I did a little reading on that, and John Reh, in his article “Alternatives to Layoffs” looks at it very objectively.

1. Layoffs are done to save money. Unfortunately, they are usually a short term fix, detrimental to the company.

Sometimes things don’t work out as forecast. And when things don’t look so good, the very pressure to take action quickly ultimately works against their own best interest.

Pressing for immediate action forces executives to cut costs, as opposed to raising income. Foolishly therefore, reducing the workforce has become an automatic response for companies who need to cut costs to look good for Wall Street. It’s wrong.

2. It’s counter-productive. It should be a last resort, not a first choice for a skilled executive.

3. Job cuts don’t save money
Sometimes expenses may actually increase. The costs of layoffs generally outweigh the payroll savings to be gained from

4. Job cuts reduce performance as the talent will leave. A company may lay off employees it considers the low end producers, but in doing so it creates a climate of personnel uncertainty. That uncertainty causes others to leave. The first people to leave due to uncertainty in the company are the best people, because they can always get another job somewhere else. The climate of uncertainty that follows a layoff, therefore, always guarantees a reduction in the quality of the staff, not just the quantity.

5. Many companies fail to realize that they have a tremendous long-term capital investment in their employees.

Companies contemplating layoffs need to consider more than just the hoped for cost savings from a layoff. They need to consider, and plan for, the less obvious effects. They need to consider the reduced morale and the reduced performance and innovation it will bring. They need to consider the reduced quality of the company’s overall workforce that will result.