Bill Canady explains why firing employees too quickly backfires: companies often rehire the same workers within a year at higher cost. A $180 million revenue example shows how cutting $7 million in telecom business removes $840k in margin, and premature layoffs can erode the gains from other improvements.
Did the work go away first or did the people go away first? If the people went first, you're gonna hire them back inside of a year at a premium, and that's gonna make you feel pretty bad. All right. So here's an example. Back to our $180 million of business at 2.25. Here's the real path. Price. A corridor cleanup delivers 1.5 points of realized price. On $180 million, that's $2.7 million. Essentially all of it straight to material margin. We love that. $63 million goes to $65.7 million. Ratio 2.35. Now mixed, retire $7 million of tel revenue running 12% material margin. That costs you $840,000 of margin. And if you stop there, the ratio goes down.
