Tech companies cut jobs to chase growth, but watch out for those shareholder returns
"The first thing to recognize is that there is an immediate upfront costs to layoffs as a business will need to reorganize itself around a small group of employees and typically incur costly upfront severance payments."
He added:"Thereafter, a business is likely to see an increase in both costly contractor hiring and demands for increased competition from remaining employees who are now under a greater burden." Although it might be tempting to lighten the payroll to ease the burden on falling growth rates, Gartner reckons the initial savings are typically offset by the"unforeseen consequences of layoffs within three years and in many cases can be detrimental to shareholders returns in the long term."
Layoff cost savings will be eroded, warns Gartner, even if a company manages to sidestep a"vicious cycle of employee turnover driven by outstretched staff and lower morale." When trade picks up again, businesses will need to rehire"likely at higher rates" than those who were laid off. "In the more negative scenarios, the factors detailed here are also going to harm growth in existing and new business, and ultimately a firm will start losing its customers," said Archer.
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