Imagine you’re driving on the highway, and a warning light flashes on your dashboard: you’re running low on fuel. You could keep going, hoping you’ll reach your destination, but chances are, you’ll stall. The same analogy applies to businesses that cut too deeply into their workforce in pursuit of short-term gains. Layoffs may seem like a quick fix for financial challenges, but if overdone, they can leave an organization stranded, struggling to recover.

That’s exactly the situation Stellantis, the parent company of brands like Jeep, Chrysler, and Maserati, finds itself in. After aggressive rounds of layoffs and cost-cutting, Stellantis became “leaner” but lost its footing in the market. The company’s share price has plummeted, and, most notably, its product lineup—especially Jeep—has failed to meet customer demands.

The Problem with Cutting Too Deep

In today’s fast-paced business environment, operating lean is often viewed as a marker of efficiency. But as the case of Stellantis demonstrates, there’s a fine line between lean and dangerously thin. A quote from an industry analyst sums it up well: “Tavares [the CEO] has made Stellantis more efficient than competitive.”

While trimming the workforce can boost short-term productivity metrics, it can also mean pushing employees beyond their limits, decreasing job satisfaction, and ultimately damaging product quality and innovation. Stellantis’ cuts have left it with cars that customers aren’t buying, which is the most telling symptom of deeper organizational issues.

This raises a critical question for HR leaders: How can we ensure that layoffs don’t damage the company’s ability to succeed long-term?

HR’s Role: Recognizing the Warning Signs

One of the key responsibilities of HR is to act as the “warning light” for organizational health. When layoffs are on the table, HR must look beyond immediate cost savings and assess the long-term impact on workforce engagement, productivity, and brand reputation.

Some telltale signs that an organization is running too lean include:

• Decreasing employee engagement: When morale dips and employee satisfaction surveys start showing negative trends, it’s a red flag that the workforce is feeling the pressure. Lower engagement often leads to decreased productivity and higher turnover.
• Turnover spikes: High turnover disrupts operations and incurs costs that may outweigh the savings from layoffs. HR needs to track turnover rates and calculate the cost of replacing lost talent, factoring in recruitment, training and lost productivity.
• Declining product quality: When employees are stretched too thin, mistakes happen. If layoffs result in cutting key positions, the company may struggle to maintain product quality—just as Stellantis has experienced with its Jeep lineup.

By tracking these indicators, HR can provide data-backed insights to leadership, showing the potential long-term damage of excessive cost-cutting. The key is to have this data readily available and communicate it clearly—ideally before layoffs go too far.

Why Rebuilding is Slower than Cutting

One of the most dangerous assumptions leaders can make is that rebuilding after layoffs is as simple as rehiring when the time comes. But that’s rarely the case. As Peter Cappelli, a renowned talent management expert, points out, rebuilding is far more difficult and time-consuming than cutting. Once employees are let go, finding and training replacements with the right skill sets can take years.

Moreover, layoffs can have lasting effects on a company’s brand, both in terms of customer trust and employee loyalty. Stellantis is now facing years of work to undo the damage caused by overzealous cost-cutting—not just in terms of its workforce but also in rebuilding trust with customers and suppliers. The company’s struggles with Jeep, a once-flagship brand, illustrate how layoffs can indirectly undermine a company’s product offering.

When to Pump the Brakes: HR’s Influence on Decision-Making

The role of HR is to bring balance to leadership’s decisions. While executives may feel pressure from shareholders and analysts to cut costs, HR must make the case for long-term sustainability. Leaders often focus on short-term gains, like stock price bumps or meeting quarterly financial targets, but HR has the responsibility to advocate for the workforce and the future health of the organization.

Data can be HR’s most powerful tool in these discussions. Metrics like employee engagement scores, turnover costs, and productivity data can all be used to build a case for why continued cuts are detrimental. The goal is to provide leadership with clear, objective information about the real costs of cutting too deeply—and to do so in a way that connects these metrics to broader business outcomes like profitability and customer satisfaction.

Sometimes, this means quietly presenting the data even when leaders don’t want to hear it. But that’s the responsibility of HR—to be the voice of reason when a company is at risk of cutting itself too thin.

Final Thoughts: Don’t Wait Until It’s Too Late

As companies like Stellantis have learned the hard way, cutting too much can cause lasting damage. The goal shouldn’t be to wait until the business stumbles to realize the problem—HR should be proactive in identifying when an organization is running too lean.

By paying close attention to the data and keeping a finger on the pulse of employee engagement, HR can help leadership navigate the delicate balance between operating efficiently and maintaining long-term success. The stakes are high, and in today’s competitive market, a misstep can set a company back years.

Is Your Organization Running Too Lean?

Are you tracking the right metrics to prevent long-term damage from layoffs? Connect with us to explore how we can help you measure and maintain the right balance for a sustainable future.

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