Lean May Not Be So Mean

Ultimately, restructuring adds jobs

Companies intent on creating value for their shareholders can be tough on their workers. But in the long run, the interests of owners and workers are closer than they might seem, says McKinsey & Co., the New York-based management consultancy. A new study of more than 1,000 companies in six countries by McKinsey argues that over time, a focus on shareholder value actually leads to more jobs. Says Thomas E. Copeland, a director of corporate financial services in New York who is co-author with Brussels-based McKinsey associate Jacques Bughin: "Stronger, leaner companies are able to compete in the world market more effectively, and that ultimately draws jobs back to those companies."

McKinsey contrasted companies in the U.S. and Canada with ones in Continental Europe, which are slower to shed jobs in the name of profits. The authors found that from 1970 to 1990, European companies lost jobs even as their return on investment fell short of their cost of capital. By contrast, the U.S. and Canadian companies increased their worldwide employment while also creating shareholder value.

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