Earlier this year, an old HistoRy about former Nintendo CEO Satoru Iwata it went viralpraising him posthumously for taking a 50% pay cut rather than firing staff.

Why would a story from 2013 suddenly make headlines? Likely because it provided such a stark contrast to current trends in North America, where layoffs of employees are reaching levels not seen since the dot-com crash of the early 2000s.

The technology sector is being hit particularly hard. According to NPR2023 was “a bloodbath for the tech industry, with more than 260,000 jobs gone.”

The cuts were blamed on post-pandemic job growth and high inflation, which dampened consumer demand. However, the layoff trend continues into 2024. According to NPR, tech companies collectively laid off about 25,000 employees during the first four weeks of this year.

While some layoffs are inevitable due to basic economic cycles recession and growth, they increasingly look like a method for CEOs to please shareholders by delivering small, short-term hits to a company's bottom line.

I think it's a short-sighted approach that reduces workers to data points and budget line items, ignoring the value of retaining employees for the long term, even when economic times are tough.

As Iwata said shortly after announcing his personal pay cut, “If we reduce the number of employees for better short-term financial results, employee morale will decrease. I sincerely doubt that employees who fear they may be fired will be able to develop software titles that can impress people around the world.”

The reflexive instinct among many CEOs today seems to be a throwback to Jack Welch management brand of the 1980s. Welch, CEO of General Electric from 1981 to 2001, was known for being relentless in his pursuit of profit and his preferred method of achieving it: firing employees. According to one PROFILE in the New Yorker, “no single corporate executive in history has fired as many people as Jack Welch.”

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He was a pioneer of “ranking and appeal” method, in which he developed a rating scale for employees and fired the bottom 10% each year. His ruthless style was revered at the time. But his legacy is mixed, and much of his success is attributed to fraud financial.

While his management style eventually fell out of favor in the 2000s and 2010s, CEOs' desire to cut the workforce for short-term relief appears to be gaining new momentum.

But does this improve a company's bottom line in the long run? Even small cuts can quickly change a company's culture, causing employees to go into self-preservation mode and stifling novelty and creativity.

I know all too well how costly loss can be long term, loyal staff due to extreme circumstances. Like countless other companies and non-profits, my charity had no choice but to lay off staff in response to the COVID-19 pandemic. It was one of the hardest decisions I've ever made because I know the value that employees at all levels can bring to an organization and the impact it would have on the lives of those employees.

And it's a decision that rarely pays off in the long run. According to a report in time, layoffs can often hurt a company's financial performance over time. They do not consistently increase profits and can lead to lower employee engagement and customer service quality.

Conversely, while it doesn't always show up on a balance sheet, there are so many benefits to fostering an environment where employees feel safe and valued and want to stay with a company for the long term.

Most of my team has been with our organization for more than ten years, with many 15- to 20-years, and I see the benefits of this dynamic every day. Employees who feel emotionally secure in their jobs provide a challenging function that is critical to decision-making and are loyal to their organization, something that can only be gained through mutual trust.

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Empowered employees work harder because they are invested in long-term results. They know they'll be around long enough to see their contributions come to fruition and aren't just on a one- or two-year hiatus before looking for their next job.

They also enjoy taking risks and driving NEW. All too often, companies reach a level of success and become complacent and risk averse, which eventually leads them down a path to failure. This is why loyal and dedicated employees are so critical. They have the confidence to challenge leadership to continue innovation and drive impact or to speak up when they see their leaders making potentially bad decisions.

A stable workforce also fosters better relationships with customers and suppliers, creating continuity and customer trust. A company that is constantly cutting and adding jobs cannot effectively maintain these relationships or conduct effective, long-term business planning.

Maintaining an engaged workforce is especially important in the age of “quiet abandon“, in which disengaged employees do the minimum level of work to keep themselves employed. This trend is not surprising given that so many employees are worried they could be laid off at any moment. This uncertainty may also fuel the trend of employees to get a side gig that will give them a softer landing if they are fired.

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But don't take my word for it. Data shows that employee retention leads to higher productivityreduced turnover and training costs, and the employees they have higher morale and lose fewer working days, that's all good for an organization's bottom line.

Rather than continually cutting the workforce to create short-term disruptions, business owners—large and small—should consider the benefits of investing in employees and nurturing a safe and sustainable workforce. Finding other ways to tighten budgets and keep your workforce intact is a decision you'll never regret.