When Downsizing Becomes Dumbsizing

The pink slips are still flying. But with the fat long gone, business is now cutting dangerously into muscle.

Rightsizing. Restructuring. Downsizing. The terms are cold and unemotional. Yet the euphemisms of the early 1990s all mean the same thing: layoffs. Over the past five years, corporate America has been driven by a single-minded mission to gut itself of "excess workers." It was supposed to be the fastest and easiest way to cut business costs, be more competitive and raise profits -- or at least that's what many top executives thought.

But there is mounting evidence that this slash-and-burn labor policy is backfiring. Studies now show that a number of companies that trimmed their work forces not only failed to...

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