Management has to do what's right for the company. They shouldn't just make cuts to placate their shareholders and Wall Street. Even after a few months of layoffs, most telecom stocks have not recovered and have actually fallen, he points out. Whatever they're doing is not working. Many are questioning whether layoffs truly pay off in the long run.
Several studies indicate that the fallout can have a negative effect.
Many executives get seduced into thinking the only way to cut costs is through head count, he says. But executives don't always take into account the indirect costs of layoffs, DeMeuse says. These include severance packages, outplacement service costs and the group of surviving employees that are often left overburdened and overworked. Assuming that many of the surviving employees don't leave the organization outright, they will likely increase their use of sick leave and health care benefits, he says. In fact, a Harvard Business Review study shows that a company can expect 10 to 15 percent of the survivors to leave after any downsizing.