Making Cuts Stick

WE SOMETIMES FEEL a sense of déjà vu when we read about companies restructuring or having layoffs. Didn’t they do something like this just a couple of months ago? In the last six months, three high-ranking executives, independent of each other, have come to us and said, “We can’t figure it out. We took out all these costs eighteen months ago, and now they’re back.”

This story line is familiar even at the most successful companies. In the mid-1980s, the athletic footwear company Nike, its sales stalled and its inventories climbing, instituted a set of traditional cost-cutting measures, including a 10 percent workforce reduction. The changes led to a temporary improvement in the company’s financials, but a few years ...

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