Corporate layoffs, often referred to as "downsizing", are very common nowadays. In the past, layoffs were a last measure for companies that were truly struggling. Or, downsizing was used only at times when the economy was exceptionally bleak.
So, why do companies now frequently use layoffs as an easy cost-cutting measure? And, what are the real costs of doing so?
Corporate downsizing is often tied to short-term cost cutting measures. Unfortunately, this has become a more common practice, especially with publicly-traded companies, where there is extreme pressure for organizations to focus on quarterly profitability and share-holder value. Although layoffs may achieve these short-term financial objectives, the true costs down the road are often higher.
example, when an employee is laid off from a company, a lot of knowledge
leaves the organization. Morale amongst remaining employees is often
lower, and the existing workforce is likely encumbered with having to
fill the void and take on additional responsibilities. And what happens
when that same company needs to augment their workforce again? There are
costs to recruit, train, and retain the new employees.