PSU Magazine Winter 1993

Downsizing i l • t'sjanuary 1993 . Newly elected President Bill C linton i trying enthusiastically to spur an American economic r urgence through job growth. But he faces a mindset among bu ine s executives that might be difficult to hake: downsizing. An a sociate professor of human re ources in PSU's School of Business Admini tration offer sugge tions on h w American companies can make the awkward tran ition from job slash– ing (down izing) to job growth (rightsiz– ing)-and ucceed in the process. "American companies need to deter– mine the be t configuration of job growth strategies that will help them su rvive in the 1990s." says PSU' Robert Eder, a specialist in trategic staffing. "I've got a sense that some companies are not cutting themselves to rid themselves of any ailment. They actua lly may just be bleeding themselves to death." The term "downsize" came out of the 1970s, when auto manufacturers began to reduce the size of their models in response to widespread fuel shortages. By the early 1980s the term expanded its meaning to de cribe ma - sive permanent layoffs in uch declin– ing industries as steel and auto manufacturing. Today it seems as if companie in nearly every industry are in the mid t of downsizing. JO PSU • • ts1z1ng "The desire to see organizations staffed in a lean fashion is here to tay," says Eder. "The bloated organization is not palatab le in the 1990s. The last ve - tige of that is in the public ector– govemmental agencie , universities, the military. We're already eeing those areas changing drastically." Eder and other bus iness ob erver agree that downsizing has its good po ints. But they also see many busi– nesses that appear to be downsizing for no succinct reason. Numerous companies pare their operations' payroll so they can reduce the cost of manufacturing a product. That's under tandable in the face of a sluggish national economy and increased global competition in the marketplace. Also, today's companies are trying to fo llow a "total quality management" approach that empha– sizes greater flexibility from top to bot– tom and a reduction in middle– management overhead. But some companies have perma– nently reduced their staffs for the wrong reasons. Some, wary of takeovers or acquis itions, reduced staffing simply to improve the bottom line-and make their overall financial performance look better than it really was. Other companies, says Eder, appear to be downsizing simply because their competitor are downsizing. This alarming trend cries out in an eye-open ing survey conducted last Job growth instead of job slashing may give American companies the competitive edge in the '90s marketplace. By Brian White Associate Professor Robert Eder September by the New York-based American Management Association. The as ociation polled 836 member companie about emp loyee layoff plans. One in four said they planned to reduce their work fo rce by June 1993. And, according to Eric Greenberg, the association's survey director, about 75 percent of bu inesses that downsize are profitable before they begin laying off people permanently. Continued ma sive layoffs are likely to haunt the first few months of the C linton administration, to no one's surprise.