Chief Executives Trumpet Smaller Workforces as a Sign of Corporate Health

Big companies are getting smaller—and their CEOs want everyone to know it.

- Chip Cutter

The careful, coded corporate language executives once used in describing staff cuts is giving way to blunt boasts about ever-shrinking workforces. Gone are the days when trimming head count signaled retrenchment or trouble. Bosses are showing off to Wall Street that they are embracing artificial intelligence and serious about becoming lean.

After all, it is no easy feat to cut head count for 20 consecutive quarters, an accomplishment Wells Fargo's chief executive officer touted this month. The bank is using attrition "as our friend," Charlie Scharf said on the bank's quarterly earnings call as he told investors that its head count had fallen every quarter over the past five years—by a total of 23% over the period.

Loomis, the Swedish cash-handling company, said it is managing to grow while reducing the number of employees, while Union Pacific, the rail operator, said its labor productivity had reached a record quarterly high as its staff size shrank by 3%. Last week Verizon's CEO told investors that the company had been "very, very good" on head count.

Translation? "It's going down all the time," Verizon's Hans Vestberg said.

The shift reflects a cooling labor market, in which bosses are gaining an ever-stronger upper hand, and a new mindset on how best to run a company. Pointing to startups that command millions in revenue with only a handful of employees, many executives see large workforces as an impediment, not an asset, according to management specialists. Some are taking their cues from companies such as Amazon.com, which recently told staff that AI would likely lead to a smaller workforce.

Now there is almost a "moral neutrality" to head-count reductions, said Zack Mukewa, head of capital markets and strategic advisory at the communications firm Sloane & Co.

"Being honest about cost and head count isn't just allowed—it's rewarded" by investors, Mukewa said.