eadlines when it announced plans to lay off more than 40,000 workers, a number which is larger than many entire towns in the country. The reaction from the press and the public was immediate and swift: nearly universal condemnation for AT&T, which was not deemed to be in financial difficulty, but which was planning the layoffs in order to "remain competitive".
By 1997, AT&T had backed off its plan and announced that only 17,000 workers would be laid off. At the same time, the company announced that it would invest between eight billion and nine billion dollars in improving its infrastructure and improving its signaling network's capacity. This demonstrates that the company responded to the negative publicity which surrounded the initial announcement, and also points out a problem that many downsizing companies face: supplementing downsizing efforts with investments in technology or other programs which are not financially insignificant. These supplemental measures are necessary in order to compensate for the displaced workers.
There are typically three reasons that companies engage in downsizing: immediate financial crisis, short-term improvement of financial statements and long-term strategic decision.
Immediate financial crisis occurs when a company faces a severe financial problem, perhaps because a major customer has withdrawn business or because an anticipated contract does not come through. In other cases, a customer (or several) may withhold payment, forcing the company to take measures in order to meet its short-term obligations. In each of these situations, the immediate financial crisis is acute and short-lived: the company is either able to emerge from the situation (including companies which reorganize under Chapter 11 of the bankruptcy code), or it does not. When layoffs are associated with these types of crises, the laid off workers are frequently recalled to their jobs once the company has regained ...