Layoffs reduce intellectual capital

Over at Inc. magazine there is a great little piece on the “6 Reasons Layoffs Are Really Dumb.” Each of the 6 is a way in which layoffs reduce intellectual capital (especially a regular practice of layoffs):

Innovation loss: Innovation is a group process. Break the group dynamics, you break the innovation process.
Intellectual property loss: Should be obvious, know-how is what makes IP work.
Business relationships: Losing that relational capital
Cost: It costs to rebuild the lost intellectual capital
Trust: Key part of your structural and human capital that affects morale, employee effectiveness, and productivity.
Turnover of important talent: Layoffs and lack of trust drive everyone to look for other jobs. “In other words, you chase your top talent off to your competitors.”

As I’ve said many times, company executives mouth the words “people are our most important asset” but continue to treat people as a cost. The above are 6 reasons why that is a bad business decision. Just ask Circuit City.

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One thought on “Layoffs reduce intellectual capital”

  1. The lessons of Circuit City

    Last Friday’s posting made a passing reference to Circuit City. In numerious previous postings, I have held up the now-bankrupt Circuit City electronics retail chain as the example of how not to foster your intangible assets. Now comes an article…

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