APPENDIX E - "After Downsizing - How to Rebuild"

After Downsizing - How to Rebuild

James W. Buttimer of Arthur D. Little, Inc., from December 1988 Boardroom Reports

For the thousand of companies that have suffered the pain of downsizing, it's time to map out ways to ensure that the pain was not endured for naught. By failing to follow up with plans for renewed growth, companies run the risk of . . .

Losing good people - those who survived the restructuring - because they fail to see where the company is headed. The company thus loses its capacity to expand into profitable new businesses.

Letting old habits creep back in: Adding layers of people, duplicating functions, etc. The company gradually loses its edge again - in a business environment that is far less tolerant of the inefficient.

Rules for rebuilding . . .

Pay more attention to the remaining workforce. Essential: As the company trims back, it needs people with a broader range of skills at every level; from hourly workers on up. Middle managers who are excellent at their rigidly defined specialties, but who close themselves off from the rest of company operations, aren't helpful in a lean, highly productive operation.

Start with more careful recruiting. After downsizing, the company should be much more selective than it was in the past. The luxury of hiring bright people and seeing what they can do and who survives is a thing of the past. Instead, you need top people to handle major responsibility.

Next, rethink the company's performance appraisal system. More rigorous evaluations are needed to keep top employees on their toes in an environment of tough competitiveness. Managers must deal with problem employees sooner and with directness. They must prepare candid evaluations and encourage feedback. If the company resumes its old habit of going through the motions of evaluating without taking serious action, fat will start to build up again.

Cultivate new skills in employees. Move them around among departments and job functions. The value of such lateral transferring is new to many managers, though it has always been a key part of the success of the best-run corporations. One of Procter & Gamble's many great strengths is its low-cost, high-quality production. Key to the training: Young people brought into production are usually rotated through two staff functions during their first five to seven years with the company, so that they can see how the company's "internal customers" react to what's done in production.

Share the scaled-down resources. Companies that strip away unnecessary jobs must guard against the inevitable creep-back. As soon as the dust settles from downsizing, managers will start to argue their need for "specialists" on their own turf to get the job done. Don't give in. It's always more efficient for managers to share secretarial, clerical, data processing and other key services with each other.

Helpful: New, more powerful computer communications. One engineering company is letting each of its three production sites around the country build up a different engineering specialty team. Each site now shares - by computer - the expertise of the other sites, as needed. Previously, all three units competed to hire the high-salaried experts.

Use ad hoc task forces to solve especially tough problems. Defense companies use what they call Tiger Teams of seasoned managers on an ad hoc basis to solve critical problems - such as a lagging production schedule on a vital production system. Drawback: Experienced managers are often entrenched in old habits and bureaucratic methods of getting things done. That stymies efforts to solve important problems.

New Idea: Ad hoc teams of younger managers. Ask senior managers from all involved departments to recommend the best and the brightest to serve on the team - under the direction of a top manager. The younger managers get access to other parts of the company, get a broad view of how the company operates and often come up with innovative solutions that elude senior managers who have become fixed in their positions.

Be serious and consistent about improving communications among survivors of the downsizing. After downsizing, the survivors are armed - ready to fight. They're worried and often bitter about what's happened to their co-workers and their company. These feelings may not be out in the open, but they're real nevertheless.

Pep talks and memos won't rebuild trust and loyalty. You can't give lip service to employees who have been through a major restructuring. Management's aim must be to create new excitement about the future of the company and to make survivors realize that they're extremely important parts of that future. Stronger personal ties between management and workers is called for in a post-downsizing environment, to re-establish stability and security.

Example: In one company, a senior vice president began inviting small groups of employees to dinner at a good restaurant once a month. He encouraged them to be pen about what was going on in the company, what they liked and didn't like, what they would change. The first groups were very reticent. But as the dinners continued and it became evident to the guests that the manager was eager to respond to their suggestions with action, rather than just words, communication blossomed. Problems were solved and the dinners began to play a role in rebuilding company spirit.

Bolster the reward system and make it apply to everyone. Incentive programs won't work if they're limited to a small group of managers at the top. And don't limit incentives to financial rewards - career development is at least as important as money to most people.