If You Think Downsizing Might Save Your Company, Think Again

https://hbr.org/2017/04/if-you-think-downsizing-might-save-your-company-think-again?utm_medium=social&utm_campaign=hbr&utm_source=twitter&tpcc=orgsocial_edit

«we controlled for known potential drivers of both downsizing and bankruptcy. These included the size of the firm, changes in market capitalization, prior performance, profitability, trajectory toward bankruptcy (using the Altman Z score), a large number of employees per sales relative to their industry peers, and other indicators of financial health. As firms might differ in number of employees they downsized, we controlled for the percentage of employees reduced in each downsizing event. We also accounted for the number of acquisitions in the previous five years (since downsizing often occurs after acquisitions) and industry differences. We further confirmed our findings across a different time period (1995–2000).

We found that downsizing firms were twice as likely to declare bankruptcy as firms that did not downsize.»

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