The Trend Begins Abroad
A front-page article on December 31, 2022, in the Wall Street Journal foreshadowed a significant shift in the job market for middle management positions. The article highlighted the massive downsizing of middle managers in various industries across the United States.
The Rise of Efficiency and AI
The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have combined to eliminate many employees occupying positions between front-line workers and executive teams. According to research firm Gartner, U.S. managers now oversee three times the number of employees they did in 2017.
A Growing Productivity Gap
LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses too stressed to support them. This trend is more pronounced in Canada than its U.S. counterpart. The declining productivity under the Liberal government, the resulting increased productivity gap with the U.S., higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring have made the plight of Canadian employers worse.
A Shift in Management Structure
The Wall Street Journal points out that many U.S. employers are demoting their middle managers. However, this approach is unworkable for most companies in Canada due to the risk of constructive dismissal claims. In many states, such demotions can be done with impunity, but in Canada, they would lead to severe legal consequences.
A Little-Known Alternative
One alternative that employers seldom use is providing advance written working notice of a downsizing. This option offsets severance costs for wrongful dismissal cases and makes sense in the context of demotions where the employer wishes to retain the employee.
The Consequences of Downsizing
Downsizings are inevitable, especially in Canada’s often long-tenured middle management ranks. Despite the cost of severance, employers will have no economic choice but to implement these changes. An abundance of management layoffs will mean far fewer comparable positions for laid-off employees to secure, resulting in greater severance pay and further worsening of the plight of Canadian employers.
A Corporate Crisis Ahead
This trend is setting up an unanticipated corporate crisis for the next government to contend with. As Howard Levitt, senior partner of Levitt LLP employment and labor lawyers, notes: "Downsizings are coming to Canada’s often long-tenured middle management ranks."
Conclusion
The shift in middle management positions is a global trend that will likely affect Canadian employers soon. With the rising cost of severance pay and the increasing difficulty for laid-off employees to secure comparable positions, this trend will have far-reaching consequences for Canadian businesses.
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