LAYOFFS: CREATING OR DESTROYING SHAREHOLDER VALUE? by D Campbell
Right or wrong, making wholesale cuts in the number of employees is still a CEO's first and preferred step in cutting costs. The word "still" is important, because cuts call into question, or more precisely cast doubt on, the almost universal tendency of CEOs to trumpet that "employees are our most valuable asset." But, as these co-authors and consultants at the Boston Consulting Group ask, should employees be the first assets overboard if a business begins to sink? Or, are companies mortgaging their most valuable assets for short-term benefits? And, do shareholders benefit from layoffs or are they in fact being short-changed? The answers to these questions expose a fundamental weakness in many companies and point to a system of performance measurement that is geared less to the importance of today's intellectual capital than it is to financial capital.
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