The downsizing and reengineering initiatives so prevalent in the early ’90s have
largely proved financially short-sighted. With hindsight, we now know that almost
half of downsizing companies reported lower profits the year following their
cutbacks. In fact, Mercer Management Consulting research into the link between
profitable growth and stock market valuation has found that cost-cutters’ stock
prices grew more slowly than those of companies which successfully grew both
their top and bottom lines. Less than one in five cost-cutters were subsequently
able to put their companies back on a profitable growth track.