DownsizingWhatdoweknow - I Academy of Management Executive...

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I Academy of Management Executive, 1993 Vol. 7 No. 1 Downsizing: what do we know? What have we learned? Wayne F. Cascio, University of Colorado Executive Overview Downsizing, the planned elimination of positions or jobs, is a phenomenon that has affected hundreds of companies and miiiions of workers since the late 1980s. While there 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 the economic and organizational consequences of downsizing. We argue that in many firms anticipated economic benefits fail to materialize, for example, lower expense ratios, higher profits, increased return-on-investment, and boosted stoclr prices. Likewise, many anticipated organizational benefits do not develop, such as lower overhead, smoother communications, greater entrepreneurship, and 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. In My View American Telephone & Telegraph, Eastman Kodak, Citicorp, Goodyear, Digital Equipment, Amoco, Chevron, Exxon, Black & Decker, CBS, ABC. The list reads 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 only 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 economic history. What's Different About the Current Cuts? In previous business downturns, manufacturing has tended to take the big hits.
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