Mass layoffs were once rare, seen as a sign of corporate distress. But they have now become a routine management practice at even healthy companies, Bloomberg contends. In 2022, 58% of Fortune 100 firms announced job cuts. The ubiquity of downsizing has made managers numb to its harmful effects.
While layoffs may provide a short-term stock pop, research shows they hurt profitability, innovation, and morale over the long-term. Layoff survivors often leave, and trust declines across the company. At the societal level, the link between effort and reward is severed, fueling cynicism.
Though firing poor performers can be justified, axing loyal long-term employees for "restructuring" breaks the psychological contract. The economy has accepted periodic layoffs as inevitable, but it doesn't have to be this way. Managers should refocus on hiring, developing, and retaining talent. With commitment, there are alternatives to routine downsizing that better serve workers, companies, and society.
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