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Do Massive Layoffs Really Benefit Companies?
Motley Fool ^ | 07/19/2014 | By Chris Neiger

Posted on 07/20/2014 6:10:46 PM PDT by SeekAndFind

Microsoft's (NASDAQ: MSFT ) recent announcement that it will cut 18,000 jobs was much higher than anyone expected. It's the company's largest layoff by headcount since it laid off 5,800 employees in the midst of America's Great Recession back in 2009.

Microsoft isn't the only one to make such striking job cuts. Global pharmaceutical company Merck (NYSE: MRK ) is in the middle of a two-year plan to reduce its workforce by about 20% -- which equates to about 16,000 employees. At the end of it all, the company expects this to contribute substantially to its goal of saving $2.5 billion by 2015.

Eliminating jobs is obviously bad for those on the receiving end of the downsizing. But it's also possible for massive layoffs to hurt the companies as well. Conventional wisdom says massive layoffs create a more efficient company and makes it easier for the company to retain profits. But the research on mass layoffs may paint a different picture on the long-term benefits of deep employee cuts.

The cost of layoffs Researcher Wayne F. Cascio from the University of Colorado's business school found that simply cutting jobs isn't the answer. Companies need to change how the business is run as well. Cascio looked at data up to nine years after a company's downsizing event and found that, "As a group, the downsizers never outperform the non-downsizers. Companies that simply reduce headcounts, without making other changes, rarely achieve the long-term success they desire."

He notes that massive cuts lead to fewer sales people, less research and development, and a loss of high-producing individuals. The result is lower sales, reduced product innovation, and decreased productivity due to low morale.

(Excerpt) Read more at fool.com ...


TOPICS: Business/Economy; Society
KEYWORDS: layoffs

1 posted on 07/20/2014 6:10:46 PM PDT by SeekAndFind
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To: SeekAndFind

Shut up and gives me my Soshel Securty check!!!!!!!


2 posted on 07/20/2014 6:16:48 PM PDT by SkyPilot
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To: SeekAndFind

Layoffs are the way upper management hides their stupid decisions and ensure their bonuses.


3 posted on 07/20/2014 6:19:06 PM PDT by DoodleDawg
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To: SeekAndFind

Surely the ‘bring back jobs, just sayin’,’ reads the fool.


4 posted on 07/20/2014 6:19:08 PM PDT by deadrock (I am someone else.)
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To: SeekAndFind

I’m surprised Microsoft makes enough to keep the employees they still have. Their stuff is crap. No good ideas in years and years.


5 posted on 07/20/2014 6:27:47 PM PDT by equalator
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To: SeekAndFind
Eliminating jobs is obviously bad for those on the receiving end of the downsizing.
It's not obvious, and it isn't necessarily bad.
6 posted on 07/20/2014 6:28:45 PM PDT by Cboldt
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To: SeekAndFind

What’s the savings on firing 18,000 Americans, and hiring 18,000 H1-Bs at a 30% discount, or overseas Indians for a 50% discount?


7 posted on 07/20/2014 6:29:22 PM PDT by Vince Ferrer
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To: DoodleDawg

I agree, can you imagine if an nfl coach decide that
a winning strategy was simply to let 1 out of 10 players go?
Inept managers can’t find a business plan that makes sense.

Microsoft will no more make a go as a iphone competitor than
blackberry or hp did.


8 posted on 07/20/2014 6:35:58 PM PDT by jonose
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To: Vince Ferrer

How much of the discount is eaten up by re-work and schedule slips? This based on my experience in the engineering and construction world.


9 posted on 07/20/2014 6:37:54 PM PDT by Fred Hayek (The Democratic Party is now the operational arm of the CPUSA)
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To: jonose

Maybe not a great analogy.
NFL teams cut from 90 to 53 from training camp to beginning of reg season.


10 posted on 07/20/2014 6:39:16 PM PDT by nascarnation (Toxic Baraq Syndrome: hopefully infecting a Dem candidate near you)
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To: jonose

any thoughts if massive layoffs might work with government?


11 posted on 07/20/2014 6:39:40 PM PDT by PeterPrinciple (Where is your thinking cap? The one you were issued in elementary school.)
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To: Cboldt

>Eliminating jobs is obviously bad for those on the receiving >end of the downsizing.

Not for all. Some will go to work for the competition and do very well. Some will take ideas that microsoft didn’t like
and will do a startup. Some will retire and find a better target for their efforts.


12 posted on 07/20/2014 6:40:35 PM PDT by jonose
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To: nascarnation

yes the do but they have a strategy to the process versus decimation.


13 posted on 07/20/2014 6:42:12 PM PDT by jonose
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To: SeekAndFind

So Microsoft won’t be allowed to apply for or employ any H1B foreign visa employees.Right?

Because what qualified USA employee in the IT field would even want to apply for a position with them, knowing of their recent firings?

Can they profit from creating a hostile working environment?


14 posted on 07/20/2014 6:53:17 PM PDT by sarasmom
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To: equalator

Never underestimate the power of inertia in IT. If Microsoft had come into existence over the past few years, of course nobody would buy any of its products. However, because its products have been in use for so long, most of the do-nothings in IT administration will continue to pay for them year after year.

Nobody ever got fired for suggesting Microsoft products just as nobody ever got fired for suggesting Cisco networking equipment.

You will occasionally find an IT worker who is willing to do more than the bare minimum and *think* instead of rubber stamping whatever happens to be “ mainstream,” but such people are rare.

By and large, you find paper tigers who growl about Metro, Office, and everything else imaginable, but never do anything about it. Microsoft knows this, which is why it can continue to do what it does: nothing.


15 posted on 07/20/2014 6:58:25 PM PDT by Cato in PA (Resist!)
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To: sarasmom

They need to reduce the number of H1B visas by 18,000 immediately and push out 18,000 by the end of the month.


16 posted on 07/20/2014 6:58:49 PM PDT by RetiredTexasVet (Could Warren Buffet's oil trains be considered mobile Jihadist weapons of mass distruction?)
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To: PeterPrinciple

The government is another issue entirely and it’s going to take a team of first class detectives to figure out who all does what. For instance, responsibility for issues dealing with Veterans is spread across at least six different agencies. I would suspect that most government tasks function in this manner. The goal seems to be to make things such a tangled web and mess that no one can figure out who does what.

Certainly one way of finding out would be to eliminate everything except those that are engaged in direct military or security operations, plus the GAO, Budget Office, CIA and FBI and see what happens.


17 posted on 07/20/2014 7:01:37 PM PDT by Grams A (The Sun will rise in the East in the morning and God is still on his throne.)
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To: SeekAndFind

Mass layoffs can change the way some of the metrics look, so the stock will look more appealing to anyone who doesn’t look too close. But it’s short-term, and hamstrings the company’s long-term operations. You lose your employees, who does the work?

When analyzing a stock, one of the red flags I watch for is a sudden drop in certain expenses. That’s usually a sign that the company is cutting corners that really shouldn’t be cut.


18 posted on 07/20/2014 7:03:10 PM PDT by Ellendra ("Laws were most numerous when the Commonwealth was most corrupt." -Tacitus)
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To: equalator

Xbox. People spend a fortune in games and extras there.


19 posted on 07/20/2014 7:04:30 PM PDT by Ellendra ("Laws were most numerous when the Commonwealth was most corrupt." -Tacitus)
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To: equalator

CEO dreaming. Windows 9 will bring on a hiring frenzy at Microsoft!!
I bet that 9 will try charging everyone money each year just like they are doing with Office 365.

Charging people for update in Windows 8. Just stupid:
Users who install Windows 8.1 Update 2 from scratch will need new license keys. They said, assuming Bing translated it all properly, Microsoft will offer two options to users who are still on Windows 8.0: update to Windows 8.1 Update 1 and then to Windows 8.1 Update 2, or for likely a small fee, purchase a direct update to Windows 8.1 Update 2 from the Windows Store.
http://www.networkworld.com/article/2449563/microsoft-subnet/wzors-return-brings-windows-9-rumors.html


20 posted on 07/20/2014 7:09:49 PM PDT by minnesota_bound
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To: SeekAndFind
My experience is that a mass layoff isn't really the problem for large companies going through major changes. The real problem comes when some mid-level manager is told: "Eliminate X positions at Level A, Y positions at Level B, etc." -- without anything more substantive and concrete than that. All too often, the company ends up laying off the WRONG people in a case like that.

I know what I speak of here. LOL.

21 posted on 07/20/2014 7:14:11 PM PDT by Alberta's Child ("What in the wide, wide world of sports is goin' on here?")
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To: Ellendra

the xbox one was garbage. It was hyped until it came out. Now, silence.


22 posted on 07/20/2014 7:16:08 PM PDT by equalator
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To: SeekAndFind

Micron and Intel stock jumped after big layoffs.
Layoff Americans and hire in India is now the working model


23 posted on 07/20/2014 7:21:35 PM PDT by Zathras
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To: SeekAndFind

The CEOs and CFOs get boosted salaries.


24 posted on 07/20/2014 7:40:49 PM PDT by stocksthatgoup (Take out the trash)
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To: SeekAndFind

Remember MS is dealing with Washington labor laws. Probably a significant number of the people “laid off” are just people they wanted to get rid of but didn’t have the paper trail to make it work with legal. Layoffs open that opportunity window. Where I work was HQd in Washington for a while, we sold off a division and laid a bunch of people that the buyers “didn’t want” who actually had nothing to do with that division.


25 posted on 07/20/2014 7:46:39 PM PDT by discostu (Villains always blink their eyes.)
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To: Alberta's Child

No kidding.

Wholesale cuts, across the board are very dangerous.


26 posted on 07/20/2014 7:55:51 PM PDT by Vermont Lt (If you want to keep your dignity, you can keep it. Period........ Just kidding, you can't keep it.)
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To: Vermont Lt

Maybe we need context, but “As a group, the downsizers never outperform the non-downsizers.” is about as enlightening as “Companies that are growing always outperform companies that are dying”.


27 posted on 07/20/2014 8:07:20 PM PDT by JmyBryan
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To: SeekAndFind

The academic knows better....

The reason for mass layoffs is to take the restructuring charges against profits at a time that it is favorable to do so for the company. It’s much more complex than this lightweight piece suggests. And it’s not about the salary cost, it’s about the total cost of employment of those people for the rest of their career, which includes the three taxes (SS, unemployment, and medicare) plus workers comp insurance, and company benefits. A good estimate is 30 to 50% on top of the actual salary, more if the company offers a pension or other disappearing perks.

Public companies really don’t care if they sell out their future for the sake of another quarter. That’s how the system is incentivized, and to a CEO making several million dollars a month or more, having another three months of job security is worth almost any dumb decision you can think of. Layoffs are like candy to investors, they see the short term gain and will worry about the long term cost another quarter.


28 posted on 07/20/2014 8:38:15 PM PDT by bigbob (The best way to get a bad law repealed is to enforce it strictly. Abraham Lincoln)
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To: SeekAndFind
"Do Massive Layoffs Really Benefit Companies?"

I don't know if massive layoffs are the right way to purge the company. But it's pretty easy to make an argument for a large company to let go of the bottom 5% every year and fix those problems with new hiring.

If 95% of your hires are good, solid employees, then your company is doing a heck of job at the interview process.

29 posted on 07/20/2014 9:13:12 PM PDT by MV=PY (The Magic Question: Who's paying for it?)
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To: SeekAndFind

similarly…is it enough (longterm) to just cut calories? Or do you need to adopt a positive agenda of nutrition and fitness including building muscle?

Or…in the family context…is it enough (longterm) to just cut expenses? Or do you need to figure out a positive agenda of increasing revenue?

Positive movement is always far more powerful than negative…esp longterm.


30 posted on 07/20/2014 10:50:56 PM PDT by ConservativeDude
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To: SeekAndFind

18,000 x $50,000 = $900,000,000

If they’re not bringing in a billion dollars of revenue...


31 posted on 07/21/2014 3:35:48 AM PDT by ctdonath2 ("If they bring a knife to the fight, we bring a gun" - Obama, setting RoE with his opposition)
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To: SeekAndFind

No. Imagine the productivity you could get from 18,000 people!


32 posted on 07/21/2014 4:26:55 AM PDT by ThePatriotsFlag (Defund Obama!)
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To: ThePatriotsFlag

RE: Imagine the productivity you could get from 18,000 people!

That of course assumes:

1) That all of them are productive.

2) All of them do not COST MORE in terms of salaries and benefits than their contribution.

3) All of them have the skills needed to develop your next big, profitable product.


33 posted on 07/21/2014 5:12:02 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: ctdonath2

RE: 18,000 x $50,000 = $900,000,000

The average Microsoft salary is $90,000.

See here:

http://www.salarylist.com/company/Microsoft-Salary.htm

And that doesn’t even include benefits like healthcare, paid vacation, etc.


34 posted on 07/21/2014 5:14:51 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind

My company has been cutting, and the biggest target on your back is the pay grade - if you aren’t a manager.

It is the same bureaucratic weakness that affects government. Get rid of expensive doctors, bring in nurses and assistants. But no one thinks to cut oversight.


35 posted on 07/21/2014 6:35:30 AM PDT by tbw2
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