Newspaper article The Christian Science Monitor

Efficiency Gains Rare after Business Layoffs

Newspaper article The Christian Science Monitor

Efficiency Gains Rare after Business Layoffs

Article excerpt

A MAJORITY of the largest thousand corporations in the United States have "downsized" work forces in the last two years. Many of the remaining Fortune 1000 and thousands of other smaller companies will take similar action in the years ahead in the hope of containing costs and becoming more competitive.

But according to Kim Cameron, a professor of organizational behavior at the University of Michigan School of Business Administration, those efforts are likely to fail if the traditional methods of reducing staff are employed. The companies will be less productive - not more efficient.

The massive layoffs, early retirements, and other "grenade" approaches to cutting wage costs could also damage the morale and loyalty of the American work force.

"We will pay the price," Mr. Cameron said in an interview.

Cameron's thesis hangs on a three-year study he recently completed of 30 downsized operations within the automobile industry - assembly plants, suppliers, parts companies, etc. He talked with chief executive officers or managers regularly, and surveyed 3,000 management employees to find out what worked and what didn't. "Unless management is very good, the employees performed worse after the cutbacks," Cameron found. "In only five or six of the organizations I studied did I see a marked increase in productivity. In all the rest, performance went down."

The basic reason is that the managers did not pay sufficient attention to the human element. In a modern company, people are key to its success. They are individuals with talents to be developed, not replaceable pegs to be shoved around from slot to slot - or out.

When a firm engages in major cutbacks, it obviously can hurt those removed. Horror stories are abundant. Cameron tells of one manager forced into early retirement who saw two of six friends in the same situation commit suicide.) It also can devastate those remaining to pick up the corporate pieces. They may be faced with more work, unfamiliar tasks, pay freezes, and often a mean spirit among the survivors. …

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