Sub Prime crisis hitting prime IT services

Ever since there were news on sub prime crisis which the US companies are facing, the global economy is having tough times. While the United States is most affected due to this obviously, it had serious impact on European , Asian and even the world's growth engines like Brazil, Russia, India and China. The recent casualties like Lehman brothers or AIG have added salt to the wounds and now the ripple impact is felt in the "till now" rosy scenario of IT in India also. This year has seen more layoffs than any other year by all major or minor companies across the board . Though they keep on denying the layoffs and say that this is a regular exercise being done every year but it is an open secret that though all of them had the processes in place for this exercise all these years but they were rarely implemented due to dearth of talent and continuous flow of business from overseas.

Now when the businesses flow is reduced and the IT talent supply has improved, they can afford to implement the policies of chucking out the bottom 5 or 10% of employees on the basis of performance. I have always challenged this type of exercise since I think that while it is right to do this exercise and find out your weakest links but it should also consider the overall abilities those people have before taking the final decision on handing the pink slips to them. All big companies claim that they have the best of talent in their organizations and yet they agree that they tend to get rid of their 5-10% of population every year. So which part is correct? Best talent one or the 2nd part?

If 5 students in a class are in bottom five but they have scored 60% marks overall (it is highly likely that in at least one of the subjects they have scored a distinction - 75% or more). As per the policy, they need to be out of the game but looking at the %age score and not the percentile score, we get to see that they are bright in one or other areas. So, do they deserve to be kicked out?

I know, people have their share of arguments that a misfit in one organization can be a good fit in another organization and this exercise is meant only to find out a misfit in their organization, but hey - do you offer that employee a chance in another organization or just washing your hands off? In all cases, no company will ever take pain in positioning the employee even at one of their low profile subsidiaries. I agree that there are cases when a a bottom 5% employee in one organization became a top 50% employee in another organization and it is possible due to multiple reasons - 1. Actual Performance 2. Performance Measurement criteria 3. Executive sponsorship 4. Motivation to perform 5. Skill set match besides other softer reasons like family problems etc. but does everybody gets chance to work in another organization of similar stature where he/she can enjoy the role also, I doubt.

Overall, I think that actual performance but not the relative performance should be a criteria of laying off people if we are taking a plea of laying off just because of performance. In case, the reasons are different (like closing a business, acquisitions etc.) then the prime causes are more likely to drive the layoffs and not the performance.