by Carl E. Frahme, Ph.D
Downsizing is a word we've heard quite frequently in the past several years. It has taken on a meaning of its own, and it is a word that strikes fear and anxiety in the minds of many American employees. That's true not only in industry but also in government, utilities, public schools, universities and even in the military. Is downsizing good, bad, or both???
Like most other business phenomena, downsizing has both positive and negative attributes. When an organization gets "bloated", over-staffed, and non-competitive, or it the marketplace changes dramatically, a reduction in staff may be necessary for the health and often the very survival of that organization. Obviously, such downsizing is painful to those who are the casualties. There are many other pressures that can lead to downsizing. One of the most pervasive and fundamental presuures is new technology. Computerization and advances in automation cause the elimination or reduction of certain types of jobs. Another has been the switch to a global economy. Think back twenty or thirty years and remember the state of communications, transportation, computers, entertainment, home electronics, medicine, education, government regulation, foreign competition, and the fabric of our society. The changes are dramatic, and they exert part of the downsizing pressure.
Such downsizing pressures as these are virtually inevitable, and they are for the most part healthy. They are a natural result of change. Industrial societies have had to adapt to such change for the past 150 years, but the rate of change today is staggering. Responding to such change is a real challenge for all of us.
There are other pressures as well. Downsizing raises the promise of profit growth, although sometimes this proves to be short term or illusory. The stock market exerts its own pressure. Companies that have announced plans to downsize have often seen their stock prices rise on the market. Executives who have a strong stake in a stock price rise, and most do, are given another reason to look toward downsizing in a positive light. For the same reason, stockholders often pressure management to downsize.
The effect of downsizing on employees, and often on whole towns or cities, can be devastating. The effects of those "downsized" out the door are fairly obvious- loss of income and self-esteem, the need to seek new employment, and an uncertain future.
The effects on those left behind are often nearly as severe, for both themselves and their employer. This is a partially hidden and very negative consequence of downsizing, and it must not be ignored. Robert N. Burt, Chairman of FMC, summed up his feelings, saying, "The negative impact on the morale of those who remain after downsizing is deep and it lasts for years. Chief executives shouldn't assume that restructuring is good for a company. In fact, most are not good."
CEO's are beginning to acknowledge this side of the picture. Listen to Dana Mead, CEO of Tenneco, Inc.: "There's a lot of wishful thinking in the nation's boardrooms that the issue of corporate responsibility will go away. However, this is not a fad. It will not disappear." Corporations are paying severe penalties for laying off older, experienced workers. This takes the form of lost organizational memory and experience as well as the decline of morale. It is, after all, employees who have to provide customer service, make sales, build products, or provide services. In too many companies, downsizing has increased the workload on the remaining employees- the things that need doing don't get downsized. Sometimes new technologies have allowed fewer people to do these things, but often this is not the case. And the employees left behind are sometimes less qualified, have become demoralized, and feel that loyalty to the company will not provide loyalty by the company in return. The fear of downsizing even reaches employees of companies who are not downsizing and don't plan to. It has become a psychological epidemic of sorts. No one feels immune! And in too many cases, critical ties are broken between customers and suppliers when downsizing occurs, since the people who built these ties may no longer be present.
If you think so, there are things you can do to survive the cut. A prime goal would be to make yourself more valuable. Get training in areas valuable to your company and pertinent to your job- or your supervisor's job! That might be in business, computer-related technology, engineering or technology, ISO 9000, marketing- there are lots of areas. Take a critical look at your company and identify some "weak" spots that you could tackle and make a difference, and then ask to tackle it. Form a team with a co-worker or co-workers. Teamwork is valuable! Strengthen and broaden your contacts outside your company (a little insurance).
Having said all this, I also need to say that downsizing creates opportunities for consultants like us. So maybe I shouldn't have written this column! Seriously, downsizing is a fact of life, and even companies that haven't officially "downsized" are often running on lean staffs. However, competitive pressures, both domestic and foreign, have greatly increased, and new technologies add extra pressures. How can a company undertake the special projects- productivity enhancement, better process control, ISO 9000, personnel training, new marketing techniques like the Web- without hiring new permanent staff? How can existing staff upgrade themselves to meet new challenges? I would suggest to you- and I could be accused of making a callous sales pitch, I suppose- that a good consulting firm can be part of the answer. Consultants aren't hired forever. They are given specific jobs at a known cost. They bring a wealth of experience and a new perspective. And a good consultant will help you build morale and make your employees permanently more productive. That's good for everyone! We'd certainly be pleased to discuss this role with you.
