The Bureau of Labor Statistics has journalists buzzing about how the disappointing August jobs report rattled Wall Street. Correct me if I am wrong, but wasn’t it Wall Street that celebrated the corporations reducing their workforce by 10-15% and rewarded those companies with increases in their stock prices?

I guess what they really meant was ‘we reward you with stock price increases when you announce that you will layoff massive numbers of employees but when we don't see jobs sailing back in after the storm we have to pull back'. Isn’t that a double standard?

Perhaps a better approach is to reward companies that have profit-building teams whose sole function is to explore every line of the profit and loss statement for cost reduction opportunities before resorting to some level of layoffs. Layoffs then would be substantially reduced due to the cost saving action steps taken.

When a company has a profit building function incorporated into its everyday business strategies and takes numerous creative cost-saving tactics before it is forced to layoff employees, that company should receive an ‘A’ rating from Wall Street and should be rewarded by the market.

A company that takes the typical knee-jerk reaction of quickly resorting to a major layoff to reduce costs should receive an ‘F’ rating from Wall Street.

Here’s why:

Generally, ‘A’ companies would be higher profit margin companies because they would have explored every line of the company’s P&L statement and found the cost savings within. They could survive periods of economic downturns because they held on to valuable employees and would be better prepared for growth once the economy turns positive. They would not have aided the downward spiral of the economy by kicking large numbers of employees into the unemployment lines.

Generally, ‘F’ companies would have earned a short-term gain by laying off a large number of employees but they would experience narrow margins because they would not have explored all other lines of the P&L (beyond the labor line) and would not have discovered the cost savings within. They would not be prepared to respond to a turn in the economy because they would lack the employee talent to survive an economic downturn. In fact, they would be contributing to the recession by throwing more employees into the layoff fire which fuels an economic downturn, weakens consumer confidence, and generates negative jobs reports.