Society's Re-Engineered Future

By McCarthy, Joseph L. | Chief Executive (U.S.), June 1996 | Go to article overview

Society's Re-Engineered Future


McCarthy, Joseph L., Chief Executive (U.S.)


When AT&T recently announced plans to restructure into three separate businesses and lay off 40,000 workers in the process, public opinion about downsizing reached critical mass. The pent-up rage of a decade in which up to 5 million middle managers alone were shaved from corporate payrolls exploded in the broadcast and print media, perhaps most visibly in a seven-part feature by The New York Times, which documented the reactions and conditions of rank-and-file employees-both those who were destroyed by the downsizing blast and those who survived.

While acknowledging the human consequences of downsizing and grappling with the precise role they must play in addressing them, many CEOs worry about its alternative-forcing businesses to run at a less-than-optimum level of efficiency. The price, they say, would be double-digit unemployment on a European scale and the loss of competitive advantage in such industries as manufacturing, chemicals, and financial services.

If downsizing is a necessary evil, what is the role of business and government in building a "new social contract"-that changed relationship between employers and employees in a global economy marked by deregulation, technological advances, free trade, and cutthroat competition?

CE asked a number of CEOs to describe this new contract, and how it might be built. Few say they wish to see government involved in ameliorating the effects of displacement, preferring to address the situation themselves with training and outplacement initiatives. Indeed, vaunted "learning organization" strategies play a large part in our respondents' model of the future, as they seek to create lifetime "employability" in the absence of a lifetime employment guarantee.

Many acknowledge that CEOs as a group do not wish to comment publicly on downsizing, fearing they and their companies would be scapegoated by the business press. Former Scott Paper CEO Al Dunlap, however, who last year slashed Scott's work force by 30 percent, urges his peers to step up to the plate.

"This is the key to the entire free-enterprise system, and everyone is running for cover," he gripes. "Society will pay the price."

ROBERT E. ALLEN, AT&T

As CEO, it's my job to make these changes work for AT&T's employees, customers, and investors. That has meant the restructuring of the company into three separate enterprises. Unfortunately, it also has meant downsizing. I've been criticized for deciding to reduce jobs while AT&T is a market leader, but I respond that a healthy company is better-positioned to absorb change. And competition within healthy industries creates jobs faster than the former regulated system.

I believe people need help from business to cope with the changes born of competition. Three areas are key, although I'm the first to admit I don't have all the answers.

First, a lifelong learning process can help people take advantage of new jobs and opportunities. AT&T spends $1 billion annually on employee education. Nobody can guarantee lifetime employment anymore, but updating skills can guarantee lifetime employability. Second, through the creation of industrywide job banks, businesses can develop leads for employees affected by downsizing. AT&T has identified 100,000 outside job leads for employees who must leave our company. Finally, businesses should help employees bridge the gap: When people leave AT&T, I know they're getting a good financial severance package, and a year's free health-insurance coverage for themselves and their families.

It's impossible to turn back the clock. But in addressing change in a straightforward manner, we can capitalize on today's business environment and create long-term benefits for all of business' constituencies.

DANA G. MEAD, TENNECO

Whether or not you call it a new social contract, restructuring and downsizing have changed the relationship between employers and employees.

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