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.