Tuesday, February 3, 2009

Job Cut Announcements Overstate Job Losses

Losing ones job is horrible, but in previous periods of announced job cuts, the announced cuts at public companies significantly exceed the actual numbers that lose their jobs at those companies. Publicly traded companies often believe it is good for their stock price to announce a cost cutting effort, particularly when profits are low.

Companies will often include in announcements: (1) personnel included in a sale of a business unit or subsidiary who retain their jobs under the new owners; (2) people retained by the company and moved to a different job in the company when their old position is abolished; (3) abolishing a higher paying senior position to only rehire at a lower paying junior position; (4) normal job attrition due to retirement, quitting, taking a job at another company, etc., and (5) failure to follow through and actually lay-off the announced number of people for numerous business reasons.

Also, companies are often vague about the time frame in which the reductions will occur. The reductions at some companies are not immediate and they can take place over several years.

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