You Can Get Thin, But It's No Way to Get Healthy: The Perils of Appalling Downsizing

Recently we spoke with a senior HR executive whose organization is undergoing the travails of downsizing. His frustration was clear: try as he might, he was unable to bring top management to address the issue of motivating the remaining employees.

Later that day, we came across an article headlined, "Workers Air Their Gripes on Southland Radio Show." The article described a growing number of grievances resulting from the cavalier attitudes that many corporations are taking toward their employees in these 'lean and mean' times.

Globalization of markets, accelerating technological development, transforming economies and lingering recessionary pressures are all driving a frenzied focus on quality improvement and cost reduction. In concrete terms, this is taking the form of downsizing, debureaucratizing, delayering, process redesign and a pantheon of organizational strategies and tactics. The toll on the human component of organization is beginning to sound some alarms.

Economists, consultants, and even some corporate executives are expressing concern that Corporate America may be cannibalizing its future. "Until companies understand what creates value for their customers," says John Parkington, who conducted a study of corporate restructuring for the Wyatt Company, "what they will continue to do is somewhat mindlessly lop off expense, eventually constraining the ability to generate new revenue."

While "restructuring is a good thing, in that it is laying the foundation for the future," comments Michael Porter of the Harvard Business School, "it will yield results only if it includes investment in people, training and new products."

Numerous study findings are confirming the suspicion that restructuring and downsizing efforts are not achieving their expected goals. "My darkest fear," confides Morgan, Stanley & Co. economist Stephen Roach, "is that, in the name of getting lean and mean, we will have hollowed out our corporations so much that we won't have the capacity to meet the demand when the work economy finally picks up." "This continuous downsizing - it's corporate anorexia," quips Gary Hamel, British competitiveness expert. "You can get thin," he adds, "but it's no way to get healthy."

The message is profound: short-term financial fixes are being achieved at the expense of the macro organization and the people who make it work. Smart organizations will heed these warnings. Playing catch-up with a disgruntled work force is no way to achieve long-term success. Quotes from The Washington Post, January 10-16, 1994.