Layoffs Don't Improve Company Performance

The recent layoffs in tech, especially the large companies like Google and Amazon, got me thinking about the effect of layoffs for the business doing the layoffs. It might be mostly bad. A study of layoffs from 1979 to 1997 found that companies that announced layoffs had negative stock returns and larger layoffs led to greater negative stock returns. It doesn’t increase individual company productivity—a study of 140,000 US companies from 1977 to 1987 found that the greatest increases in productivity had nothing to do with downsizing. They also lead to losing people that businesses don’t want to lose—one third of the companies rehire some of the employees they lost because they still need their skills.

I would be interested to see how these results will play out for modern internet businesses. Will it be any different this time? Was there anything to learn from decades of layoffs prior?

Read The Case Against Layoffs: They Often Backfire.