Corporate America Is Mismanaging Its Employees

Article excerpt

Corporate downsizing has become a nearly universal fact of life in American business, both in good times and bad.

Even as the American economy grew handsomely last year, companies cut 516,069 jobs overall - compared with only 316,047 in the recession year of 1990, and 555,292 in the trough year of 1991.

Becoming the low-cost producer is now the paramount objective of nearly every corporation, no matter what its business.

Because wages and benefits constitute two-thirds of company payrolls, people must be cut, again and again.

Hence, layoffs have continued apace in the prosperous present, even as corporate profits rise. They grew impressively in 1993, 1994, and again in the first quarter of 1995.

Wages are also being held down, of course, and now so are the costs of employee benefits.

The Labor Department recently reported that the increase in employee benefit costs was a mere 2.8 percent in the year ending March 31, the lowest gain in eight years.

Much of this low rate of growth reflects an effort to hold down medical and pension costs for both current and retired workers.

All this to meet the challenge of foreign competition, the uncertainties of the future and to please the stock market.

Indeed, there is no better way to raise the price of a company's stock today than to an- nounce a new round of job cuts.

Mobil Oil Corp.'s report this month that it would cut an additional 4,700 workers - it has shed 10,000 since 1991 - sent its stock soaring to a 52-week high.

Market analysts are now routinely bullish in response to cost cutting, which has become a veritable corporate religion that even shareholders have adopted as their own.

But there is a problem with continuing layoffs - in fact, several, and they are quite serious from the point of view of the long-term health of American business.

First, continuing layoffs destroy the loyalty of the work force.

Second, they demoralize and thus retard the productivity of those who remain, who fear they may be next, which in many cases they are.

Third, the insecurity they produce retards consumer spending by those still employed, who reasonably fear they soon might not be.

But all these objections, which management by and large dismisses as either insignificant or merely short-term in their effect, pale beside much more grievous consequences.

Being the low-cost producer isn't enough to guarantee success, though the notion has now become a virtual corporate mantra. …