When Downsizing Becomes Dumbsizing

Rightsizing. Restructuring. Downsizing. The terms are cold and unemotional. Yet the euphemisms of the early 1990s all mean the same thing: layoffs. Over the past five years, corporate America has been driven by a single-minded mission to gut itself of "excess workers." It was supposed to be the fastest and easiest way to cut business costs, be more competitive and raise profits -- or at least that's what many top executives thought.

But there is mounting evidence that this slash-and-burn labor policy is backfiring. Studies now show that a number of companies that trimmed their work forces not only failed to...