When financial pressures rise, many organizations instinctively look inward at their budgets and outward at their workforce. The most common response is cost-cutting — budgets are slashed, projects paused, and their people retrenched.
From a financial perspective, this seems like a neat solution. Salaries represent one of the largest line items, and cutting jobs offers an immediate, measurable impact on expenses.
But while this approach satisfies the short-term need to stabilize accounts, it often undermines the long-term health of the organization. In fact, it exposes a deeper issue: how companies value their people. That’s why, at Altitude, we’ve helped organizations rethink survival and reshape their employee culture to drive sustainable success.
The Financial Reflex
Corporate decision-making is often tied to financial reporting cycles. Shareholders, boards, and investors expect quarterly results, and executives feel pressure to demonstrate decisive action. Unfortunately, headcount reduction has become a shorthand for “efficiency” in corporate language.
According to McKinsey research, companies under financial stress frequently resort to layoffs not because they are the most strategic option, but because they are the fastest and most visible way to cut costs. For boards and investors, a smaller payroll signals control. For employees, however, it signals instability and disinvestment.
People as Assets — or Just Costs?
Employees are often described as a company’s “greatest resource.” Yet when times get tough, organizations frequently treat them as expendable costs rather than as a reservoir of talent, knowledge, and innovation.
This contradiction points to a cultural challenge: many businesses still prioritize financial capital over human capital. The irony is that the very people who are released during downturns could be instrumental in helping the company pivot, create efficiencies, or uncover new markets.
Frontline employees, for instance, are often closest to customer frustrations and operational inefficiencies. They see where value is lost and where improvements can be made. Involving them in problem-solving can uncover sustainable solutions — but this requires a mindset shift from viewing “people as expenses” to viewing “people as co-creators.”
The Hidden Costs of Layoffs
While reducing staff may provide immediate relief on the balance sheet, it often triggers a cascade of longer-term risks:
Loss of skills and institutional knowledge: Experienced employees take critical know-how with them, weakening recovery capacity.
Declining morale: Remaining employees often experience “survivor’s guilt” and disengagement, leading to reduced productivity.
Reputational damage: A reputation for instability or frequent layoffs can harm employer branding and make it harder to attract top talent.
Reduced innovation: Fear-driven workplaces stifle creativity — precisely when innovation is most needed.
Harvard Business Review studies show that companies relying heavily on layoffs often underperform peers in revenue growth over subsequent years. In other words, the perceived cost savings can be illusory when weighed against long-term opportunity loss.
South African Lessons
South Africa has weathered numerous economic shocks — from the 2008 global financial crisis to the COVID-19 pandemic and the ongoing energy crisis. The responses of local businesses reveal both the dangers of heavy-handed cost-cutting and the potential of people-centred approaches that prioritize financial resilience through engagement, innovation, and trust.