Organizational Linkages Understanding the Productivity Paradox (1994) / Chapter Skim
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11 ORGANIZATIONAL-LEVEL PRODUCTIVITY INITIATIVES: THE CASE OF DOWNSIZING
11 ORGANIZATIONAL-LEVEL PRODUCTIVITY INITIATIVES: THE CASE OF DOWNSIZING
Pages 262-290
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From page 262... ...
. The most successful downsizing they found, however, involved total factor productivity; that is, downsizing tended to be associated with a wide array of cost factors, as well as an aspiration to regain the nimbleness and spontaneity typical of younger, smaller organizations.
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From page 263... ...
Shrinking, retrenching, or consolidating the organization was viewed as a lastditch effort to thwart organizational demise or to adjust temporarily to cyclical downturns in sales. It was almost always targeted at bluecollar or hourly employees, and it was customarily defined negatively (Hirshorn et al., 19831.
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From page 264... ...
Instead of focusing on job redesign, working harder, and tightening up rules and procedures, downsizing became more focused on bottom-up participation by empowered employees, team coordination, and working smarter through redesigned work processes. In brief, downsizing was redefined as a productivity improvement strategy rather than as a last-ditch survival effort.
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From page 265... ...
A survey by the Society for Human Resource Management found that more than half of the 1,468 firms that downsized indicated that productivity had deteriorated as a result of downsizing (Henkoff, 19901. This conclusion is further substantiated by a survey conducted by the Wyatt consulting firm and
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From page 266... ...
The several investigations revealing that downsizing initiatives frequently do not yield commensurate gains in productivity appear to have identified another form of the productivity paradox. Indeed, this is an especially troublesome version of the paradox because it would naturally be expected that removing sizable amounts of overhead or slack from an organization's balance sheet would lead to increased organizational productivity.
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From page 267... ...
Consistent with the well-known justification, "What is good for General Motors is good for the U.S.," internal organizational improvements are often justified on the basis that, "What is good for the finance department (e.g., increased productivity) is good for General Motors." In the case of downsizing, cross-level organizational effects play an equally important role in determining the long-term "success" of the initiative.
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From page 268... ...
Second, the downsizing process may not have been managed competently in many firms, and thus the intended productivity gains have not been achieved (Whetter, 19811. In fact, in one set of studies the process by which downsizing programs were implemented was found to be more important than the actual downsizing strategies applied (Cameron et al., 19911.
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From page 269... ...
We briefly discuss each of these underlying causes of downsizing management mistakes in turn. Paternalistic Management The ineffective downsizing initiatives we have observed are indicative of a paternalistic management paradigm that was repudiated during the expansion era of the 1960s and 1970s, but that appears to be reemerging during the period of contraction that began in the 1980s.
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From page 270... ...
Their goal is to prevent further erosion of their organization's reputation by using problem-solving processes and solutions that have the stamp of"accepted practice" (Galaskiewicz and Wasserman, 19891. Truncated Decision Making The tendency to mimic the behavior of other highly visible downsizing firms is reinforced by the extreme time pressure generally associated with a performance crisis.
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From page 271... ...
This oversight results in implementation problems in most downsizing programs that substantially inhibit or diminish the anticipated productivity gains. Indeed, some downsizing initiatives are so disruptive at lower levels that organizational productivity is impaired (Cameron et al., 19931.
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From page 272... ...
The American penchant for action, however, actually lengthens the overall time required to plan and implement a program because the truncated planning (decision-making) cycle leads to a protracted implementation process often marred by multiple false starts.
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From page 273... ...
Most managers in charge of downsizing, therefore, share much less information than they should. Right Associates found, for example, that only 74 percent ofthe downsizing firms surveyed communicated information to employees about the reasons for downsizing, and less than half of the firms provided crucial details about the downsizing, such as timing and decision
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From page 274... ...
(1993) found that one of the most powerful predictors of successful downsizing is the involvement of internal and external constituencies in the planning and execution of downsizing strategies.
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From page 275... ...
They erroneously assume that the relief of avoiding a pink slip will overshadow any negative feelings ongoing workers have about the consequences of the downsizing process. In slightly more than half the downsizing firms in the Right Associates survey, the reasons for downsizing were communicated to the surviving employees.
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From page 276... ...
Both survivor guilt and survivor envy are likely to operate among employees in downsized firms. Myth 5: Spread the Pain-Don't Target Specific Areas for Disproportionate Reductions The Right Associates survey indicated that most organizations sunply hand down a mandate to downsize or cut costs.
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From page 277... ...
If top managers do not gather adequate data, assiduously analyze it, and prepare a rationale for prioritized downsizing, whether they administer it selectively or across the board will create defensiveness and · · criticism. The major problem with the across-the-board approach to downsizing is that cutbacks, by themselves, are generally an inadequate response to a deteriorated competitive position.
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From page 278... ...
However, it is just as obvious that for most such firms, excessive overhead is a symptom, not the problem. The overarching problem is poor performance, characterized not only by poor productivity, but also by poor production and service quality, inferior product design, insensitivity to customer needs and preferences, lack of accountability among top managers, lack of a global strategy, and so on (Drucker, 19881.
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From page 279... ...
The point is that hidden costs can escalate substantially when defensive or passive cost cutting occurs. Myth 7: When Raclical Change Is Requirecl to Avoid the Demise of the Organization, Aclopt a Revolutionary Model of Change Beginning with Top Management.
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From page 280... ...
Two Approaches to Downsizing The core argument thus far has been that prevailing myths about downsizing represent not ideal, but flawed, practice. The purpose of the downsizing initiatives characterized by these myths is too narrowly focused on cutting costs.
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From page 281... ...
Mode] B can be characterized as top management treating "subordinates as partners" in an organizational improvement program.
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From page 282... ...
It is neither exclusively short term in focus nor exclusively long term. In other words, instead of simply selecting a set of polar opposites, managers of effective downsizing programs combine seemingly opposing elements into a hybrid strategy.
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From page 283... ...
Successful downsizing firms pay equal attention to the transition experienced by the survivors. For example, one company held regular "forums" in which data were shared on the performance of the company and its major competitors, and it conducted sessions with blueand white-collar workers.
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From page 284... ...
Dramatic improvements in productivity, product quality, and a sense of corrective teamwork were outcomes of this event. Other firms have used name changes to spur improvements, such as renaming the quality control department the customer satisfaction department, or generated names and slogans for subunit teams (e.g., one product design team became Delta Force: "Seek and destroy errors before customers catch them"~.
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From page 285... ...
B downsizing strategies were associated with superior organizational performance compared to model A The most important predictors of effective downsizing in the Cameron et al.
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From page 286... ...
It is reasonable to assume that high organizational productivity is closely associated with assessments of organizational effectiveness and with competitive superiority. Hence, it does not require a large leap of faith to make at least an indirect connection between model B downsizing strategies and enhanced productivity.
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From page 287... ...
· Do our observations about effective downsizing strategies apply equally to all organizations? Or, do organizations that downsize effectively differ fundamentally from other downsizing firms in terms of their culture, structure, size, age, industry, history, and so on (Cameron et al., 19873?
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From page 288... ...
The purpose is narrowly defined as cost cutting, and the process is very much topdown-with limited employee involvement. In contrast, we have proposed an alternative perspective that incorporates a broader set of purposes and processes This dualistic approach is less disruptive to organizational productivity and more likely to produce desired organizational outcomes.
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From page 289... ...
Dutton 1981 Threat-rigidity effects in organizational behavior: A multilevel analysis. Administrative Science Quarterly 26:501-524.
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From page 290... ...
Whetten, D.A. 1980a Organizational decline: A neglected topic in the organizational sciences.
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