The big mistake behind layoffs: failing to reorganize

When a company’s results begin to deteriorate, personnel costs are usually among the first items management examines. Salaries and contributions represent a major expense, they are easy to measure, and reducing headcount produces an almost immediate budget saving.

The pressure is particularly strong after years of rising labor costs. Eurostat data cited by the article shows that hourly labor costs in Romania increased by 10.6% in 2025 in national-currency terms. The average reached 13.6 euros per hour, compared with 34.9 euros across the European Union. At the same time, real labor productivity per hour worked rose 3.9% in Romania, above the EU average of 1.4%.

Those figures explain why companies cannot ignore staffing costs. But when profitability suffers, management must also examine how much of the problem comes from the cost of employees and how much comes from the way their work is organized. The article says companies often confuse the two.

Business consultant Sorin Spiridon warns that cutting payroll may reduce spending without addressing the underlying cause. The same processes, unprofitable transactions and unnecessary work can remain in place, while the initial savings later disappear through operational bottlenecks, overloaded teams, the loss of key employees or weaker service quality.

The hidden cost can come from excessive approval levels, administrative work that creates no value or a commercial model that consumes more resources than it generates. A 500-leu order and a 5,000-leu order may require similar processing, picking, delivery, invoicing and payment-collection work. When the resources consumed are nearly the same, the smaller order can use up a significant share of its margin in servicing costs.

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A reduction in the payroll fund is immediately visible in costs. But if the same processes, the same unprofitable transactions and the same unnecessary work remain, the cause of the problem has not been resolved. The savings achieved today may be eroded in the following months by operational bottlenecks, overloaded teams, the loss of key people or a decline in service quality.