Layoffs, the conventional wisdom goes, are a necessary evil during economic downturns. The problem is, the conventional wisdom is wrong. Researchers at Bain & Company analyzed the layoffs at S&P 500 companies during the early stages of the current downturn (from August 2000 through August 2001) and found that even as layoff numbers reached record levels, most companies weren’t downsizing. Rather, a small group of poorly performing companies accounted for the vast majority of firings, and their experience shows that reactive downsizing can backfire.
A version of this article appeared in the April 2002 issue of Harvard Business Review.
