Newspaper article THE JOURNAL RECORD

Downsiging Firms May Create Jobs

Newspaper article THE JOURNAL RECORD

Downsiging Firms May Create Jobs

Article excerpt

Though repeatedly assailed for downsizings in which many thousands of jobs are eliminated, America's biggest companies may actually be creating additional jobs.

That might sound contradictory but it isn't, says the man who makes the claim. It is, he says, a misimpression resulting from a failure to understand the process involved, and an overemphasis on lost rather than created jobs.

While downsizings aren't pleasant, the news isn't all bad, he says, because when big companies cut jobs, entrepreneurship may get a boost.

What is occurring, says Prof. Eugene Jennings, is an efficiency effort by large concerns in which they concede that smaller, entrepreneurial companies, less encumbered by costly overhead, can help them produce better.

In this way, says Jennings, professor emeritus of management at Michigan State University and long-time adviser to heads of blue-chip corporations, jobs are transferred to "off-premises employers," that is, to smaller companies.

These smaller companies, he says, often owe their existence to the large company's downsizing.

"IBM has shrunk by 60,000 jobs in the past few years but it has created off-premises more than 300,000 jobs," the professor stated.

He observes that smaller employers are expanding in many industries, including automotive parts, banking, environmental services, computer software and hardware, pharmaceuticals, chemicals, communications, telephone systems, office equipment, health care, medical supplies, capital goods and research.

Much of it is due, he says, to job-creating alliances the big corporations have developed among themselves or between themselves and smaller companies, the latter either established concerns or start-ups.

In the metropolitan Detroit automotive industry, he says, there exist 150 companies that weren't in existence five years ago. Most of them, he says, were encouraged with capital or promises of contracts from big manufacturers.

The truth, says Jennings, who has studied corporate structures for decades, is that "as many or more jobs are needed to sustain big corporations today as it took a few years ago. …

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