As we bid farewell to another year, a front-page article in the Wall Street Journal on December 31st painted a stark picture of the future ahead for Canadian employees. The massive downsizing of middle management positions was the topic of discussion, and it’s clear that this trend is not just a U.S. phenomenon but will soon be felt in Canada as well.
The Drive for Efficiency and Productivity
The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have all combined to eliminate many positions between front-line workers and the executive team. In the United States, managers now oversee three times the number of employees they did in 2017, according to research firm Gartner. Furthermore, LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses who are too stressed to support them.
The Canadian Context
While the U.S. may be experiencing a similar trend, Canada is facing its own unique challenges. The Liberal government’s declining productivity and the resulting increased productivity gap with the U.S., along with higher taxes and reduced foreign investment, have made the plight of Canadian employers worse than their U.S. counterparts.
Demotions vs. Downsizing
In many states in the U.S., demoting middle managers is a viable option for companies looking to reduce costs. However, in Canada, such demotions would be considered constructive dismissal, allowing employees to resign and sue as if they had been fired. This reality makes demotions unworkable for most Canadian companies, with outright termination being an unpalatable option due to the associated severance costs.
Advance Notice: A Viable Solution?
One potential solution is to provide advance notice of a demotion or downsizing. This approach would allow employees to seek new employment and reduce the employer’s liability in the event of a wrongful dismissal claim. However, this would require companies to be proactive in their planning and communication with affected employees.
The Unintended Consequences
While downsizings may seem like a necessary evil for companies looking to cut costs, there are unintended consequences that need to be considered. With an abundance of management layoffs, comparable positions will become scarcer, leading to greater severance pay and further exacerbating the plight of Canadian employers.
The Next Government’s Corporate Crisis
As we look ahead to the next government, it’s clear that they will face a corporate crisis like no other. The middle management cull is coming to Canada, too, and companies need to be prepared for the challenges that lie ahead.
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