In tough economic times, cutting jobs in a business may appear to be the simplest solution to reducing expenses. However, layoffs present many disadvantages for employer, employee and customer. In the long term, they may cause irreparable harm to a company. Consider the impact of losing valuable workers before choosing the last resort of cost-cutting decisions.

Company Culture

A business is a place for work. But it is also a social space in which friendships and rapport develop among co-workers. The banter between cubicles and around the water cooler makes a job more than a life sentence of tedious toil. When workers are laid off, other office or factory workers often will feel a sense of loss. Further, it proves highly alienating to workers who begin to think of themselves as disposable commodities. David Sirota notes in his essay “The Impact of Layoffs” that cutting jobs “results in a disengagement from the company and its objectives.”


The Machiavellian boss believes fear can be a greater motivator than love. “Cracking the whip” disciplines the rank and file. Eliminating the weakest link through a layoff becomes the ultimate punishment for inadequate work. While a certain amount of stress is natural in the workplace, fear of job loss does not inspire superior job performance. Instead, anxiety distracts employees from their duties. The American Psychological Association estimates job stress costs $300 billion per year in absenteeism, reduced productivity and medical problems such as high blood pressure or heart disease.

Customer Loyalty

Businesses often rely upon relationships between their employees and customers. For example, a well-liked salesperson knows exactly how to pitch a new product to a regular account. The customer might be able to get a better deal from a rival company, but goodwill toward the salesperson ensures his loyalty. Losing that salesperson loses that account. And salespeople are not the only employees who retain customers. A friendly waitress or helpful pharmacist will keep the customer base happier than any kind of sales or marketing campaign.


Cutting the position of an experienced employee may be like amputating a limb. Suddenly, actions taken for granted require a great deal more work by the remaining employees. For example, a senior employee may be the only person capable of performing a task in a department. Workers sometimes can be kept on the job a few extra weeks to train someone else, but it will take the trainee months or years to learn the task completely. If this situation arises once or twice, a business will be able to carry on. However, a major loss of experience and brainpower may paralyze a company, especially when layoffs are performed by outside consultants or out-of-touch executives who don't understand the internal functionality of a staff.