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Got to Give to Get

Downsizing has undercut employees' commitment to their company's success. Now managers will have to work overtime to restore it.

In the early, euphoric phase of the downsizing fad, corporate managers assumed that they could have it all -- investors would respond with enthusiasm to their personnel cuts, and a thinned-out workforce would deliver the high performance needed for growth and profitability. But it was not to be.

The perfect symbol of an era that is now passing is the aptly named executive-gun-for-hire "Chainsaw Al" Dunlap, CEO of the Sunbeam Corp. Last fall, weeks before announcing job cuts that would reduce the company's workforce by more than half, Dunlap boasted to the Wall Street Journal: "When a board of directors hires someone like me, the company is already dying. It's me or Dr. Kevorkian!"

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This focus on re-engineering and downsizing has transmitted a demoralizing message to employees. It may not be the message management intended to transmit. But it is the message that has come through. The first part of the message is: "Our corporate vision promises to give us success in the new global economy. We know the only way it will become a reality is if you, our people, give us every ounce of dedication." But the second, contradictory half of the message is: "Our No. 1 goal is to maximize shareholder value. In the pursuit of that goal, you, the employee, are expendable. We expect loyalty and top performance from you, but you must understand that we owe you nothing in return."

For employees, this mixed message violates their sense of fairness and undercuts their commitment to the company. They begin to withdraw their loyalty and to make plans either to leave the company or, more commonly, to give less to their jobs than in the past.

What about management's own understanding of this message? Do managers see it, as employees do, as a hypocritical, sanctimonious contradiction? Most do not. They see it as a difficult but manageable balancing act: On the one hand, they need to reduce costs by eliminating redundancies and demanding greater commitment from people; on the other, they need to keep employees reasonably well-motivated. So they use a combination of carrot (incentive pay for good performance) and stick (the threat of job loss). No contradiction there; nothing more than a passing moment of discomfort.

But after a decade of downsizing -- some 1.7 million workers and managers were shown the door in 1995 alone -- many executives have come to realize they have been sacrificing employee loyalty to short-term shareholder interests, straining their employees to the breaking point. They are now trying to rectify the excesses of their downsizing binge.

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