A downsizing strategy at City Corp. has resulted in negative stock returns and lower profitability following the layoffs. Which statement best explains the reason for these negative results at City Corp.?

A) Downsizing tends to eliminate good performers instead of poor performers first.
B) Downsizing demands the HR department have a third-party vendor provide services, which results in lower revenues.
C) Downsizing conducts a complete review of the organization's critical work processes, which results in heavy expenditures.
D) The HRM of a firm must provide downsized employees with multiple stock options.
E) When labor costs fall after a downsizing, sales per employee also tend to fall.

Question

Kassidy Chick · Accepted Answer

Final Answer : E, Explanation :  The decrease in labor costs after a downsizing often leads to a decrease in sales per employee, resulting in lower profitability and negative stock returns for the company.

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