this post was submitted on 07 Aug 2023
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I never understood this tactic. Why demoralize your whole workforce for months until enough motivated and talented people leave that you don't have to fire anyone. The useless ones are never the first ones to leave, especially if they don't have any talents to sell to other companies. Also people don't leave immediately after it turns bad, it usually takes months for them to be demoralized enough and find new arrangements.
By that time wouldn't it be smarter to eat the cost of firing people from the start, get rid of the fat, pay the severance and move on with those that can still lead you to success? I'm convinced the moral hit would be a lot less this way and the bounce back would be faster.
I worked for a guy who referred to it as "layoff by attrition" who essentially explained that they only have a couple heads over what they predicted based on production volume, and they know the conditions at the plant aren't nice to be in, 95° F and 50% through most of the summer in a stamping and welding shop. So instead of a tiny layoff or firing people they just wait until the people who won't put up with the conditions on the floor take care of it themselves.
It makes the short term numbers look good. They just want to produce a spreadsheet that tells Wall Street that they cut $x million in labour costs, and don't really care how that affects the long term health of the company.
Besides, when a corporation becomes a certain size, they don't invest in innovation any more, they just buy a start-up that did something innovative, integrate it into their existing product and then repeat the cycle.
Capitalism is trending more and more into short term thinking, because Wall Street realised that capital can be moved at the press of a button. When a corporation is sucked dry, you load it with debt, sell your stock to retail investors, pension funds and/or the government and move on to the next opportunity.