Реферат: Downsizing Panacea Or Anathema Essay Research Paper

Observers across the political spectrum have found the behavior of numerous companies unseemly. Many large, successful corporations are permanently downsizing their workforces while earning record profits. Corporate executives are raking in multi-million dollar pay packages while workers pay stagnates or declines. Republicans such as Massachusetts Gov. William Weld and presidential contender Robert Dole have lectured corporations on their responsibilities to their coworkers and communities. Democrats such as Senators Edward Kennedy and Jeff Bingamin, Congressmen Richard Gephardt and David Bonior, and Labor Secretary Robert Reich have gone further and suggested that the government provide incentives that reward good corporate behavior and punish bad. The press has taken up the battle cry. “Corporate Killers,” blared the headline on an attention grabbing Newsweek cover story. The New York Times weighed in with an excruciatingly detailed seven part series that chronicled the plight of workers and communities caught up in what it called “The Downsizing of America.”

Wall Street and the business community have responded by defending their obligation to maximize shareholder value. As former Scott Paper CEO Albert S. Dunlop put it, “The reason to be in the business is to make money for your shareholders. The shareholders own the company. They take all the risks.” Among these shareholders, the argument goes, are pension funds and mutual funds serving a broad swath of American workers and consumers. The bottom line of this argument is that everyone is better off when corporate managers maximize shareholder value. This position is not a new one. Every since the sweat shops of the industrial revolution, there has been a tension between the perceived goals and practices of American industry and the periodic need of the community. Just how much a company should or should not base their policy making decisions on these pressures from the community is beyond the scope of this paper and does not bear more than a precursory mention later in the summation.

Having explored the less than lustrous results of the majority of reorganizations, it is apparent that a large percentage of the companies fail to benefit from their downsizing, Those that do recognize a short term gain in share price may find the benefit to be temporary at best. Those that are fortunate enough to truly recognize an increase in productivity, and increase in operating earnings, and a sustained competitive advantage as the result of a layoff, may find themselves somewhere down the road having a higher rate of employee turnover and a subsequent difficulty attracting and retaining to new talented and ambitious employees necessary to keep the professional ranks fresh and competitive. The conclusion would seem to indicate that downsizing has not been the panacea for ailing profits and sagging stock prices that many thought it would be.

Why such poor results? A fairly clear pattern is beginning to emerge. CSC Index, a consulting firm that focuses on re-engineering surveyed 5,800 organizations in North America and Europe about their experience with reengineering and received 497 responses. The final report has yet to be released, but after reading the preliminary results, the staff of The Economist (July 3, 1994) concluded that “perhaps the most important thing to emerge from the report, which chimes with other smaller studies, is that reengineering is not enough on its own. It needs to be linked to strategy.” In another study of the mixed outcomes of reengineering reported by three McKinsey consultants, their conclusion was also that lasting results were only achieved when the senior management had defined a clear and common vision of the business’ future and invested their time and energy in communicating that vision and working to bring it into being (Hall, Rosenthal, and Wade, Harvard Business Review, November-December, 1993)

A University of Michigan, four year study of 30 organizations undergoing downsizing found that one of the four significant predictors of organizational improvement during downsizing was “systematic analysis in advance of downsizing.” The findings of the study led the author to prescribe that downsizing be associated with a clearly articulated vision of the desired future of the organization (Cameron, 1994). This may sound like a restatement of the obvious, but “structure follows strategy.” That was the major finding of Alfred Chandler’s studies in business history (Chandler, 1962).

The findings of the studies mentioned above give rise to the observation that the choices and trade-offs involved in restructuring a business can only be made after answering the question: Where do we want to go in the future? They require a clear business strategy. Furthermore, when corporations engage in restructuring and downsizing they often wreck havoc in the lives of those directly affected and spread fear and uncertainty among those remaining. They can’t help asking the question, “Why are we doing this?” It is imperative for senior managers to be able to articulate a clear, strategic justification for restructuring to help their people appreciate why these changes are necessary to maintain the viability of the organization.

In the earlier examples given above, restructuring was conducted by large corporations in a kind of knee-jerk response to market pressures, mismanagement of corporate affairs, or through simple greed on the part of the executive board. In all of these examples there is one constant; the downsizing that resulted was the executive strategy for achieving a specific end result. As illustrated so thoroughly by fact and statistics, this approach can only hope to produce the desired result, but will most likely further impair the corporation’s ability to competitively produce in the future. Downsizing, rather than being The Strategy, should be the final outcome in the strategic planning process, if indeed, the strategic planning process leads the executive board to a downsizing decision.

Done properly, the corporation’s vision for the future will be the guiding light for the development of the strategic plan. Before the managers of any organization can determine how to do work better or how to organize to perform work more efficiently, they must first determine what work needs to be done and what processes are critical to perform. Opportunities for increased revenues as well as for reduced costs need to be examined. Choices among those opportunities can only be made on the basis of strategy.

There are several approaches to strategy that may be used to develop the details of the strategy that will most likely achieve the firms vision. A thorough analysis of all holdings and assets, market conditions, the competition, the internal and external social pressures that may arise, as well as the processes used to fabricate the goods must be undertaken. A well kept secret in most organizations is that strategy is seldom formulated, articulated or understood in a way that provides managers with a useful basis for making decisions about restructuring.

Armed with a full understanding of the corporations vision, goals, and the broad level strategic plan, the business unit level manager is then ready to conduct his/her restructuring planning. This information establishes clear strategic priorities for restructuring by identifying the capabilities that do and do not contribute to a firm’s competitive advantage. When restructuring is strategic, it is common for firms to upsize areas in which strategically important work is performed, while downsizing strategically unimportant work. Strategy clarification sets the stage for strategic restructuring by providing a logic for prioritizing organizational work. When the business strategy is clear it is possible to answer the following questions about an organization’s work:

What work should be the object of our most intense improvement efforts?

What work activities need to be improved together and which can be improved separately?

What work should be eliminated?

What work should we outsource?

When is efficiency (i.e., doing things right) and when is effectiveness (i.e., doing the right things) the most useful driver of important efforts?

(Barney, 1991).

The important message here is that although massive layoffs often result in a short-term gain in stock price and sometimes in a moderate gain in productivity, the long-term effects can be disappointing (and perhaps destructive) if the restructuring is not the final step of a business level strategic implementation rather than the first. It is important that strategy be defined and directed from a corporate level, but that the actual strategic plan be developed on the business unit level. Seldom is it the case that the same prescriptive changes directed from the corporate level are effective for each business unit within the company.

With a clearly defined strategic road map, a corporation will often discover the need to fortify or build up one aspect of the business process while trimming or divesting another. By providing the individual business unit with a clear vision of the firm’s goals and plans for the future while allowing them the autonomy to map their own strategic plan, a corporation can insure that the hard decisions and process level reengineering will be accomplished by the expert – those who work within the business process daily. Another benefit to the organization that uses this approach is the opportunity to function as a mentor and a coach to the individual business units while providing a corporate wide network for re-allocation of displaced resources.

There is a storm brewing on the horizon concerning corporate responsibility. The public outcry and political rhetoric witnessed today are but harbingers of the maelstrom of public opinion to come. The evidence is abundant. Presidential candidates noted the early popularity that Buchanan achieved when he began to criticize corporate behavior. Should the economy take a sizable downturn, corporation bashing may become a popular sport. Not that some haven’t deserved it.

A corporation that rewards it’s executives for short term stock valuation while ignoring the company’s real growth in terms of expansion or increased market share will be shortchanging the stakeholders in the company in the long term. This corporation will also face a growing public outcry against perceived disregard for the welfare of its employees and for the communities wherein they reside. These considerations, taken in light of the amassed evidence that huge layoffs most often provide only short-term gain and may do long term damage, should adequately emphasize the need for caution when considering a restructuring.

The seemingly obvious conclusion is that there are times and conditions when a decision to downsize is justified as a means of achieving strategic initiatives. The decision to downsize, although a painful one, is not anathema. If the decision is a part of a larger, broader strategic plan, there is a distinct possibility that displaced individuals may have the option to retrain, relocate, or to integrate into another discipline within the company. Any action that a corporation undertakes; if it is to succeed; if it is to provide material gain; if it is to improve market position, it must be the logical outcome of a strategic plan. Seldom are knee-jerk responses to market pressures the best.

“A Top Economist Switches His View On Productivity” New York Times May 8, 1996

Baker, Dean. “Trends in Corporate Responsibility: Getting More for Less?” Technical Paper.

Economic Policy Institute, Washington, D.C. 1996

Barney, J. “Firm Resources and Sustained Competitive Advantage,” Journal of Management, March 1991, 99-120

Cameron, K. S. “Strategies For Successful Organizational Downsizing,” Human Resource Management, 33, 2, 189-211

Challenger, Grey & Christmas. “People Trends” The New York Times March 3, 1996

Chandler, A. “Strategy and Structure: Chapters in the History of Industrial Enterprise,” Cambridge, Mass. :The MIT Press, 1962

Downs, Alan. Corporate Executions: The Ugly Truth About Layoffs–How Corporate Greed is Shattering Lives, Companies, and Communities. New York: AMACOM, 1995