Abstract
Downsizing is a necessary evil when times get tough or when corporations get bloated. It is not, however, a viable long‐term business strategy. Even in the short run, downsizing produces relatively weak returns. A Mercer Management Consulting study of the 1,000 largest US companies, comparing the stock market performance of successful cost‐cutters with that of successful growth companies, found that investors will pay considerably more for a dollar of profits generated through revenue growth than for that same dollar generated through cost reduction. The message is clear: a company cannot shrink to greatness. It has to grow.
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