The "use-by-date" of a CEO LO10061

Rol Fessenden (76234.3636@CompuServe.COM)
18 Sep 96 21:58:15 EDT

Replying to LO10026 --

Dave Buffenbarger says,

Has it (downsizing) been successful? We shall see. Downsizing articles I
have read point to most (70+ per cent) companies not being any more
successful financially than they were prior to downsizing. Management by
fad says do what your network "board members" are doing. Gary Hamel even
talked about the "leming approach" by management at the Sustaining
Transformational Change Conference. Companies are so "unique" they even
hire the same sets of consultants to help them get ahead of their
competitors(who are doing the same thing they are)

== end quote ==

I have done an exhaustive but informal literature search on performance of
downsizers. The following are all true of 65% or more of downsizers.

Their financial performance is worse than their competitors in their same

Their stock performance underperforms their competitors in the same

Their productivity -- key goal of downsizing -- does not improve.

They end up downsizing again. And again. And again.

Some companies have legitimately allowed their bureaucracies to swell
during good times. Howeever, downsizing has been shown not to work as a
solution to productivity and profitability woes. On the other hand, in
difficult times, some companies can see no other way to reduce their
costs, and so they are still in a quandary. These companies may need to
shrink, but they also need to be careful of swollen expectations. Other
companies who down-sized "proactively" have found that it has generally
worked to their detriment.


Rol Fessenden LL Bean, Inc.

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