employee layoffs

Much has been in the news on employee layoffs to control costs. When a management team does this, the news stories often paint the management team as taking strong action to improve the company's fortunes. What is usually not stated is that this, in my view, is strong evidence that management has failed in plannning and /or execution. At some point management had hired these now being layed off employees. Also, this same management team increased the salaries (and thus the cost of) these employees. To me it is obvious, that in laying off employees, management is showing that they have made serious errors in judgement yet often the stock price will go up and management will be given praise instead of being critized.

Also, while companies often state that employees are their most important asset, the financial system records employees only as an expense. Even when an employee is so important that the firm takes on key person insurance, the target employee is shown only as an expense on the firm's books. If training (often very expensive) is given to an employee, it is treated as a period expense, even though the benefits will span many periods. When natural resources such as forests increase in value this increase in value is recorded in the books of record (accretion) but when an employee's value is increase through experrience, training and education there is no reflection of this increase in value. Also when a valuable employee is lost (retirement, layoff, or voluntairy leaving) there is no reflection of this lose within the books.