Debunking Layoff Myths

Popular wisdom says layoffs are the reflex response for most businesses when the economy weakens. But Bain & Company's year-long analysis of layoffs at S&P 500 companies proves that wisdom wrong. The results debunk four myths about downsizing. They reveal that: not all companies go into automatic layoff mode at the first hint of downturn; big job losses can actually hurt stock prices because they can invoke greater costs than benefits; shareholders can tell "good" job cuts from "bad"; and "binge and purge" employment practices are a flawed response to economic ups and downs.

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