Featherbedding
Featherbedding is the practice of hiring more employees than necessary or maintaining unnecessary work processes, often due to union rules or labor agreements. This practice typically leads to higher costs without corresponding productivity benefits, affecting a company’s overall efficiency.
Example
A shipping company is required by union agreements to keep extra staff on board, even when automated systems have reduced the need for manual labor. This leads to higher operational costs without additional productivity.
Key points
• Stems mainly from labor union agreements.
• Increases labor costs without boosting efficiency.
• Can be a barrier to adopting cost-saving technologies.
Quick Answers to Curious Questions
It raises operational costs, which can negatively affect a company’s financial performance and stock valuation.
Risks include reduced profitability and higher operating costs; benefits are minimal, often limited to job preservation.
Recognizing the impact helps assess a company's cost structure and potential inefficiencies.
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