The gut-wrenching decision to downsize is usually made a little easier by the belief that at least there’s a purpose to it all: The company will save money and might even improve performance. But a new study indicates that layoffs often prompt demoralized survivors to quit. The resulting unexpected staff shortage can hinder efficiency, and the company incurs costs as it scrambles to find and train new people. As if that irony weren’t painful enough, career-development programs, which of course are partly aimed at improving retention, appear to have the unfortunate effect of worsening turnover after a layoff.
A version of this article appeared in the May 2008 issue of Harvard Business Review.