There's something wrong with this picture. The dark side Several studies have shown that companies that have to slash their employment ranks may enjoy a temporary earnings increase after the restructuring costs are absorbed. But in the long term, a majority can't cut their way to prosperity. As revenue growth stalls, their earnings drop and so do their stock prices. When we deal with a company in the aftermath of a deep downsizing, it's almost impossible to move mutual projects forward.
Morale disappears, and the organization is usually paralyzed in decision making.
Another huge negative effect is that cutbacks trigger anxiety, and the best performers, those with the most skills and options, are the first to jump ship. Of late, knee-jerk layoffs are triggered at a hint of a downturn. There are a good number of devices that can be used to cushion the permanent work force of a company from mandatory layoffs. Yes, sometimes those kinds of measures are not enough and terminations become necessary for survival. My company is not immune.