Downsizing has its price

A 9-yr-old would understand that chopping workers from the payroll will save a company money. But he might not understand how it could cost a company money.
By Raymond Dreyfack October 1, 1999

A 9-yr-old would understand that chopping workers from the payroll will save a company money. But he might not understand how it could cost a company money.

One way this might happen is via the side effects of lowered morale, reduced productivity of remaining workers, damaged public relations both in-plant and in the community, plus resignations of employees you may not want to lose. Another side effect coming more and more into play these days involves the surge of unionization in U.S. plants.

“After years of eclipse,” writes Marc Levinson in Newsweek , “America’s much maligned labor movement is finally enjoying some sun.” He goes on to say, “Anger over corporate cutbacks and meager pay hikes is giving the movement its biggest boost in decades.”

A sobering thought, as Maintenance Manager Harry Forstner learned the hard way. Forstner was in overall charge of maintenance in the company’s main and three subsidiary plants. Responding to top management’s continuing pressure for improved bottom line results and a leaner operation, he felt the timing couldn’t be better to become a hero in his own right and give his career a nice boost.

With this thought in mind he designed a “restructuring plan” that would chop almost 100 employees from the payroll, and save the company thousands of dollars. Proud as punch, he marched with his brainstorm into Plant Engineer Arthur Gordon’s office.

Question: How do you like Forstner’s rationale? Is this a good way to win top management recognition? Or not?

Gordon’s response: Gordon winced when he heard Forstner’s plan. “Grate idea,” he said. “That’s spelled G R A T E. I’ll tell you why. We have to weigh the savings against the potential loss. The dollar payroll deduction is clear. Less obvious is the loss in terms of skilled people who will find other jobs with the training and experience investment the company made in them down the drain. Not to mention the negative morale jolt that would result in causing some employees we don’t want to lose to resign. Plus the adverse public relations effect on the community. And on top of that, with the union pressing to get in here for months, this could be just the kind of break that they need. I’m glad you’re thinking in bottom line terms, Harry, and while a a few cuts might be in order, firing 100 people in one shot could be unsettling enough to cancel any gain we might make.”