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Issue Date: Vol. 50, No. 6, June 2010, Posted On: 6/20/2010


The Perils Of Downsizing Outweigh The Myths


Hank Schlesinger
swag@earthlink.net
vending, bulk vending, small business, business people, vending news, coin-operated, coin-op machines, vending machines, vending industry, Henry Schlesinger, Hank Schlesinger, vending times, Wayne Cascio, James Surowiecki, downsizing

A businessman I interviewed years ago took time out from my questions to mull his management style and philosophy. "My most valuable assets leave at five o'clock," he said, gazing thoughtfully out through his office window. "I'm talking about my employees."

I restrained myself from adding, "They leave here to lock themselves into a steel and glass box with a highly flammable liquid behind them, and a controlled explosion in front, while they zoom down the freeway at 60 mph."

My impulse to crack wise at the comment was overwhelming, since I knew the businessman didn't believe a word of what he said. You hear a lot of nonsense when you're a journalist. Even as the words left his mouth, we both knew with absolute certainty he'd drive a school bus packed with orphaned kittens and puppies off a cliff if there were a chance it would push his company's stock price up another 7%. It was, after all, an age when common wisdom linked stock prices to layoffs. A new word, downsizing, had recently entered the business vocabulary.

As it turns out, his spin about employees being "valued assets" was right. A growing body of evidence suggests that companies attempting to downsize their stock prices up or create increased efficiencies are probably doing neither. A recent column in New Yorker magazine by James Surowiecki noted that such companies as Circuit City and Citigroup were either punished or ignored by Wall Street following announcements of significant layoffs. It seems that downsizing, Surowiecki observed, may have the effect of making a company more productive and boosting the bottom line in the very short term, but the positive result vanishes in the wake of negative impact on morale and other unintended consequences.

Who'd have thunk it? Quite a few very smart people, actually. Wayne Cascio, a professor at the University of Colorado (Denver) and author of Responsible Restructuring: Creative and Profitable Alternatives to Layoffs (Berrett-Koehler), has noted that massive layoffs have an effect on surviving workers. According to the professor, they tend to become more risk-averse in an attempt to not rock the boat. Other survivor symptoms are increased absenteeism and turnover. These costs are hidden but significant.

For instance, a risk-averse individual, clinging to the status quo, will be less likely to propose innovation for fear of losing his or her job. Likewise, increased turnover and absenteeism place burdens on a company. It's not difficult to imagine a company going into a death spiral triggered by downsizing.

On the other side of the equation, the problem managers and business owners face isn't difficult to understand. Very simply, there are few positions within a company that easily offer quantitative measurements of employee value. Employers who have no problem measuring the employee costs very often run up against a brick wall when trying to determine the benefits of those costs. It's easy for the manager or owner to look over the vast prairie of cubicles and ask, "Who are all these people, what are they doing here all day, and why do they cost so much money?"

It isn't hard to imagine the businessman I interviewed gazing out over the parking lot harboring such thoughts about his employees, since he fancied himself tough-minded and pragmatic. He's history now; his company's product line having become noncompetitive, then obsolete and finally irrelevant. He would have done well to pay more attention to himself.


Topic: Editorial: Music and Games

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  • Lessons Learned From The Life Of The Mad Mogul Felix Dennis
  • Can Operators Cash In On Heavy Summer Traffic?
  • Are Vendors Adapting Too Slowly To Changing Retail Landscape?
  • The Dangers Of Binary Thinking In A Complex World

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