The Dangers to Companies That Use Layoffs as a Strategy

Sometimes companies get stale and lose market relevance. They need to rejuvenate themselves. Far too often executives use layoffs to balance their budgets without realizing the long term consequences of not considering other options first. Without creating more market relevance the overall outlook goes from difficult to dangerous.

Cutting capacity without building new revenue streams. While it may make sense to sometimes to cut expenses it will be useless in the long run without find new ways of making money. The irrelevancy of the organization as it currently stands is part of not having a viable market strategy.

There is also a "hit" to employee moral and retention. High quality employees move onto other companies, people feel insecure and limit their work, and the culture becomes self-consuming as people become afraid of losing their job.

The reputation also is punished in the market for about 3 years. The stock price suppressing thereby sucking needed capital for a turnaround and increasing the risk of future bankruptcy.

When times get tough companies should first consider methods of rejuvenating their business position and then move toward layoffs as part of the strategy to hire those skills which will help them implement those new strategies. Before going down the road of excessive cost cutting companies must consider the fallout from not finding better ways of doing business.