>There are two options a company will do to cope with this situation. 1) Lay off X% of their workforce, shielding their existing employees from the financial "downs". 2) Lay off 0%, increase the workload of everyone to account for the financial losses, and see who quits.
Or, you know, keep some money around to pad for financial downs during financial ups.
If those are periodic and not final (eg. not that the company / industry is doomed) that's an option as well.
Companies pay lip service to "investing" in their people all the time. This would be an actual investment in your people -- taken from your margins...
> Or, you know, keep some money around to pad for financial downs during financial ups.
For most companies that isn't attractive because that means forgoing opportunities to compete/diversify (depending on situation) when the market best supports them, which means greater chance of firm failure. It's better to have to fire some people in pruning a line or reducing scale at the next negative market shift than to have to fire everyone when the firm fails.
I mean, sure, if shareholders are extracting value from the firm via dividends, you could in principle reduce those to provide the reserve fund—but most firms have shareholders realizing value by stock appreciation driven by perceived future scale, not current dividends.
>For most companies that isn't attractive because that means forgoing opportunities to compete/diversify (depending on situation) when the market best supports them, which means greater chance of firm failure.
And then getting bought up by some competitor who _did_ keep some cash on hand.
I've seen this happen some 8 years ago, when the financial "crisis" hit, as the (larger) company that I worked for managed to not only stay afloat, but actually acquire at a very steep discount some of the smaller and more "efficient" competitors that went under as soon as reality diverged from their market assumptions.
Or, you know, keep some money around to pad for financial downs during financial ups.
If those are periodic and not final (eg. not that the company / industry is doomed) that's an option as well.
Companies pay lip service to "investing" in their people all the time. This would be an actual investment in your people -- taken from your margins...