DECISION MAKING

The Case of the Downsizing

Decision
by Alan S. Train
FROM THE MARCHAPRIL 1991 ISSUE

ndrew Jordan sat at his desk, absentmindedly watching a barge chug slowly upstream on
the Thames. The dinner meeting he had scheduled with a select group of senior
managers at Universal Products Company, Ltd. would begin in an hour. For three years, it

had seemed enough to focus on the business problems of UPCs Connectors Division, and Jordan,
the divisions general manager, had made it the most protable unit in the company. His success had
brought him tremendous respect at UPC. Now problems not of his own making threatened to
undermine all those years of hard work. One last time, Jordan opened the le.

Grenville Village Bankers Equities Group

Grenville House 28 High Timber Street London EC4V 3SB

March 25, 1991

Important Advisory Bulletin on Universal Products Company, Limited.

GMB Equities Group is downgrading its rating on Universal Products Company, Ltd. common stock
from hold to sell. Although analysts believe the 32-year-old electrical products company has
underlying strengths, the inability of senior management to capitalize on those strengths means
that, for the time being, UPC is not a sound investment.

The surprise announcement late last Friday that UPC Chairman and CEO Sir Randolph Charteris,
CBE, is retiring is only the most recent in a long line of shocks at the company. Since the prominent
London solicitor became chairman in 1975, the company has been plagued by slower and slower
growth. Falling stock prices, defections of critical sta, and the loss of several major accounts over
the past three years have made it obvious that something is seriously wrong. To make matters
worse, construction costs for UPCs new global headquarters came in signicantly over budget
causing much lower than expected 1990 earnings.

Sir Randolphs resignation and his immediate replacement by Mr. Charles Rampart, formerly
corporate vice president for technology, constitute the clearest possible demonstration that the
board of directors nally lost condence in the companys leadership. However, Rampart is little
known outside the company, and it remains unclear whether his appointment reects a temporary
accommodation that enables the board to continue with some semblance of order or whether he is
genuinely seen as a leader who can resolve UPCs growing troubles.

UPC at a Glance

UPCs global operations and 38,350 employees are organised in ve largely autonomous divisions
Switchgear, Connectors, Wire & Cable, Diversied Products, and ElectroTek. The rst three
represent the companys traditional businesses, while the latter two reect new markets and
proprietary technology. Both Connectors and Switchgear have been able to maintain strong market
position and protabilitywith the recent performance of the Connectors Division an especially
bright spot. By contrast, Wire & Cable has been the least satisfactory of the ve business units.
Performance at Diversied Products has been extremely erraticat present, it is showing surprising
strengthand results at ElectroTek have been unequivocally disappointing.

Managements Challenge

The investment community is waiting to see serious action from the new management on two
fronts. First, the company must get control of its costs, which have mushroomed in recent years.
The minor redundancies announced by the company last August have had almost no impact on the
situation. It is understood that a far deeper cutback is under consideration, a step that could do
much to restore condence in the company.

Second, management have to develop a strategy for maintaining the companys signicant and
protable participation in electrical connectors and switching equipment while actually creating the
new sources of revenue that they promised would come from ElectroTek and Diversied Products.
As for Wire & Cable, UPC must either x it (not an easy task, given its market and competition) or
eliminate it (not necessarily easier since it embodies a considerable and aging fraction of the
companys xed assets).

At Fridays close, UPC common was quoted at 633/8, continuing a fairly steady decline from its
modern high of 91 at the end of 1988. Note that the present P/E ratio is still quite high, reecting
investors recognition of the companys potential competitive strength. But without evidence that
management are able to turn those strengths to good advantage, the stocks decline is likely to
continue. In our view, UPC is at a crossroads, and much will depend on Mr. Ramparts actions.

Universal Products Company, Ltd. Docklands, London E7A 6F8 Company

Condential MemorandumTo: Andrew Jordan, SVP and GM, Connectors
Division From: Charles Rampart, Chairman and CEO Date: April 3, 1991
Subject: Downsizing Program
Dear Andrew,

I promised you and your colleagues that I would think over our discussion at the Executive
Operations Committee meetings this morning. Having done so, I want to conrm my decision to
carry out a deep across-the-board-reduction of UPCs sta.

Obviously, a decision like this is hard for everyone, and I appreciated the candor at this mornings
meeting. Although theres no point in rehashing my thinking yet again, I do at least hope that we all
understandif not wholeheartedly acceptthe logic of spreading this heavy burden across the
entire company.

I have set as our overall objective a gure of about 11%, with fully half of that to come from the
managerial and professional ranks. We therefore need to reduce the present complement at
Connectors Division from 6,720 to not more than 6,000. I trust we can begin to show specic action
within two weeks and that the entire eort will be very largely concluded by June 3, two months
from today. Please let me know by the end of the week how you propose to accomplish this.

Andrew, let me close on a more personal note. I understand completely how dicult this is. As you
know, Ive been in similar situations before, and it is a managers worst task. But I feel we have very
little choice, and the board of directors agree fully. Whats more, across-the-board cuts are the only
way to accomplish this necessary downsizing quickly and fairly. This is a case of the sooner, the
better. Dragging it out is in no ones interest.

In the nal analysis, we owe it not only to our shareholders but to our employees and other
stakeholders as well. I am determined that those of us investing our time and our careers at UPC will
have stable and satisfying employment and a fair return on our various investments.

I know I can count on your support in this dicult but critical task. Ill certainly need it.

Universal Products Company, Ltd., Connectors Division Docklands,

London E7A 6F8
To: Andrew Jordan, SVP and GM

From: Samuel Godwyn, VP for Marketing and Sales

Date: April 5, 1991

Subject: Downsizing

You asked me to set out as starkly as possible the argument I was making at yesterdays sta
meeting. Put simply, I think Charless decision to go for across-the-board cuts is a disaster. Its a
disaster for Connectors Division, certainly, but it is also a disaster for UPC as a whole. In fact, it will
hobble our ability to look after the long-term, strategic growth of the company.

1) Across-the-board cuts are panic masquerading as a plan. It dees business sense to ask for
equivalent cuts from our division, which under your leadership has been the most protable of the
company, and from Wire & Cable, which we all know is a basket case. Granted, some kind of
downsizing is necessary. But to cut across the board is to take a blunt axe to the company when a

surgeons scalpel is called for. Not all divisions and corporate functions are created equal. Some
units deserve additional investment, not retrenchment. Others probably deserve to be terminated
altogether. The company needs to gure out where its going, then cut accordingly.

2) Across-the-board cuts will seriously harm our divisions ability to compete. We have worked
damn hard to become as lean as possible. Indeed, if the entire company controlled costs the way
Connectors has done, UPC wouldnt be in this mess. Why should we be punished for our own good
management? Any more cuts will hinder our capacity to build sales and improve service, which, of
course, is precisely what Connectors needs to do to contribute to the revitalization that Charles says
he wants to bring about. We will lose good people, have to delay product-development projects
already in the pipeline, and most likely alienate our customers as well.

3) Across-the-board cuts will destroy already-poor morale. I assume you saw the rogue e-mail
message that has been making the rounds (Ive attached a hard copy, just in case you havent). I
know Charles got a rst in maths, but damn it, this company isnt a machine. Does anyone disagree
that last Augusts redundancies were handled poorly? If we come back to people seven months later
with arbitrary across-the-board cuts, they are going to go through the roof.

There comes a time in every managers career when he has to ght a bad decision made by his boss.
Andrew, I believe you must be prepared to do that now. First, we should put together the best
alternative plan we can and persuade Charles to bring it to the board. Second, you should coordinate
with those senior managers you know will share the general perspectivelike Tom Lewellyn in
corporate strategy. Finally, we should be prepared to ght this all the wayeven if that means a wellorchestrated leak or two in the nancial press.

Date: 1APR91

To: sgodwyn

CC: Global division distribution list, via ConnectNet

Subject: April fools, of course

Fool me once, shame on you. fool me twice, shame on me! Last August, when hundreds of
undeserving folks left UPC, our very own Sir Randy said, Im going to make sure this never happens
again. Well guess what chaps: Sir Randys good intentions have paved the usual path to the usual
destination. Now were all going to pay for it. Rampart is one of the faceless men from corporate.
Unless our Jordies stued with more than straw, well all be April Fools.

Universal Products Company, Ltd., Connectors Division Docklands,

London E7A 6F8
To: Andrew Jordan, SVP and GM

From: Mary Wyatt, VP for Finance

Date: April 5, 1991

Subject: Company Downsizing

Re: your request for a memo outlining my position on the downsizing. Im quite clear as to the path
we should take in this ghastly business, and I hope you agree. There is no doubt that the cuts of 11%
will hurt Connectors Division badly in the short term. But it would be a terrible mistake for us to
focus only on the narrow needs of the division when the future of the whole company is at stake.
That is the real issue at hand.

We have to think strategically and take into account the political dimensions of this decision.
Charles is a wonderful choice for chairman, although not everyone knows it yet. Hes thoughtful,
well-informed, completely trustworthy and honourable, and damn smart. As head of technology, he
has shown that he knows how to helpand not just Connectors but everyone. UPCs problem has
been a lack of systematic action and investment; Charles will give us thatonce he has the boards
condence and support.

Our job is to help him get that support. It would be quite humiliating for Charles if we opposed his
rst decision of consequence. Granted, across-the-board cuts may not be the best way to downsize,
but under the circumstances we dont have the luxury of guring out the very best way. There is

already great skepticism about UPCs future, both inside and outside the company. Charles has got
to act and act fast.

As I said at the sta meeting yesterday, Im all for ghting bad decisions. But I also believe its
important to pick your ghts intelligently. Mounting some kind of internal rebellion right now is a
notoriously bad bet. Its likely to lead us into a morass of interdivisional and interfunctional rivalries
that will take years to sort out. After all, other division heads can argue that theyve been controlling
costs too and making signicant investments that just havent paid o yet. Whos to say that cuts in
their shops would be better for the business than cuts in ours?

Id much rather support Charles on this decision, however painful that may prove to be, in order to
buy the political goodwill to win other struggles further down the road. Surely, you can read his
intentions between the lines. If you back Charles strongly now, well be at the top of the list when it
comes time for UPC to make internal investments in the future. Well have a good chance to be a
new focus for growth. Indeed, we might even end up gaining sta.

This may sound harsh, but its the only realistic way to think of the situation: were not laying o
11% of our sta. We are investing in the future credibility and eectiveness of our new chairman.

Should Andrew Jordan Support Charles Ramparts Downsizing Plan or Fight It? And How?

David Eneld is chairman and managing director of Colgate-Palmolive Limited, U.K.

Andrew Jordans decision is not whether to support the cuts but how to make them. The key issue
here is UPCs need to restore itself to nancial health and to create a business strategy for its future.
Any company considering downsizing as a solution to its strategic concerns should rst think
through what its strategic concerns are and then t downsizing into that context.

Downsizing is a much needed rst step for UPC on the road to preserving its independent status and
getting back to nancial health. The company is in imminent danger of losing its independence. The
stock has already declined by one third in the past year. Unless the price is stabilized quickly and
performance reversed, UPC will be targeted for acquisition. The consequences of inaction would be

far more draconian than an 11% cut in sta. However, Jordan must make the moves in a manner
that drives home to all employees the logic behind themthat without these moves UPC will cease
to be an independent entity.

As a manager, Jordan has three immediate tasks. He must quickly make it clear that he supports the
new chairmans decision and that the real issue is the survival of UPC. Second, he must develop a
specic plan to reduce his sta by 11% and formulate a revised business strategy to maintain the
health of his division. Finally, he must devise a way to minimize the impact on the morale of those
remaining as well as those being let go.

Jordans easiest step will be justifying his support for Ramparts decision. By explaining how the
investment community perceives UPC and sensitizing his division to the threat posed to the
company, Jordan will provide a backdrop for the immediate moves. He need not apologize that the
successful Connectors Division has to suer, since this is an external threat to the company at large
with little regard to individual units.

The next stepidentifying specic redundanciesis more dicult. As the memos from Godwyn and
Wyatt indicate, his managers have strongly divergent views. Jordan will rst need to gain their
individual support for what is to happen and then be prepared to start the cuts at this level if his
direct reports are not prepared to match his degree of commitment. Jordan and his team will then
need to review his divisions business priorities, focusing on the trends in business practice among
his customers and major competition. They should challenge the very nature of the divisions
manner of doing business, with a view to creative change. Finally, recommendations for change,
both internally and those that aect the divisions relationship with corporate headquarters, should
be communicated to Rampart.

However, Jordan should not automatically demand an equal 11% cut in each of his departments.
Rampart may have had his political reasons for this even handedness, but from a business point of
view, the move is a mistake. After all, Rampart is no stranger to UPC and probably could have better
tailored an overall 11% cut to the strengths and weaknesses of the company. Jordan would be better
advised to be more selective if he is to remain true to the needs of his own division.

The third stepthe redundancy strategyis both easy and dicult. A combination of reasonably
generous redundancy payments, counseling, and out-placement services should ease the pain of
those being let go. It is more dicult to retain the loyalty and morale of those remaining and to
successfully install the changes in working practice and responsibilities that will inevitably be
required. Jordans biggest challenge will be to rally his remaining people together, focus them on the
business, and provide them with a sense that UPC and Connectors Division is getting through its
problems and remains a productive and stimulating place to work.

Jordan also needs to work on the broader issue of UPCs return to health. He could start by raising
several important questions at the dinner meeting with the select group of senior UPC managers.
First of all, Jordan should probe just how much autonomy continues to be aordable for each of the
ve divisions. Considerable duplication probably exists in traditionally overstaed areas such as
administrative and support functions. These resources could easily be shared and rationalized.
Obviously this will be a highly sensitive subject involving past history, turf, and culture, but Jordan
is as well placed as any to broach the issue and if necessary to pursue it with Rampart. Truthfully
examining every aspect of the company for waste could lead to savings of more than 11%.

Yet sta costs are only one element of expense. UPC needs to look critically at controlling projected
expenses in all its divisions. Jordan can also take a lead in addressing this, as a start, by pointing out
the need for clear control illustrated by the overbudget construction of the new headquarters.

Finally, of course, Rampart and his senior management need to develop and agree on UPCs future
overall business strategy. This clearly cannot be done overnight. Jordan, as a member of senior
management, has a right to ask Rampart what his plans are, and to enlist the dinner group as an
initial forum to commence the development of ideas and suggestions to help Rampart in this critical
task. Downsizing alone is not the answer to UPCs problem but only the rst step in a bigger process.

Laarry Hirschhorn is a principal in the Wharton Center for Applied Research, a management
consulting rm in Philadelphia, Pennsylvania that helps companies develop strategic initiatives and
link them to their organizational practice. He is the author of Cutting Back: Retrenchment and
Redevelopment in Human and Community Services (Jossey-Bass, 1983) and, most recently,
Managing in the New Team Environment: Skills, Tools, and Methods (Addison-Wesley, 1990).

Andrew Jordan faces the dicult challenge of being a responsible follower in a company trapped by
its culture of dependency. Usually, a company creates and sustains such a culture when it operates
successfully in a stable market over a long period of time. Facing an undemanding market, people
turn inward and lose touch with the links between their personal experience at work, the roles they
occupy in the organization, and the companys primary business task. Later, when they confront an
institutional crisis, people nd it dicult to refocus on the marketplace and the needs of the
business.

Consider the electronic-mail message that Samuel Godwyn attaches to his memo. The anonymous
writer reminds his colleagues that after the last cutback, former Chairman and CEO Sir Randolph
Charteris had promised to make sure this never happens again. The message writer feels
betrayed by the prospect of yet more layos. But such a feeling is misplaced. How can a CEO
guarantee his employees eternal protection in an increasingly unpredictable business environment?
And even if he did, why would they believe him?

Sir Randolph and his employees have created an organizational culture in which feelings of
dependency, protection, and victimization are paramount. In such settings, people expect to be
protected and feel victimized when they are not. As a result, they take up their roles passively.
Indeed, one cant really blame Sir Randolph for making so irrational a promise or his employees for
believing him. After all, his board had protected him despite 15 years of poor performance. Just as
he passively let the company slide into a crisis, the board passively stood by as he failed to protect
the companys assets.

As an insider, new CEO Charles Rampart is also caught up in UPCs dependency culture. Defending
his cutback strategy to Jordan, he adopts a passive postureI feel we have very little choice
rather than forthrightly spelling out what he has decided to do. To be sure, Rampart faces the
challenge of building his political credibility. Yet the tone and content of his memo suggest that he
feels vulnerable, unable to draw on his inner strength to project a personal sense of his authority.
Instead, he paints a picture of his own precarious situation: I know I can count on your support
Ill certainly need it.

Similarly, Andrew Jordans subordinates are blinded by UPCs dependency culture. Defending
Connectors Division, Godwyn argues that it is the most protable division in the company, in
contrast to Wire & Cable, which is a basket case. But these internal comparisons are less relevant
than each divisions performance in its marketplace. Connectors may have a good market share but
is it more protable than its competitors? What hidden subsidies might it prot from as a division of
UPC? As Mary Wyatt, Jordans VP for nance, correctly argues, what counts is the strategic posture
of the company as a whole. Connectors may perform well, but Wire & Cable still possesses the bulk
of UPCs assets. It may make strategic sense to modernize Wire & Cable, even if this means
squeezing Connectors.

Lacking such a marketplace focus, people typically rely on the more primitive criteria of fairness and
loyalty. Godwyns memo argues that Ramparts decision is unfair, that Connectors is being punished
for its good management. Fairness and loyalty are not irrelevant, but unconnected to task and
mission they lead people to focus inside rather than outside the company, and to value
interpersonal ties over role relationships. Thus, Godwyn frames the issue entirely in terms of us
versus them, the division versus corporate.

Godwyns proposed strategy also reects the features of a dependency culture. Believing that
Rampart is weak, he wants to persuade Jordan to bring an alternative plan to the board. But
uncertain of his own and Jordans authority, he wants to draw on the power of outside investors and
shareholders by leaking news to the nancial press. In dependency cultures, people cannot confront
and challenge one another directly. Because they do not take their own authority seriously and
cannot see how they might authorize others, they replace straight talk with covert politics.

Unfortunately, Mary Wyatts proposed strategy is equally problematic. Like Godwyn, she assumes
that Rampart is weak and vulnerable. Where Godwyn wants Jordan to be loyal to the division, Wyatt
wants him to be loyal to Rampart. Where Godwyn has contempt for Rampart, Wyatt idealizes him as
completely trustworthy and honourable and a wonderful choice for chairman. But idealization,
like contempt, is just another way to avoid taking Rampart seriously as a real person who faces
concrete choices, struggles, limitations, and opportunities. Both contempt and idealization have
deep roots in a dependency culture. They reect peoples contempt for their own rolesafter all,
they dont feel connected to real workand their idealization of the all-protecting company.

For Andrew Jordan, being a responsible follower means breaking through this culture of
dependency. That entails three tasks:

1. Rather than just following Rampart out of loyalty, personal ties, or mere opportunism, Jordan
must take the new CEOs authority seriously and challenge him to be the boss. For example, Jordan
could invite Rampart to talk with his direct reports so they can hear the new CEO spell out the
business logic behind his decision. This would give Rampart the opportunity to take public
responsibility for his downsizing decision, and give Jordans subordinates the chance to experience
directly Ramparts authority and commitment to the companys revitalization.

2. Responsible followers also complement their superiors limitations with their own strengths. As
an insider, Rampart may nd it especially dicult to take the authority he needs to develop and
implement an eective strategy. Jordan needs to help Rampart articulate a strategic view of the
companys prospects that highlights each divisions opportunities as well as the links among the
divisions.

3. As division manager of Connectors, Jordan should help his subordinates develop a more
sophisticated understanding of the divisions role in the companyhow it can contribute to UPC,
how its success in the marketplace may help leverage UPC resources, how it might help revitalize
Wire & Cable, while also contributing to the boards obvious hope that a technology CEO like
Rampart can refocus UPC on its increasingly dynamic marketplace.

Whats more, while Rampart wants across-the-board cuts from his divisions, Jordan can reduce
head count within Connectors in a more tailored way. Natural attrition, voluntary retirements, and
creative programs that allow people to leave a company while still remaining connected to it
through new business arrangements are ways executives can contain the trauma of a cutback while
using it to strategic advantage. Ironically, by dening the problem entirely in terms of fairness and
loyalty, Samuel Godwyn inhibits Jordans ability to devise a cutback plan that may help people leave
or remain with dignity.

When he meets with his fellow executives for dinner tonight, Jordan should start with one central
question: Charles wants us to reduce expenses and increase cash ow. We need to do this in a way
that accomplishes the most from what will necessarily be a painful cutback. How as a group can we

best support Charles, now and into the future, so that he gets the authority he needs to revitalize the
company?

Emmanuel Kampouris is president and CEO of American Standard Inc., a leading supplier of airconditioning, heating, and plumbing equipment to the construction industry.

Andrew Jordan has his work cut out for him. He must convince Rampart to develop a broader vision
of his company and not just make generic cuts in the work force. Jordan should agree to personnel
reductions only under the condition that Rampart present these moves as a prelude to a new
direction at UPC, one where the company has a clearly dened mission and an organizational
structure consistent with its new philosophy.

Across-the-board layos are the worst way to reduce costs. Cutting by percentage is a crude and
ineective short-term solution to a deep-rooted problem. Its instant gratication that does nothing
to fundamentally remedy the situation. After a downsizing action, temporary employees are often
brought in to work in positions left vacant by the laid-o personnel. Jordan will nd that in no time
he will be ghting the issue of excess personnel once again if these replacements become
permanent. The only course at UPC is to nd a way to eliminate excess sta permanently.

The real solution here is to rationalize the work, not the workers, and to do so in a manner that
prevents the problem from creeping back. Successful companies reduce costs by reducing useless
layers of work rather than blindly cutting people.

This process is not easy. Management must begin by stripping away everything in the company that
is not adding value. They must, in a sense, go right to ground zero by scrutinizing the work load and
reducing it to the essentials. Rampart must eliminate all middle managers that exist only as power
brokers and impediments to communication. He should nd where the power structure of the
organization prevents workers at every level from taking responsibility. Throughout the company,
Rampart must undo bureaucracy.

Once UPC has eliminated the nonessential work load, it can rebuild the organization using only
those people necessary. In the long run, this could result in more than an 11% reduction in sta. If
UPC reduces the work load intelligently, the smaller work force will be asked to do lessnot more.

By making these moves, Rampart will create something far more useful than a smaller company: a
more responsive and ecient company. In fact, the corporation will be free of the communication
roadblocks endemic to overstang and middle management.

Rampart should also devise a costs goalnot a personnel target. Consistent with a philosophy of
distributing responsibility lower and lower in the organization, Rampart should let everyone reduce
costs the way they see t. As part of his broader strategy, however, Rampart may set the timetable
for these moves.

Creating a leaner, more responsive organization is just one step of an overall philosophy. Once
Rampart creates a delayered, responsive company with open lines of communication and no middle
management, the new organizational mind-set will turn its concern from how it is structured to
what is important to its customers.

Roald Nomme is senior vice president for organization development at Norsk Data Group, a
Norwegian computer company based in Oslo.

To decide that downsizing is necessary is the easy part. Far more dicult is knowing how to
implement a downsizing so that it really accomplishes the objective of revitalizing the company.
Depending on how it is carried out, downsizing can strengthen employee morale or destroy it. It can
be a solution to a companys problems or a serious new problem in its own right.

Unfortunately, UPCs Charles Rampart is going about it in the worst possible way. Granted, UPC has
serious problems, and the impatience in the nancial community is an important danger sign. But it
is no reason to rush through across-the-board cuts that are completely disconnected from any longterm strategic vision. In this respect, Connectors Division marketing vice-president Samuel Godwyn
is right: across-the-board cuts are panic masquerading as a plan.

Ramparts overall approach to change is also faulty. His strategy is simply to order people to change.
He decides on cuts across-the-board, presents his decision at a morning meeting, then sends his
direct reports a rather cursory memo conrming his decision and asking their support. What
Rampart fails to grasp is that gaining his top managers agreement to the downsizing plan is not
enough. He must also secure their alignmenttheir active conviction that the proposed changes

not only are necessary but will prove eective. Such a haphazard and cavalier approach to change is
likely to lead to disaster. Loyal managers like Jordan may go along grudgingly with Ramparts
decision but without the internal commitment necessary to make the downsizing work.

Andrew Jordan has to persuade Rampart to rethink his downsizing decision. First, he should tell
Rampart that this is not the type of decision that can be presented at a half-day meeting and then
discussed in memos. Instead of spending two to three months guring out how to cut 11% of the
work force across-the-board, UPC managers should take that time to struggle with the dicult
strategic issues facing the company.

To begin this process, Rampart and his entire top-management team have to get together, face-toface, over one or even a number of days to thrash out a common view of the companys strategic
situation and options. What are the long-term prospects of the companys various businesses? What
should the company do about Wire & Cable? How should UPC target the burden of cost reductions?
And how should the company handle the all-important communications issues in order to convince
employees of the necessity of the decisions made? The end result of this exercise should be a new
strategic direction that includes not only cuts but also new investments.

Jordan should also explain to Rampart that the best way to bring about change is to let the
employees actively participate in it. That way, they develop insight into the reasons why change is
necessary. Therefore, once corporate management crafts a new strategic vision, Rampart should
invite UPC employees to take part in developing the methods for its implementation. Such an
approach may be more time-consuming, but it leads to far more eective and long-lasting changes
not the least because participation tends to strengthen employee morale.

Once this strategic vision and participatory change process is in place, the organizational context
will exist for Jordan to take a fresh look at his own division. It may well be that his business can
prosper and become considerably more protable, even in the short run, if he plans for immediate
cost reductions. After all, most organizations still have considerable slack, no matter how lean and
ecient they think they are. Whats more, the fact that the whole UPC group is introducing stronger
measures may result in improved productivity for Connectors.

Finally, Jordan has to work with his own management team to get them to understand the need for
hard measures. Once again, the key is face-to-face interaction that will allow managers to confront
and resolve the negative feelings and the conicts inevitable in downsizing situations. In this way,
Jordans direct reports can also develop a shared picture of the current situation and the companys
future potential.
A version of this article appeared in the MarchApril 1991 issue of Harvard Business Review.

Alan S. Train is a pseudonym for a management consultant who was involved in the events described in this case.

This article is about DECISION MAKING

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Related Topics: CHANGE MANAGEMENT |

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DOWNSIZING

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