Poistokierre

Poistokierre is a Finnish term that translates to "exit spiral" or "layoff spiral." It describes a negative economic phenomenon where a company experiencing financial difficulties initiates a round of layoffs to reduce costs. However, these layoffs can lead to a further decline in the company's performance. Reduced staff can result in lower productivity, decreased output, and a diminished ability to serve customers effectively. This, in turn, can lead to falling revenues and profits, prompting the company to consider further cost-cutting measures, including additional layoffs. This cycle of layoffs and subsequent performance decline is the essence of the poistokierre.

The poistokierre can be difficult to break. As the company shrinks and its operational capacity decreases, it may struggle to regain market share or adapt to changing economic conditions. Employee morale can also suffer significantly, leading to a loss of institutional knowledge and a reluctance among remaining staff to take on additional responsibilities. In severe cases, a company caught in a poistokierre may ultimately face bankruptcy or acquisition by another entity. Recognizing and addressing the root causes of financial distress early on is crucial to preventing a company from entering this detrimental cycle.