How deep can you cut?

1 min read

The seemingly endless stream of bad news continues with the publication of National Semiconductor’s latest financials.

It’s not a pretty report, showing sales down 36% year on year and by 31% from the previous quarter. If that’s not enough, it sees sales dropping by another 5 or 10% in the next quarter. So it’s cutting costs. That means 26% of the company’s 6500 workers will go over the next few months – and 850 will be shown the door immediately. Unsurprisingly, chairman and chief executive Brian Halla claimed the actions would help the company to remain competitive. You’ll see similar comments from other ceos as they try to put a gloss on the bad news for shareholders. Many companies seem to be operating on a rolling head count reduction process. Is that what they teach MBAs to do when the going gets tough? So each quarter, another few percent of the workforce goes. How far can you cut? At what point does the process become counter productive? Once you’ve cut the staffing levels as far as they can go, it’s time to take the axe to the business. At that point, surely any company is past the point of no return?