In looking for ways to cut costs—something most companies still need to do despite the good economic times—most managers reach for the head-count hatchet. There’s good reason: the markets usually roar with approval. When Eastman Kodak, for example, announced three years ago that it would lay off 10,000 people, saving an annual $400 million in payroll, its market capitalization rose by $2 billion within a few days. Similar stories have played out hundreds of times in the past decade.
A version of this article appeared in the September–October 2000 issue of Harvard Business Review.