A downsizing strategy at Archer Corp.has resulted in negative stock returns and lower profitability following the layoffs.Which of the following best explains the reason for these negative results at Archer?
A) Downsizing tends to distinguish good performers from poor performers rather than eliminating an entire group of employees.
B) Downsizing demands the HR department have a third-party vendor provide services, which results in lower revenues.
C) Downsizing conducts a complete review of the organization's critical work processes, which results in heavy expenditures.
D) The HRM of a firm is not authorized to provide downsized employees with outplacement services to help them find new jobs.
E) When labor costs fall after a downsizing, sales per employee also tend to fall.

Question

Quizplus · Accepted Answer

Contrary to popular belief, research has found that downsizing is associated with negative stock returns and lower profitability following the layoffs. One reason may be that although labor costs fall after a downsizing, sales per employee also tend to fall.

A Downsizing Strategy at Archer Corp