Section Fourmortgaging its future. Such cuts may prevent a company from
pursuing its intended strategies because it has focused on
short-term tactical moves to the detriment of strategy. Thus,
before conducting layoffs, companies should seek an
appropriate balance between short-term and long-term
demands, as well as between the goals of workforce stability
and organizational adaptability. Downsizing strategies are also
more effective when the most effective performers can be
retained. In some instances, the performance evaluation
system may need improvement for accurate identification of
such individuals. Further, the reward system may require
modification to obtain the flexibility needed to retain them.
Such flexibility is necessary because of resource scarcities that
often prompt downsizing strategies but may be obtained
through future-oriented rewards such as stock ownership and
profit sharing.^59
Companies also must be aware that even their short-term
problems may not be solved by downsizing because of the loss
of skills resulting from the departure of experienced employees
who are offered early retirement options or severance
packages. There is empirical support for this caveat, as the
study of declining industries, mentioned earlier, found that “The
poor performers [companies] looked at their actions (e.g.,
layoffs or early retirements) as individual events without
considering the long-term consequences.”^60 It has been