bout a year and a half ago, I had the opportunity to present a paper on downsizing at a Cutback Management Training Conference sponsored by a regional association of the American Society for Public Administration. Back then, Vice President Gore's National Performance Review was calling for a reinvented government that worked better and cost less. Reducing the size of the civilian workforce was one piece of this effort, but it wasn't viewed as an end in itself. Agencies had been assessed their share of an overall goal of cutting 272,900 federal jobs-an average of about 12 percent to be achieved over five years. The hand-wringing and teeth-gnashing were proceeding in earnest.
Oh, how the world has changed since then. Now we've lived through a budgetary train wreck, a series of partial shutdowns of the government and steep cuts in agencies' appropriations.
Human resources managers, who bemoaned the consequences of a 12 percent cut over five years, now face reductions of 15-20 percent in a single year. And me? Well, my agency, the Commerce Department, barely escaped with its life last year, and is still targeted for elimination by zealous budget-cutters. The Office of the Assistant Secretary for Administration-where I work-is planning for a 25 percent cut and young staff members I recruited, hired, trained and promoted see the prospect of being out of work.
As a result, I have a new understanding of downsizing. So let me offer some thoughts to my fellow career managers as we try to cope with new challenges that require faster action, more creativity, more flexibility and closer partnership with employees and customers than is typical in the traditional bureaucracy.
Downsizing for Success
Downsizing is, without a doubt, a growing trend. More than 85 percent of Fortune 1000 firms cut employment between 1987 and 1991. Between 1991 and 1994 alone, U.S. job cutbacks increased from 111,285 per year to nearly 400,000. News headlines report the grim statistics on a weekly basis across virtually every industry: "IBM trims 20,000 workers," "Frito-Lay pares staff by 30 percent," "AT&T cuts 40,000 employees," "Digital to cut workforce by one-fourth," "Aetna cuts 2,600 employees."
The American Management Association (AMA) has reported that 69 percent of companies it surveyed have downsized at least once since January 1988; 48 percent at least twice; and 26 percent three times or more. Downsizing has become the norm in corporate America and, since the creation of the National Performance Review, in the federal government as well.
In early 1991, the Wyatt Co. conducted a study on corporate restructuring practices that companies used in the late 1980's. The conclusions of that study can be summarized as follows: Much restructuring (primarily downsizing) took place in order to improve profits and reduce expenses, yet few companies achieved their profitability and expense reduction goals through restructuring. Morale and motivation among the surviving employees suffered.
Fortune magazine summarized these findings more succinctly: "Downsizing, as commonly practiced, is a dud."
Examples of successful reinvention may be elusive, but several can be found in "The Reinvention Roller Coaster: Risking the Present for a Powerful Future," an article that appeared in the November/December 1993 Harvard Business Review. In this article, management consultants Tracy Goss, Richard Pascale and Anthony Athos argued that organizations must abandon their most basic assumptions and manage from a vision of a seemingly impossible future. British Airways, Eurocar and Haagen-Dazs, for example, all boldly stated what they wanted to become and set up management processes as if that future were already in place.
The notion that companies should stretch themselves to achieve unprecedented goals is spreading to more and more companies in the private sector. In last year's letter to shareholders, General Electric Chairman John F. Welch Jr. told them that "stretch is a concept that would have produced smirks, if not laughter, in the GE of three or four years ago, because it essentially means using dreams to set business targets-with no real idea of how to get there."
Incremental goals, argued Welch, "inspire or challenge no one, capture no imaginations. We're aiming at . . . the introduction of more new products in the next two years than we've developed in the last 10. In a company that now rewards progress toward stretch goals rather than punishing shortfalls, the setting of these goals, and quantum leaps toward them, are daily events."
Before and After the Cuts
Unfortunately, achieving such lofty goals often involves downsizing, and downsizing is a lot like surgery: It is traumatic, tedious and emotionally draining. In a 1977 article in Public Administration Review, Rufus Miles argued, "It is important that . . . a thoughtful judgment [be] reached that the wielding of the surgical knife is going to achieve a purpose that, after a period of recuperation, will be worth the trauma. And the surgical knife should not be wielded again and again before the healing process from earlier incisions has been completed."
Many managers believe that once they've decided whose services no longer will be required, informed those individuals and worked out severance and outplacement programs, the hard part is over. But the real work doesn't begin until after the downsizing. Morale of those who remain hits an all-time low, confidence is shaken, communication is fragmented and trust becomes a memory. Most employees are in the midst of their own individual grieving process for colleagues who are no longer there and for an implicit employment agreement that is gone.
At the same time, those who remain are trying to figure out why they were chosen to stay with the firm. Was it because they had some sort of special talent? Or was it simply a roll of the dice?
Amid this spiraling confusion, the employees who remain often don't understand the firm's new vision. With one skeptical ear they listen to management's messages. With the other, they expect to hear the thud of another shoe dropping.
This situation calls for leaders who can manage in a changing environment-a new breed of managers who are more entrepreneurial, more attuned to their customers and better able to instill confidence, trust and stability.
The starting point is preparation prior to actual downsizing. At that point, senior managers must clarify their objectives and define their strategic goals. Fundamental questions need to be asked, such as: Where is the organization going? What does it want to achieve? What is in the way? And what needs to be done to overcome all of these obstacles?
David Noer, author of Healing the Wounds (Jossey-Bass, 1993), a book about helping companies recover from layoffs, says executives should never talk about job cuts solely in economic terms. That, he writes, "is like going to a funeral and reading a statement to the widow that her husband's death, while regrettable, was actuarially necessary to make room on the planet for other people."
Recognize too, Noer counsels, that the organization is literally in mourning. One of the fundamental ways management can help is by providing those who remain with the opportunity to deal with their sense of loss and the tools to deal with the changes that are occurring.
The next step, of course, is to take all that grief and concern and convert it into positive action. It's important to have everyone pulling in the same direction. Training, retraining, recognition for significant contributions, meetings to discuss future opportunities and the like-all are necessary.
During the process, it's important for top managers to listen as well as to talk. After a major downsizing, senior managers at Bank of America held many brown-bag lunch meetings with employees. This gave employees the opportunity to discuss how they felt about the layoffs, the company's future and their future with the company. At Commerce, we've had a series of "all-hands" meetings and several brown-bag sessions to explain the current budgetary and organizational situation, and we've used e-mail messages from Secretary Ron Brown to communicate with employees.
How well do most organizations do in this regard? "See you later," appears to be about the only warning most veteran workers get in the 1990s before they are laid off. More than half of workers laid off between 1991 and 1993 who had worked for their employer for at least three years got no written advance notice of termination, the Labor Department reports.
Renewal and Revitalization
Change is not something employees are universally ready to handle. To a large extent, management's role is to prepare people to adapt to changing environments, providing employees with the tools to better deal with the future.
In today's turbulent times, much of the ownership for career management will shift to individual employees. Equipping people with the skills to understand their own strengths, limitations and motivations and to define their career needs and goals can ensure they create the right places for themselves.
In the July/August 1994 issue of Harvard Business Review, Robert H. Waterman, Judith A. Waterman and Betsy Collard argue that organizations must now shift from the traditional focus on employment to a new focus on employability. "It is the company's responsibility," they write, "to provide employees with the tools, the open environment, and the opportunities for assessing and developing their skills. And it is the responsibility of managers at all levels to show that they care about their employees whether or not they stay with the company. The result is a group of self-reliant workers-or a career-resilient workforce-and a company that can thrive in an era in which the skills needed to remain competitive are changing at a dizzying pace."
In March 1995, months before fears that the Commerce Department would be dismantled or at least cut back severely, the department established a Career Reinvention Center. "The world and the workplace are changing rapidly," said Secretary Brown. "Department of Commerce employees will thrive if they learn to embrace change and steadily reinvent their skills and careers. At the Career Reinvention Center you will find the tools to craft your future."
What are some of those tools? Workshops on making over your career, composing a resume that sings, assessing your strengths and stretching interviewing and networking skills. Self-assessment computer programs to help employees explore their work and life options. Brown-bag lunches on career issues. And confidential sessions with certified career counselors to help employees find motivation and assist them in setting goals for their careers. Since the job outlook has turned troubling, the Career Reinvention Center has been inundated.
The Cutting Edge
These days, organizations that were recently superstars find themselves stagnated, frustrated and often in seemingly unmanageable crises. The phenomenon is by no means confined to the United States. It has become common in Japan and Germany, the Netherlands and France, Italy and Sweden. And it occurs just as often outside business-in government agencies, hospitals, museums, libraries and churches. While the United States has been on the cutting edge (no pun intended) in streamlining, other countries are now stepping up to the challenge of restructuring their workforce-Canada, the United Kingdom and Uganda, to name a few.
These countries can call on a variety of tools to get the job done. Management theorist Peter Drucker has noted that not in a very long time have there been as many new major management techniques as there are today: downsizing, outsourcing, total quality management, economic value analysis, benchmarking and reengineering. Each is a powerful tool, but each is primarily designed to do differently what is already being done.
We also need to be aware, though, that what to do is increasingly becoming our central challenge. Drucker calls for the development of a new "theory of the business." It's the old "vision thing." And we will need to focus on it in the months and years ahead.
NEXT STORY: Meltdown