It seems to make sense that if hiring an additional employee provides marginal shareholder value, that the company will hire additional employees. So, when the company stops hiring employees, it seems reasonable that this is because the marginal benefit of hiring an additional employee is not positive. However, I don’t see why this should suggest that the company is likely to hire an employee that provides a marginal value of 0 or negative.
“Number of employees” is not a continuous variable. When hiring an additional employee, how this changes what the marginal benefit of an additional employee can be large enough to change it from positive to negative.
Of course, when making a hiring decision, the actual marginal benefit isn’t known, but something one has a belief about how likely the hire is to provide each different amount of value. I suppose then one can just consider the marginal expected benefit or whatever wherever I said “marginal benefit”. Though I guess there’s also something to be said there about appetite-for-risk or whatever.
I guess there’s the possibility that: 1) the marginal expected benefit of hiring a certain potential new employee is strictly positive 2) it turns out that the actual marginal benefit of employing that person is negative 3) it turns out to be difficult for the company to determine/notice that they would be better off without that employee
and that this could result in the company accumulating employees/positions it would be better off not having?
It seems to make sense that if hiring an additional employee provides marginal shareholder value, that the company will hire additional employees. So, when the company stops hiring employees, it seems reasonable that this is because the marginal benefit of hiring an additional employee is not positive. However, I don’t see why this should suggest that the company is likely to hire an employee that provides a marginal value of 0 or negative.
“Number of employees” is not a continuous variable. When hiring an additional employee, how this changes what the marginal benefit of an additional employee can be large enough to change it from positive to negative.
Of course, when making a hiring decision, the actual marginal benefit isn’t known, but something one has a belief about how likely the hire is to provide each different amount of value. I suppose then one can just consider the marginal expected benefit or whatever wherever I said “marginal benefit”. Though I guess there’s also something to be said there about appetite-for-risk or whatever.
I guess there’s the possibility that:
1) the marginal expected benefit of hiring a certain potential new employee is strictly positive
2) it turns out that the actual marginal benefit of employing that person is negative
3) it turns out to be difficult for the company to determine/notice that they would be better off without that employee
and that this could result in the company accumulating employees/positions it would be better off not having?