There's a surprising culprit behind mass layoffs, says a prominent management professor at Wharton [View all]

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Most bosses blame layoffs on economic downturns, a decline in demand for services, or even overhiring. But one Wharton professor has a different view: It's how U.S. accounting rules force companies to classify human capital that makes them seem like an expense to be cut, rather than an asset to be protected.

Peter Cappelli, the George W. Taylor professor of management at the Wharton School, is the author of the new piece, "How financial accounting screws up HR," published in Harvard Business Review. Cappelli argues that employers have gotten bad at managing employees and U.S. financial reporting standards are in part to blame.

“If employees had asset value, one would think twice about just cutting them,” says Cappelli, also the director of Wharton’s Center for Human Resources.

For decades, public companies have been required to use generally accepted accounting principles to report their financials. But the standards for these accounting rules set by the Financial Accounting Standards Board need a reboot, according to Cappelli. Though they may be your biggest competitive advantage, "Employees are not considered assets—even though the tenure of a valuable employee is often far longer than the life of any piece of capital equipment,” he writes.

https://www.msn.com/en-us/money/companies/there-s-a-surprising-culprit-behind-mass-layoffs-says-a-prominent-management-professor-at-wharton/ar-AA17fpCW