Failings of layoff frenzy prod companies to take aim on poor performers But corporate America is burdened by bad reputation as a judge of talent

November 07, 1993|By Kim Clark | Kim Clark,Staff Writer

As evidence mounts that many mass layoffs of the early 1990s backfired, more and more companies are approaching new layoffs with a revised strategy: removing the poorest performers.

They've resolved not to lose so many good workers to indiscriminate pink slips or broad early retirement offers -- moves that reduced productivity, hurt customer service and deepened losses. This time, they say, the layoffs will be different.

This time, it's personal.

"We have learned you don't do it by instinct, by section or by groups," said Al Kamhi, a spokesman for Bethesda-based Martin Marietta Corp. "We try to separate the wheat from the chaff."

But victims of the new style of layoffs, as well as many independent researchers, say that corporate America's emphasis on selectivity is too often a cruel joke.

Large corporate bureaucracies are notoriously bad at judging workers' performance. Those tapped in the latest round of cuts are often the politically powerless rather than the least productive, says University of Wisconsin professor Kenneth P. De Meuse, who has studied corporate reductions.

So, the companies' insistence that layoffs are based on merit is especially painful to those who lose their jobs. "It grabs at your self-esteem more now than before," Dr. De Meuse said. "You have to say, 'It is me.' You can't dismiss it" as fate.

Just ask Joe Hurst of Eldersburg.

After more than nine years of winning merit raises and surviving layoffs at Westinghouse Electric Co.'s factory in Linthicum, he was called in to his boss' office and given an "absolutely devastating" performance evaluation -- only the second evaluation he had received in his tenure there.

A week later, he was laid off.

And despite his conviction that the review was a sham, he suffered through depression and self-doubt. He remembers walking into job interviews and wondering if the inter

viewer thought: "There goes a loser."

The reasons for the new emphasis on selectivity are clear.

Several studies released this summer show that the layoffs of the late 1980s and early 1990s failed in achieving executives' goals.

In an American Management Association survey of members who had made reductions between 1988 and 1992, nearly two-thirds saw no productivity increase.

And in a study of large companies, Dr. De Meuse found that while nearly every company's profits fell from 1989 to 1991, companies that had layoffs saw profits plummet far more than those that hadn't.

Those studies accurately reflect a time of corporate chaos, say workers who lived through the cuts.

One former USF&G Corp. manager, who helped with two rounds of layoffs since early 1991 -- before losing her job in the third round -- saw co-workers turn into "scared rabbits."

After the first round of layoffs, productivity fell sharply, recalls the manager, who asked not to be named because she is looking for work.

Workers often spent good chunks of each day on the phone, finding out who had lost jobs and checking out the latest rumors.

Meanwhile, managers -- forced to cut workers but facing an increased workload -- often hired back the people they had just laid off, she says. "I know one woman who was laid off, brought back as a consultant, laid off again, brought back as a full-time worker and laid off again."

Meanwhile, the insurer's losses mounted. USF&G reported losing $213 million in 1991 and another $20 million last year.

USF&G says it took time to recover from the shock of slashing its

work force, which has fallen by 5,000 since Norman P. Blake took over in late 1990. But the cost reductions were crucial to the insurer's recent return to profitability, says spokeswoman Kerrie Burch DeLuca.

The company reported a $20 million profit and a 34 percent increase in productivity in its most recent quarterly financial report, she says. "Our cost savings goals absolutely have been achieved. . . . Productivity has demonstrably improved" as a result of the cuts.

Many companies, of course, still follow the old rules in layoffs. F.W. Woolworth is laying off all the clerks at the stores it is closing; many of USAir Group's recent cuts will be made according to seniority rankings.

But where unions or widespread closures aren't involved, executives insist they are getting better at culling out unproductive workers.

For example, a 1993 survey by the Wyatt Co., a management consulting firm, found that six of 10 executives believed recent -- layoffs had achieved cost-cutting goals. Responding to the same question two years ago, fewer than half of the executives said layoffs in the late 1980s had sufficiently reduced costs.

The key: doing a better job of evaluating worker performance.

Some companies have begun to realize that relying on a single manager's evaluation leaves too much of the individual's fate -- and the company's resources -- to personality and politics, says management consultant Craig Dreilinger.

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