Spare the knife, spoil the company

Milton Moskowitz

May 17, 1993|By Milton Moskowitz

IN all the talk about big companies cutting costs and laying off thousands, people forget that a new career path that holds great hope for the future has opened up. Companies desperately need managers who can cut the fat out of operations.

Our leading business schools are not supplying us with managers who can breathe vitality into corporations. Many have added courses on ethics.

We don't need to instruct managers in the moral verities; they can get that in church. Where are courses in "The Art and Science of Laying Off People" or "The Temp Worker"?

IBM is in trouble because of the mindless generosity shown to long-time employees. During the late '80s, IBM let employees take early retirement with packages that provided as much as one week's pay (sometimes two weeks) for every year there. Often these packages came with benefits such as health insurance for the rest of the employee's life.

There was no need for this magnanimity. Where is it written that a person who has worked at a company for 20 or 30 years is owed something beyond a firm handshake and best wishes? That person should have been saving money and of course has Social Security to look forward to.

During the '80s, Kenneth H. Olsen, the founder of Digital Equipment, found himself on Fortune and Business Week covers hailed as a great entrepreneur.

He started a company in an old New England mill, a firm that eventually employed more than 100,000 people. He refused to give people walking papers even when sales declined -- a policy that bred loyalty.

Now we can see that such humanism was short-sighted. Ken Olsen is gone, people at Digital are being fired and the mill is being abandoned. Digital should have fired people years ago.

We need models like Christopher J. Steffen, who cut more than 4,000 jobs at Honeywell and went on to Eastman Kodak, which was bloated with more than 130,000 jobs and suffused with a culture that placed great value on people who gave the company their all in return for lifetime security.

He lasted less than four months. Evidently he clashed with the CEO, Kay R. Whitmore, who hates to fire long-term people. "Mr. Steffen is proud -- even boastful -- of his role in some bloody corporate restructurings," the Wall Street Journal reported.

IBM, which prided itself on never forcing people to leave, has hired financial ace Jerome York, who helped Chrysler cut $4.6 billion in costs during the past four years.

IBM has eliminated more than 100,000 jobs since 1985, mostly through early retirement deals. But more than 300,000 still work there -- plenty of fat for York to chop. When he joined Chrysler, it had more than 150,000 employees, today 99,000.

We're not grooming executives who can walk into a meeting of security analysts and say: "Good news. We're closing three plants and firing 20,000." That message will get a standing ovation -- and the company's stock will shoot up.

Some softies may worry about the people being fired from overstaffed corporations. Many need to be trained as bottom-line-oriented, cost-cutting managers who won't let people get in the way of profits.

Perhaps we need to revise the executive compensation system so that bonuses and stock option awards are triggered by large-scale dismissals.

We operate in a global marketplace. Why not dispatch the people we fire to places with a future like Malaysia and Mongolia? It's true they'll take wage cuts. But homes cost a fraction of what they do here.

Milton Moskowitz is co-author, with Robert Levering, of "The 100 Best Companies to Work for in America."

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