Last month we presented our Global Economic Forecast for 2002, and I predicted—with a lot of help from contributing editor Daryl Delano—that the recession would turn around into growth mode again by this summer. Whenever the economy rebounds, recent layoffs could spell trouble for companies large and small that have made across-the-board cuts. It seems like ages ago, but 2001 began with labor shortages. If manufacturing fires up again in six or nine months, these companies—many of them converters and package printers—will be in a poor position to compete.

John Di Frances, managing partner of Wales, Wis.-based business strategist Di Frances & Associates, has identified eight common consequences of pursuing cost reduction through massive staff cuts. Here's a quick rundown:

1. Lack of a recallable employee pool. Most severed employees today are told their release is final. Many senior workers become entrepreneurs. Where will you find knowledgeable people when you need them again?
2. Lack of trust among younger employees. Workplace loyalty is almost an oxymoron with young people as they see their older colleagues axed to save money. Because of the tight job market, they may not bolt today but they'll remember.
3. Loss of your experience base. No matter how up-to-date your new workers might be, they'll never substitute for the knowledge, experience and wisdom of the organization's veterans.
4. Loss of corporate culture and available mentors for new and existing employees. Every company needs to have incontrovertible statements that transcend fluctuating business climates: "In this company, we do [blank] because we believe it's fundamentally right." The fewer seasoned veterans to pass these values on, the less they'll be able to maintain the soul of the organization.
5. Loss of established customer service and contact points. Long-term relationships matter; they also say something about the reliability and stability of your company. Without relationships, price rules, and the only price that rules today is the lowest one.
6. Employees may be needed again before termination savings are fully realized. Remember: the cost of replacement includes both the expense of firing as well as training and integrating new hires.
7. The possibility of having to bring back workers as independent contractors, at a higher total cost. Doing this for the short-term often becomes long-term, costing your company more than if they had stayed on the payroll.
8. Diminished market share and status as market leader. The time and money that go into building a company's image during "good times" is often amazing. But, as soon as the economy dips, the slashing begins without much thought to the negative impact it has on years of careful work and dollars spent.

"Although severe cost cutting can increase near-term profitability, ultimately the broad-based innovations of a committed and motivated workforce are essential to restoring profitable, long-term growth," DiFrances says.

For the future of your business and the industry, it's enduring growth that should be every converter's primary objective.