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