I worked at a company, back in the mid-90s, that wasn't doing so well (I found out later because of really bad decisions by the owner) and cut everyone's pay by

I worked at a company, back in the mid-90s, that wasn't doing so well (I found out later because of really bad decisions by the owner) and cut everyone's pay by 20%. Full-time employees took a 20% cut and part-time employees could only work 4 days a week. At the time, this seriously hurt the goodwill that we, as employees, had for the company. One concern was that if we could continue to live on the reduced income and were happy to do so, there was no reason to restore the salaries if the company ever turned around. So anyone who stuck around at the reduced rate was only delaying their leaving the company eventually anyway. All this did was keep people from being forced to find new jobs sooner. Another concern was that _everyone_, the employees known to be valuable _and_ the dead weight, were potentially paying to keep the dead weight around. The ability to do cut-backs gives you a bonafide excuse to get rid of the dead weight, cut the fat, and operate leanly. One way to do that is by giving your top performers more responsibility and showing them they are valuable; the good people will step up to the challenge. By keeping under-performers around, it sends the message that the company actually isn't interested in surviving _as_a_company_. "You mean I have to take a pay cut _and_ I still have to deal with these personnel inefficiencies? No thanks."