Abstract

We give a simple stochastic model for the optimal size of staff of a large (especially, but not only, research) corporation as a function of its wealth and provide a quantitative theory with explicit prescriptions for increasing, decreasing or leaving constant the number of personnel in order to maximize total profit, discounted with fixed interest rate. Features of the optimal policy seem in at least qualitative agreement with observed practice in that, for example, there are occasional large scale down-sizings similar to large layoffs or incentive retirement plans observed in real corporations. In the optimal plan, this type of firing occurs only on an upswing, i.e. when the company's fortune ascends to a threshold relative to staff size. Small scale or "attrition" firing also occurs under the optimal policy, but this type of firing occurs only on a downswing, when the company's fortune descends to a threshold relative to staff size. The model is extremely simple and depends on only ...

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