Conference 7.286::digital

2450.0. "Economist Article on corporate loyalty" by GYMAC::PNEAL () Tue Apr 06 1993 05:30

Reprinted, in part, without permission from the Economist, April 3-9th 1993.

The death of corporate loyalty.

	"The job losses among the world's largest companies continue to
	mount ....

	Many firms, confronted with international competition and techno-
	logical change, have had little choice but to slim down. Though 
	accelerated by recession, this trend is likely to continue after 
	economic growth returns. Whether it is called "re-engineering", 
	"downsizing", or "delayering", the goals are the same: to eliminate 
	tiers of middle managers in order to delegate responsibility to those 
	actually running factories, designing products or dealing with 
	customers. Ideally big firms should emerge from such reorganisations
	able to be as flexible, entrepreneurial and nimble as their smaller
	rivals. But, unless they find new ways to motivate those who have
	survived the repeated purges of professional ranks, most big firms
	may never achieve the gains that are supposed to justify such
	wrenching changes.

	That is because they are tearing up the implicit contract they have
	always had with managers and other professionals; security of long-
	term employment in exchange for dogged loyalty. "Those assumptions
	are gone forever in almost every big American company, and they are 
	now being undermined in Europe as well.....The problem is that 
	many companies have given no indication of what the new pyschological
	contract is".

	.....

	This trend draws on the work of innumerable management thinkers, who
	champion the idea of cutting corporate flab and "empowering" teams 
	of employees, which can then be judged by their performance. Some,
	like America's Tom Peters and Britain's Charles Handy, sketch a 
	future in which big firms will become little more than "networks"
	of independent businesses. Most such gurus assume that employees
	will respond to their new responsibility with enthusiasm, even if
	their firm has just sacked thousands of workers and declared that
	no one's job is safe.

	This seems naive....scrapping corporate cultures which evolved
	over decades is likely to be far more costly than many firms, or 
	management theorists, imagine.....Job cuts at Eastman Kodak, IBM 
	and Philips have shattered morale and embittered many of those
	who remain, despite lavish redundancy payments. Massive jon-cuts
	have also led to an exodus of the most talented employees. 
	Confident of finding work at a firm with brighter prospects, the
	best people are often the first to take payments that go with
	voluntary redundancy.

	Sometimes the damage to a firm's reputation and morale inflicted
	by large-scale redundancies will be hard to gauge. Most employees
	at hard-hit firms are simply praying that they survive the cuts.
	Few will complain openly about having more responsibility and risk
	thrust upon them.

	....

	Although superficial damage will eventually fade, the institutional
	costs forsaking the old links between employees and their companies
	could take even longer to emerge. True, no business expert any
	longer defends the managerial hierarchies or long-term employment
	policies which characterised most big firms for decades. 
	Nevertheless, such structures had strengths, as well as weaknesses.
	
	Hiearchies offered employees a clear career progression....
	They enabled firms to reward outstanding employees... and the
	promotion of job security allowed big firms to demand sacrifices
	from long-term employees....Most important of all, big firms
	could invest in the education and training of professional employees,
	reasonably confident that their newly acquired skills would not
	immediately be lost to another firm. Equally, employees could make
	the considerable effort needed to master their firm's products,
	operations and management methods, reasonably certain that such
	knowledge would be useful to them, as well as the firm, in the future.

	....

	In the future, [Peter Herriot, director of Sunbridge Park Management
	Centre, near London] predicts, big firms will have to offer the
	best professional workers regular opportunities to add to their
	marketable credentials in order to recruit or retain them, even 
	though this will also increase their ability to jump to another
	firm.

	......

	Small firms have always thrived by poaching good employees and
	sharing success, as well as failure, with their own workers. Whether
	the world's largest firms can do the same remains to be seen."

				The Economist, April 3rd-9th 1993.P63/64

Valid theme; seem frequently nowadays.
    
It occurred to me several months ago, while reading through all the memos 
and notices, that DEC has now become _two_ companies. One is the company 
being formed to compete a la Intel in the 90s. Let's call it 'DECtel.' The 
other is everyone else at DEC who does not fit this scheme but has not yet 
been let go (by F95, an additional X0,000 people in non-chip-related, non-
integration, non-commodity work). Let's call this one 'DECosaur.' There are 
two increasingly disparate companies working here now. They are gradually
coming to have separate locations, support, roles, and identities. DECtel 
is proceeding ahead at full speed; DECosaur is slowly sinking into the 
economic tar pit of the 90s.

Where do you work?


    

re: .1

  I think that's a great characterization.  Yes, it sure seems that way.

I'm "real" curious about the size (real/projected) of these
respective companies and where the two Digi"tals" would fit in
into today's market.

		Bob 

re: .1

I have friends that work in the banking industry that split into a BAD bank and
a GOOD bank.  If this is Digital's goal, than I say "just do it"

In the banking industry, both banks have clear goals and missions, and in
general, they both can succeed in their roles.

I would welcome being part of either of the DEC parts, as long as
everyone from the top to the bottom knew which part they were in, and
what the role/mission is.

Bill Z.

I also agree with Ken's description of two Digitals in .1.  The profit margin
and goals and customers of each are very different.  Maybe it's unrealistic to
expect our PC hardware business to meet the same criteria as our Software
Integration business, for instance.

Or are the larger profits of some areas of the company required to subsidize the
lower profit margins of others?

Paul

Outright margin percentages are meaningless. Compare $ Margin figures. High
volume at 2% GM will probably feed more $$$ into the corporation that
nominally "high margin" products and services.
								- Ian W.

	Wait a sec, the .0 memo said that the goals were to eliminate
	middle managers.. You can't seriously think that applies to 
	DEC, can you?

				in a cynical mood tonight,

							mike

  It seems to me although I am no mathematician that true competitiveness in
this industry is equal to innovation & technology plus efficiency minus cost.
What I mean is most all computer companies these days are suffering from growing
pains from the 1970's & 1980's when systems would sell as fast as they could
make them. Today as usual times have changed and for many reasons systems just
aren't selling like they use to so profits are down. Now we have all the board
of directors with their infinite wisdom who are on a mission from the almighity
dollar to make their companies become profitable with their stock prices higher.
But at what cost?
   Recently we've seen one board make a desperate seemingly logical decision to
put some new blood in charge of big blue. Of course they made a deal with
him that would make even the greediest sports star come to work with a smile.
What I am getting at here is the incentive part of his contract. Sure he will
make a million or so for a salary but he stands to make tens of millions
in bonuses if he can just show a profit soon. But at what cost? Give tens of
thousands of loyal employees the boot and sell buildings left and right. We've
all seen that type of format before.
   Anyway what I am getting at is I have worked here only six years and in that
time I have seen moral go from what I thought was good to bad and its no wonder
why. What I think this company really lacks is a sense of ownership for the
average employee as well as the big wheels. Some type of bonus or profit sharing
plan is needed for everyone. This alone I think would help dramatically increase
the average drone bees to work a little harder and to think a little more about
ways to bring more honey back to the hive to be shared by all.  
  

  >>>
        Wait a sec, the .0 memo said that the goals were to eliminate
	middle managers.. You can't seriously think that applies to 
	DEC, can you?
  >>>

        Are you kidding? Of course, it does. All middle managers will be
        known as "Supervising Coordinators". "Middle managers" are 
        eliminated and Tom Peters is happy. :-)

   Nari