When 'Healthy' Firms Cut Jobs

Bill Conner had hoped things would be easier by now.

As CEO of Entrust — a Dallas-based Internet security company — he has spent the past two years restructuring his firm.

"Restructuring" has meant altering not just the way business is done at Entrust, but how many workers are there to do it.

Conner has cut more than 500 jobs from the company's payroll, and in recent weeks he has announced more cuts. He hopes these will be the last.

"It's a really painful thing to do as a CEO in this market because certainly our employees have been doing a lot more with a lot less for the last two years," he said.

Still, to get his company profitable, he believes he's going to have to cut costs by at least 25 percent.

"Because while business is improving, it's not returned to where it needs to be to make money. Or break even," he said.

Shrinking Payrolls Tough to Reverse

Conner joins legions of CEOs not quite convinced the nation's economy is back on track, despite recent news that the economy is growing.

And with uncertainty still a part of many companies' financial planning, it is unlikely that the mind-set that has spurred companies to shrink their payrolls will be reversed soon.

Conner says shareholders want to know that companies are doing everything possible to make a profit, and if revenues aren't high enough, then expenses must be cut. And cutting jobs is often the surest way to slash expenses.

The manufacturing industry, in particular, has applied that lesson liberally.

Motorola Inc., struggling to meet its earning goals for this year, closed one of its plants in Illinois in April, laying off hundreds of employees and sending their jobs overseas to cheaper workers.

Carl Tannenbaum, a business analyst with LaSalle Bank, explained that manufacturers are focused on production and profitability, not on creating jobs.

"And, sad to say," he said, "the job losses in manufacturing have been one element in the profitability of manufacturing companies."

Could Cuts End Up Hurting Companies’ Health?

Indeed, job cuts have improved the look of many corporate balance sheets the past year. But those cuts have often been bad for morale and certainly not good for workers' confidence overall.

In the long run, some worry that cuts that go too deep could prove harmful to the health of companies and the nation's economy — particularly as employees are viewed less as assets and more as expenses, to be cut as needed.

Conner is hoping the cuts he has made will end up protecting the jobs of those workers who remain, and that employees on the payroll now will still be there at year's end.

He says he is "cautiously optimistic" that the economy will continue to improve, but he's not banking on it. Not yet.

"We see the lights of it turning around, but the growth itself is not there," he said.