Leaner Firms Not Necessarily Meaner Ones

One presumes that the irony was unintended when the House voted the other day to ban mandatory retirement at 70 years of age. The way things are going in business these days, it’s mandatory retirement at any age after 45--and layoffs regardless of birthday--that has office workers terrified.

Name a big company and it’s certain to be cutting office staff. Outfits such as Eastman Kodak, Xerox and Polaroid that once were known for policies amounting to lifetime employment have pushed people out the door through early retirement or layoffs. IBM is clinging to its no-layoffs policy but transferring staff people out of offices and into the field where they can call on customers. And now American Telephone & Telegraph, once regarded as the country’s most loyal employer, has asked its divisional executives to compile lists of the expendable from among its 100,000 managers. Those named will be offered early retirement, and if there are not enough takers, the offer will become an order.

What is going on? A widespread attempt to trim corporate fat and tone up profitability, obviously. But more than simple cost cutting is involved. What is occurring is a shift in U.S. corporate policy that has as much importance for young people starting work as for company veterans.

Implications of Downsizing

Some implications of this “downsizing” phenomenon are: a) that jobs at company headquarters will be fewer but more demanding; b) that you will be responsible for your own career with little chance that a warm and friendly company will be your guide and teacher and--a corollary--that the idea of spending an entire career with one company will become increasingly passe.

But predictions are foolhardy because, clearly, the issue goes beyond dollars and cents. “It’s a breaking of the psychological contract that said I come to the company and work hard and the company rewards and takes care of me,” says Chairman William Morin of Drake, Beam & Morin Inc., the leading firm in outplacement, as the business of finding work for the corporate dispossessed is called.

Why is it happening? So that U.S. business can increase white-collar productivity, says the management consulting firm of Cresap McCormick & Paget, which surveyed 71 big companies in collaboration with the American Productivity Center. The survey found U.S. business striving to emphasize direct production and sales work--called the line functions in corporate parlance--at the expense of the support services, or staff functions. That means the sales force of the future will need to do its own financial and market analysis, because there will be no one at headquarters to do it for them.

Productivity Gains Mixed

So is productivity rising? Government statistics don’t show it yet because our economy is changing rapidly and unpredictably, says A. George Gols of the research firm Arthur D. Little Inc. “Productivity undoubtedly increased at the firms doing the downsizing,” explains Gols, “but elsewhere in the economy the newly employed are being hired in areas where the productivity is not high.” Child care is such an area, and outside computing services for business is another. These activities tend to hire young people and the work is often part-time.

Indeed, the Labor Department reports that 17.4% of those employed now work part time, compared to 16.6% a decade ago and 15% in 1970.

To be sure, increasing part-time work while loyal employees lose their jobs doesn’t sound like a description of good times. And the fact that we are not alone is small compensation--Japanese companies, too, are looking for ways to reduce the expanded staffs that have grown like moss on their corporate organizations.

But a tougher environment need not be a depressing one; indeed, it could be bracing. Citibank is telling the young people it recruits these days that they must take responsibility for mapping their own careers, that the company won’t provide steady promotions to guide them. And for the older employees, they can look for expanded job responsibilities and authority in a leaner organization.

Perspective is essential. Consider the experience of Johann Sebastian Bach. He was 38 years old when he competed with five others for the job of choirmaster at St. Thomas Church, Leipzig. He got the job, not because of his already growing musical reputation but because he alone agreed that along with his other duties he would teach Latin five days a week to third and fourth graders in the church school.

These may not be the best of times, but they are not the worst either. Individual effort, and luck, frequently overcome difficulties; life is more random than the phrase career path implies.