It just seems counterproductive, removing your workforce because you want to grow more
In: Economics
Companies hire people because they grow, not the other way around. If a company hires 100 people and their revenue goes DOWN then they need to rethink their decisions.
Companies have a limited supply of cash on hands and not everyone in a company is useful. Let’s say you have people working in research and development but your cash flow centre is sales. If you offload your R&D to focus on sales you can generate more revenue.
You are looking at it too broadly. If there are massive layoffs, it’s not something that is random. The least efficient, poorly performing people are let go. So when lay offs happen, two desirable outcomes prevail: reducing the costs of the business as well as shedding people who are below the performance threshold. It seems counterproductive but only in the short term. A business can replace people that are let go by cheaper or more potential talents, or adopt an outsourcing or technological equivalent.
In my experience, relatively speaking, layoffs are actually a good thing. Right after they happen it is when people get promoted and are given raises. So if you are indispensable layoffs are good, but if you are a regular joe, its bad news.
Hey guys, we made 150 dollars today! Congrats!
Billy and Mary here’s your $50 wages each; thank god we still have 50 left, great, profit!
Fast forward;
150 dollars made again, nice!
Billy, Mary, here is your salary.
CEO: good job guys but we need to make more money to make our investors happy…
Uh… Billy, you’re fired.
Shareholders: Oh man, you made $100! Great!
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