Frank O’Reilly, Glenn Schrader and Gary Peterson are in their shirtsleeves, ties loosened at the neck. Open briefcases, ballpoint pens, notepads and half-empty coffee cups are strewn about the table around which they sit. Somebody wisecracks, and an easy ripple of laughter spills out of the small conference room into an outer office, where computer monitors flutter and telephones whine with urgency.
It could be a meeting in any of hundreds of corporate offices located in the heart of Chicago’s business district.
But it isn’t.
Nor are the three men gathered in this conference room talking about introducing a new product or making a new acquisition or even analyzing some new outlay of precious capital. Instead, they are talking about themselves-their careers, their accomplishments, their aspirations, their expectations. But most of all, O’Reilly, Schrader and Peterson are talking about how they and hundreds of thousands of other Americans like them have fallen victim to the fever called downsizing that is gripping American corporations.
How much of a fever? Since last January alone, U.S. corporations have announced more than 449,634 layoffs, according to figures compiled by Challenger, Gray & Christmas Inc., a Chicago-based outplacement firm. And in the last five years, a record 1.5 million executives, managers and administrative professionals have lost their jobs-double the number who were laid off from 1981 to 1988, according to the Bureau of Labor Statistics.
So here, in the offices of the Forty Plus of Chicago Inc., a 55-year-old not-for-profit organization set up during the Depression to help middle-aged, out-of-work executives and professionals re-enter the workplace, O’Reilly, Schrader and Peterson are talking about the jobs they lost-good jobs, the kind that sometimes come with corner offices and six-figure salaries. And they are talking about corporate loyalty, as in: Whatever happened to it?
Like bells tolling for the departed, the questions are resonating throughout a bleak wasteland of disenfranchised American workers forsaken by corporations that are eliminating benefits and shrinking themselves in an unprecedented orgy of downsizing.
We have all heard the laments; are hearing them every day in our homes, our offices, our factories, at gatherings with friends and relatives:
– Why are highly skilled managers and professionals with 25 and 30 years on the job-people once considered prized employees-suddenly looking over their shoulders, wondering if they will have a job next year, next month or even next week?
– Why did a recent national survey reveal that 63 percent of middle managers feel less loyalty to their companies today than they did five years ago? And of even greater significance, why did the same survey find that 57 percent of American corporations feel less loyalty to their employees?
– Why did another national survey of 400 middle managers recently report that 33 percent distrust their immediate superiors and 55 percent don’t believe anything top management says?
– Why are men and women who have enjoyed relatively successful career paths suddenly showing up at work feeling condemned by their own success-as if their salaries, their accrued benefits and even their age are part of some conspiracy to destroy the corporation?
– Why is it that employees, once lauded by CEOs as the most valuable asset of a company, are now considered liabilities or at best just another cost of production, to be whittled and squeezed and chopped and diced and discarded like some out-of-date mainframe computer or turret lathe? O’Reilly, Schrader and Peterson have not only heard these questions, they have asked them. And now they are trying to answer them.
Don’t get them wrong. O’Reilly, Schrader and Peterson aren’t sitting around grumbling and sniveling. As with other middle- aged American managers and professionals who have lost their jobs and who have come to the Forty Plus Association for help, they are actively updating their resumes, tabulating their talents and accomplishments and pursuing new opportunities.
But when asked to talk about what’s going on in the American workplace, they are not shy about volunteering their sentiments.
If you could synthesize the gut-wrenching feelings these men are expressing about life and work into a couple of paragraphs, they would sound like this:
“You go to school, maybe even to college. You acquire marketable skills. You get a job. You work hard, contributing your time, your energy and your creativity to help your company grow. You make sacrifices, many of them personally painful ones at the expense of your family. In return, your grateful company rewards you with promotions and a fair wage for the next 30 or 40 years.
“You acquire a mortgage and maybe even pay it off. You pay for your kids’ education; you buy a new car every few years. Eventually you retire with a comfortable pension, a gold watch and congratulatory speeches from your boss and colleagues. Then you settle back and savor your golden years, secure in the knowledge that the company you left is better and stronger because you were that most prized of corporate creatures: a loyal and trusted employee.”
Isn’t that the way we were all told it was supposed to be in the Great American Workplace? Isn’t that the way it was for our parents and our grandparents?
Sure it was, O’Reilly, Schrader and Peterson and the thousands of other members of the Forty Plus association in chapters scattered all across America will tell you.
This was the unwritten psychological contract that most Americans began their careers with a quarter century or more ago. It was a contract built on mutual trust and expectation in which the company expected an honest day’s work, commitment and creativity. In return you expected a reasonable salary, promotion opportunities, job security and a modest pot of gold called a pension when you finally arrived at the end of the corporate rainbow.
This was the two-way street called Loyalty that two or three generations ago still cut right to the heart of corporate America. It was a dependable and well-maintained street that we were always told led to a place called Success.
“Loyalty wasn’t an illusion,” says O’Reilly, 58, who was the chief financial officer at St. Catherine’s Hospital in East Chicago, Ind., until his job was eliminated in 1992 following a merger and subsequent downsizing in 1990. “It really existed once. At least it did when I started my career. Somewhere along the line we lost sight of what’s important.”
What’s important, O’Reilly says, is people. And the essence of that perennial psychological contract between employees and employers that we all assumed was unbreakable.
But today the contract has been broken, often unilaterally, by companies frantic to survive in an unforgiving, supercompetitive global economy.
To succeed today, corporate CEOs will tell you, a company has to be nimble, fast to react to market demands with reduced product cycle times. It has to be on top of quality and able to constantly improve processes.
The era of the lumbering battleship corporation that could fire broadsides of ill-aimed, sometimes poor-quality products into unsophisticated markets with relative impunity while using bloated crews of employees and seemingly bottomless fuel tanks of high-octane dollars, ended sometime in the early to mid- 1980s. Corporate monoliths such as IBM, General Electric, AT&T and General Motors that were once the pride of America’s mighty armada of capitalism have been limping back to port ever since.
Along the way, they have been furiously redesigning and restructuring themselves, casting off superfluous superstructure, eliminating redundant practices and old technologies. But most significantly, they have been jettisoning personnel, tossing them overboard like so much human bilge.
Consider what some of the biggest corporate battlewagons have done in the past year alone:
General Motors Inc. announced plans in 1992 to shed 74,000 jobs and close 21 plants by 1995. Twenty thousand of those jobs, including 9,000 white-collar positions, will be cut by the end of this year.
International Business Machines Corp. is cutting 25,000 jobs this year and announced last February that most of the 47,000 workers in its U.S. marketing and services branch will be offered “voluntary early retirement.” IBM’s work force, 400,000 strong in 1986, will dwindle to 275,000 by the end of this year.
In September Eastman Kodak Co. said it was slashing 12,500 workers. In October ITT Corp. announced layoffs of 5,400, and Chemical Waste Management Inc. said it is cutting 1,200 workers.
The result of all this downsizing? American corporations are beginning to look more like cruisers than battleships. They are riding higher in the water. They are trimmer, faster, more efficient. They may have less firepower than they once did, but when they do open up, their CEOs hope it is with much greater accuracy and that world-class products will be launched at targets that have been better researched and defined.
Unfortunately, the cost in human capital has been enormous, and the casualties are still mounting.
As one CEO grimly put it recently, “It’s downsizing for survival.”
For those hundreds of thousands of Americans who once felt like they belonged to a corporate family, the word they despise most in that CEO’s sentence is the dirty “D” word-downsizing. It’s a clinical and barren word that fails miserably to convey the depth of frustration, suffering, economic hardship and betrayal they feel.
“CEOs don’t like to call it downsizing, they like to call it ‘rightsizing,’ says Schrader, 56, a former vice-president and director of sales for the audio-visual division of the St. Charles-based DuKane Corp., a manufacturer of projection equipment.”But no matter what you call it, each day you walk into work, and you look around and you ask: Where have they hidden the guillotine today? Heads are rolling, and to me that’s downsizing, not rightsizing. People walk around saying, `I thought I was senior management,’ but what you are is expendable.”
Peterson, 55, who recently lost his position as quality manager with Norton Performance Plastics in Elk Grove Village, nods in agreement.
“People want to know their lives and careers count for something, but what they are being told by corporate leadership is that they don’t. What counts are the shareholders,” says Peterson, who watched 40 percent of his company move to New Jersey without him in the three years following its acquisition by a French company in 1990.
While it’s true that thousands of American companies have embarked on turbulent restructuring programs designed to enchance competitiveness, shore up the bottom line and boost stock prices, that is hardly a moral offense, say economists and management specialists.
“Capitalism is continuous revolution,” says Robert Topel, professor of business economics and industrial relations at the University of Chicago. “What are you to do when you have 20,000 people who have been on the payroll for 30 years and nobody wants to buy the things they are making? The harsh reality is, if they can’t produce something people want to buy, then they will have to go.”
Take linotype operators, Topel says. As newspapers and publishing companies moved away from “hot type” page composition in the 1960s and 1970s, thousands of linotype operators lost their jobs. Is that an issue of loyalty? he asks. Or is it simply that the industry they were in doesn’t require that kind of people anymore?
“What appears to be loyalty up and down an organization grew during a period when technology innovation was much slower and competition was less furious,” Topel says. “I don’t see a demise of morals either by employers or employees. I think companies are responding to economic realities. Loyalty really then is the outcome of the competitive environment you are in.”
James Medoff, a Harvard University economist who recently authored a paper called “The New Unemployment,” which examines the plight of those thrown overboard in the current flurry of corporate downsizing, agrees but offers some disturbing statistics that are sure to have an impact on the perception of loyalty.
Medoff says that as employers have cast off high-pay, high-perk workers, the share of new jobs that offer pensions and health insurance has dropped by as much as 35 percent since the late 1970s. And because white-collar cutbacks usually represent a permanent downsizing of a corporation, the number of new jobs advertised by employers has dropped almost 40 percent, relative to the size of the labor force since the mid 1980s.
“When companies realize that in order to survive they either have to service their debt or improve profits, they usually look at trimming the work force first, and the workers they are most apt to get rid of are those whose pay exceeds the value of their marginal product,” Medoff says.
It’s a reality that leads to a terrible irony.
“Many white-collar workers have become victims of their own success,” Medoff adds. “By piling up 20 or 25 or 30 years of annual promotions and salary increases, they become targets when budget-cutting time rolls around. When push comes to shove, the company looks for employees who may be earning more than they are producing.”
And that, of course, strikes at the heart of corporate loyalty.
“Corporate loyalty is like a marriage,” says Robert Ripely, the CEO of Kannack Manufacturing Co., a Crystal Lake, Ill., maker of storage equipment used at construction sites, who, along with 800 other people, was laid off at United Airlines during a downsizing several years ago. “It’s based on trust. The trouble is it’s difficult to build trust when things are changing as fast as they are today.”
Yet, say many CEOs, the traditional notion of loyalty in which employees “marry” employers “till death do them part,” is probably a thing of the past. Loyalty is something you give to your country or to a political principle, not to the guy who signs your paycheck, they say.
“When I was shown the front door at United, I felt betrayed,” Ripley recalls. “I was shattered. I was looking forward to a long career with United. But as it turned out, I left them on a Friday and started another job on Monday.”
It was an experience that has influenced Ripley through much of his business career, including the way he manages his 300-person company and the way he perceives the workplace.
“College students coming out into the workplace today pretty much expect to have five or six career positions, some of them unrelated, over the course of their working lives,” Ripley says.
While that may be the case for those entering the corporate workplace for the first time, what about those who have been in it for 15, 25 or 35 years-those middle managers and professionals who still can’t shed their traditional expectations?
“Middle managers today feel like slaves on the auction block,” says 83-year-old management guru Peter Drucker, who for half a century has taught and advised many of today’s senior executives and who sometimes is referred to as the “godfather of modern management.”
“The (corporate) stepladder is gone, and there’s not even the implied structure of a rope ladder. It’s more like vines, and you bring your own machete,” Drucker said in a recent interview.
William Morin, chairman and CEO of Drake Beam Morin Inc., a New York-based firm that specializes in helping corporations negotiate the minefields of organizational transition, agrees but takes it a step further.
“I think we have a crisis of values on our hands, not an economic crisis,” he says. “When times get tough, we always cut staff, and we do it brutally. We fire everybody on Friday. There is no plan. Companies are blundering through the process. Many may think they are trimming fat, but actually they are cutting deep into corporate muscle, brains and fiber.
“The impact of that is pretty negative,” Morin adds. “If you are worried about management not caring about you, if you feel underpaid, underappreciated and vulnerable to downsizing, you can’t do a good job. You see people burning out and burning up. We have a pretty disenfranchised individual out there . . . a person who can’t get along with God, company or country.”
At the same time, companies that are tempted to whack away at middle management and higher-paid middle-aged workers in an effort to shore up the bottom line for the benefit of investors are actually engaged in a kind of silent sabotage of the corporation.
The problem, he adds, is that in its rush to downsize or rightsize, management is becoming detached from reality. Not only does downsizing cause a steady decline in worker loyalty and trust, but laying off experienced middle managers may eventually leave many companies bereft of organizational memory. And that means 10 or 15 years down the road many of these companies may be forced to reinvent the wheel because there is no one around to tell them it was already done.
A recent survey by the American Management Association revealed something else about downsizing as a tool of cost control. Of 830 companies that downsized at least once since 1987, only 43 percent reported improvement in profits, and only 31 percent reported higher worker porudctivity. It was no surprise that 77 percent of those companies that used the ax reported poor morale among those workers who survuved.
But there is another danger inherent in the frenzy to downsize, Morin says. “We are paying executives on cost control; we aren’t paying them on growth. We aren’t paying CEOs to take risks, just to control costs.”
Ultimately, he says, that will lead to faltering, uninspired corporations in which you have people asking themsevles: “Do we work for a company or do we work for ourselves?”
It’s a good question and one that people like Peter Drucker have been thinking about for some time. Workers, Drucker says, need to understand and adapt to a world that is evolving into a “Post-Capitalist Society.”
In this impersonal new corporate world, workers will have to take individual responsibility for managing their own careers rather than relying on corporations.
It will be an era in which organizations will be considerably flatter, with fewer layers of management and less administration; an era when the flow of information and knowledge is more important than the flow of hardware; an era in which organizations are no longer hierarchical, with rank and power vested in the few, but one in which companies will have to truly foster “servant managers” who act as “guides” rather than bosses and who share responsibilities with “volunteers” instead of dictating to subordinates.
It sounds Utopian. Unfortunately, for thousands of spurned workers already on the streets, it’s a promised land that will exist only for others and one that people such as O’Reilly, Schrader and Peterson aren’t exactly attracted to.
“I hear people talking about being loyal to your own career, but what kind of loyalty is it when you are only loyal to yourself?” O’Reilly asks. “It sounds pretty ominous to me . . . pretty selfish. Man is a social animal. We like to congregate, work together, to belong.”
Adds Schrader: “What we are creating is an adversarial relationship between employers and employees. You can’t compete in the global market with that kind of relationship. The root core of the problem is how do you compete with non-loyal employees? What kind of future will a company have?”
For those thousands who have already been given their pink slips or who view each day on the job as just another 24 hours of survival in a leaking corporate lifeboat, the future already is here, and it’s here in spades.
“There has been a terrible betrayal of those people who did everything that their companies ever asked of them,” insists William Lundin, a psychologist who was formerly the executive director of the Illinois Psychological Association and who specializes in the changing corporate culture of America.
