I Academy of Management Executive, 1993 Vol. 7 No. 1
Downsizing: what do
know? What have we learned?
Wayne F. Cascio, University of Colorado
the planned elimination of positions or jobs, is a phenomenon that
hundreds of companies and miiiions of
is no shortage of articles on
"How To" or "How Not To" downsize,
the current article attempts to synthesize what
is known in terms of
and organizational consequences of downsizing.
We argue that in many firms
benefits fail to materialize, for example, lower expense
ratios, higher profits,
increased return-on-investment, and boosted stoclr prices.
Likewise, many anticipated organizational
lower overhead, smoother communications, greater
increases in productivity.
To a large extent, this is a result of a failure to break out of the traditional
approach to organization design and management
an approach founded on the
principles of command, control, and compartmentalization. For long-term,
sustained improvements in efficiency,
reductions in headcount
need to be
viewed as part of a
process of continuous
improvement that includes
organization redesign, along with broad, systemic changes designed to
eliminate redundancies, waste, and inefficiency.
like a "who's who" of American business. Is there no end to it? It seems to be
endemic to the 1990s. In fact, it's hard to pick up a newspaper on any given day
and nof read about another well-known organization that is announcing a
corporate restructuring (a.k.a., cutting workers, and, in some cases, selling off
other assets). By the end of 1992, just to cite a few well-known examples.
International Business Machines will pare down by another 40,000 workers, and
Xerox will cut 2,500 workers from its document-processing division. By mid-1993
the Postal Service will eliminate 30,000 of 130,000 management jobs, and TRW,
Inc. will cut its work force by 10,000 people, or fourteen percent. By 1995, General
Motors will cut 75,000 workers. More than eighty-five percent of the Fortune 1000
firms downsized their white-collar work forces between 1987 and 1991, affecting
more than five million jobs. More than fifty percent downsized in 1990 alone.
Across the total economy, counting
jobs held for at least three years, 5.6
million people lost permanent jobs from 1987 through 1991.' In short, companies
large and small are slashing jobs at a pace never before seen in American
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