Downsizing becoming a new trend

Downsizing has become the newest trend in the business world. Clearly, it is a reflection of current economic troubles.


However, such changes are long overdue as corporations have become burdened with oversize staffs.

Over the years, there has been a major evolution in the character of company management, which has entailed a progression from production-oriented business to a sales and strategy oriented one.

The personal direction of affairs by the owner-capitalist was replaced by a new group of managers, who ruled by virtue of their presumed expertise.

Businesses operated by systematized, professional ways, instead of the often highly personal manner hitherto. The overall philosophy in many cases was the bigger the better with the long-term consequences left to successors.

Rather predictably, such large corporations became bloated and only survived because they were carried along by a wave of general prosperity.

Corporate centres then became quite zealous in trying (in vain, of course) to control all aspects of management, but their hyperactivity was a failure.

Unfortunately, they also have been rewarding themselves with handsome pay packages and year-end bonuses unjustified by performance.

Maxim Consulting ran a survey of large corporations that confirmed the complete lack of supervision in large corporations.

It was startling that they revealed many chief executives were unaware of how much it cost to run their head offices, and did not know how many were working there.

In view of the business recession it has become obvious that corporations must cope with the new economic outlook.

Detailed was the requirement to emphasize efficiency above all, so quite naturally, downsizing became the first order of business.

A prime example of this is Nortel, not a newcomer in the Canadian business world, but one suffering from depressed profits in recent years. At long last, management is taking some remedial steps.

Several thousand jobs have been cut and disparate activities such as marketing and research and development have been turned over to other business units.

Private equity firms have served as examples with payroll cuts and slimmed-down organization centres.

Downsizing led to the outsourcing of many operations that headquarters were “too busy” to oversee. Direct control of some production and services by other terms followed.

These changes have helped to keep central office staffs at manageable levels.

Corporations now are just beginning to devise a new strategy to get through tough economic times. This may be painful for many over the near term, but beneficial for the future.

Bruce Whitestone