Businesses question whys, hows of laying off middle managers
Pink slips abound. Some 24,000 are to be axed at American Telephone & Telegraph. In the next five years, Ford Motor Company will cut 10,000. Union Carbide, CBS, Kodak, Motorola, Burroughs, Du Pont, Phillips Petroleum . . . the litany of layoffs includes many of the major corporations in America. And middle management is not immune. Management belt-tightening is not uncommon when the economy stagnates, as it has done this year. But this time around, management has more to contend with.
Deregulation has increased competition in the airline, broadcasting, long-distance telephone, and banking industries. On another flank, low-cost foreign manufacturers are snatching away market share from American producers. Moreover, the waves of ``merger mania'' are resulting in layoffs as companies consolidate.
So management is diligently trimming excesses.
``We don't have the luxury of keeping redundancies. We are becoming very conscious of our vulnerability to foreign competition. To get `lean and mean,' it's easier to cut staff than cut wages,'' says Karen Emig, professor of management at De Paul University.
Cuts in management often hit those supervisors not directly involved in production, those in jobs where it's difficult to calculate what value is added by their position. Advertising and marketing staff are common targets. And ``I know for a fact that strategic planning is a place where they are using a machete,'' says Ms. Emig, who is also a strategic planning consultant. ``Now they want operational people to be the planners.''
For instance, at General Electric, about one-third of the strategic planning group now consists of hands-on production managers who rotate through regularly.
The flattening of the managment pyramid also reflects a more enlightened approach to running a business, says Norman Bodek, president of Productivity Inc., a Stamford, Conn., consulting firm.
``We're rethinking how the worker can be involved in the creative process,'' Mr. Bodek says. ``We can't compete with the Japanese if we have all these extra layers of managers just to watch other layers.''
Reducing the layers of management between the production line and chief executive is a worthy goal, experts say. But the method of laying off workers is often imprecise. It's frequently done in a hurry to bolster earnings. Invariably, talented people are discarded.
If an early-retirement program is offered, it's tough to tell how many people will leave, or which ones. In some cases, in the interest of impartiality, a 10 percent slice is made right through the corporation. But that is a poor practice, productivity experts say, because it penalizes both efficient and inefficient divisions equally.
``All too often productivity programs are used as clubs instead of tools,'' says John Weber, project manager in the Seattle office of URS Corporation, a consulting firm. Such tactics are poor long-term management, according to Mr. Weber. ``As soon as you tie layoffs to a productivity program, it becomes less effective, because people start fudging the numbers.'' Productivity must be an ongoing, integral part of management -- not a cost-shaving venture at every sales dip, Weber says.
The URS productivity division emphasizes the principles used at Intel Corporation. In four years, starting in 1979, some $17 million in purely administrative cost reductions were made without any layoffs, asserts Keith Bolte, a former Intel manager, now senior vice-president at URS.
The URS program starts by plucking ``low hanging fruit'' -- reducing costs in departments with easily rectified inefficiencies. ``Large staffs doing similar functions are good areas of opportunity,'' says Weber. He lists finance, distribution, loan, engineering, and claims processing departments. By reaping successes there, the program tends to garner support from top management and other divisions.
Heavy emphasis is placed on making the URS productivity program an internal process, showing managers how to identify inefficiencies and letting them take it from there. That way, when the consultant leaves, the program stays, Weber says.