"Nobody ever cut their way to greatness..."

Several years ago, I read a book by Edward Hess Grow to Greatness as part of an MOOC (Massive Open Online Course) that he taught by the same name.  I don't remember all of the details from the course, but I can say with certainty that Hess at no time talked about cutting costs as a strategy to achieve business success.  My take was that if an organization is already running efficiently, then cutting costs as a way to keep expenses less than revenue is not an ideal business strategy.  As I've heard said probably a hundred times throughout my career - "Nobody ever cut their way to greatness." 

Whenever I hear statements such as this, I always find myself looking for evidence that the statement is in fact true.  Has any organization ever achieved success through downsizing?  There are actually a number of studies that show that lay-offs is frequently deleterious for the organization, with a so-called "dirty dozen" of detrimental effects:

1.  Centralization - downsizing leads to further centralization of decisionmaking and control

2.  No long-term planning - organizations focus more on crisis management and short-term thinking at the expense of long-term strategy

3.  No innovation - organizations become risk-averse and overly conservative

4.  Scapegoating - inevitably, senior leaders will get blamed for the crisis that led to the downsizing

5.  Resistance to change - similar to "no innovation" above, downsizing leads to further resistance to change

6.  Turnover - downsizing unfortunately often leads to the departure of top talent

7.  Low morale - downsizing leads to a decrease in morale and loyalty to the organization (which often leads to the greater turnover, discussed above)

8.  No slack - uncommitted resources or "rainy day funds" are used to cover operating expenses

9.  Fragmented pluralism - special interest groups become more organized and vocal

10. Loss of credibility - employees lose confidence in their leaders

11. Non-prioritized cuts - cutbacks occur across the board, so top talent and/or strategic programs get cut too

12. Conflict - as resources get scarce, there is growing competition and infighting for them

To this end, I found at least one published study ("Airline downsizing and its impact on team performance") that found evidence for all of these deleterious effects.  The study, which was published by Amy Fraher in the journal Team Performance Management in 2013 examined data obtained from 127 in depth pilot survey responses from major US airlines, as well as 43 semi-structured interviews, following the airline downsizing that occurred following the September 11, 2001 attacks.  Fraher found that pilots who stayed with an airline after cutbacks and downsizing experienced greater levels of burnout, loss of engagement ("quiet quitting"), loss of trust, loss of commitment and loyalty to the organization, greater distress and distraction (and as a result, more errors), and ultimately greater turnover.  

As Southwest Airlines founder Herb Kelleher explained, "Nothing kills your company's culture like layoffs."  More often than not, corporate downsizing actually worsens long-term outcomes!  In other words, it's probably reasonable to say with some degree of confidence that "Nobody ever cut their way to greatness."