"This paper investigates the performance effects of major job cuts.1 Using data from Compustat S&P database, we examined the longitudinal impact of workforce reductions on labour productivity and operational indebtedness of 239 US and Canadian companies. Repeated measures analysis showed that firms that substantially cut jobs failed to improve their labour productivity and their operational indebtedness. Then, taken a step further, statistical analysis surprisingly revealed that firms that cut the highest proportions of their workforce had a significant deterioration of their operational indebtedness and a non-significant change of their labour productivity. These results call into question the economic legitimacy of major workforce reductions increasingly institutionalized to the detriment of the strategic approach of HRM."

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