A recent article in The Wall Street Journal predicted a massive downsizing of middle management in the United States. Unfortunately, this trend is not limited to the US. Canadian employers are facing similar challenges, and it’s only a matter of time before the "middle management cull" comes to our country.
The Drivers Behind Downsizing
Several factors have contributed to the decline of middle management positions in both the US and Canada. The drive for greater efficiency and higher profits has led companies to re-examine their organizational structures and eliminate unnecessary layers. International competition, particularly from emerging markets, has also forced businesses to adapt and become more agile.
The impact of artificial intelligence (AI) cannot be overstated. As AI technologies continue to advance, many tasks that were previously the domain of middle managers are now being automated. This shift is not only cost-effective but also allows companies to respond more quickly to changing market conditions.
Productivity Decline in Canada
Canada’s productivity growth has been sluggish under the Liberal government, and this trend shows no signs of reversing. The resulting productivity gap with the US has significant implications for Canadian employers. Higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring have further exacerbated the situation.
Demotions: A Difficult Option
In many US states, demoting a middle manager is a relatively straightforward process. However, in Canada, such actions would be considered constructive dismissal, allowing the employee to resign and sue for damages as if they had been fired. This reality makes demotions an unworkable option for most companies.
Advance Notice: A Reasonable Solution
In situations where employers wish to retain employees but are unable to do so due to restructuring or other business needs, advance notice can be a reasonable solution. Providing employees with sufficient notice of their demotion allows them time to find alternative employment, reducing the employer’s liability in the process.
The Coming Corporate Crisis
As management layoffs become more prevalent, there will be far fewer comparable positions available for laid-off employees to secure. This will result in increased severance pay, further worsening the plight of Canadian employers and setting up an unanticipated corporate crisis for the next government to contend with.
Conclusion
The middle management cull is a reality that Canadian employers cannot ignore. With productivity growth stagnant, international competition intensifying, and AI continuing to disrupt traditional business models, it’s only a matter of time before this trend becomes more pronounced in our country. Advance notice may be a reasonable solution for some companies, but ultimately, downsizing will become an unavoidable necessity.
About the Author
Howard Levitt is senior partner at Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta, and British Columbia. He practices employment law in eight provinces and is the author of six books, including "The Law of Dismissal in Canada."
