by Daniel McCabe
Deborah Dougherty doesn't have anything against downsizing per se. As corporations evolve and markets shift, it might well make sense for companies to shrink in response to a changing environment. What Dougherty argues against is dumb-headed downsizing--laying off much of your workforce without really comprehending the impact it will have on how you operate.
Dougherty, a management professor, recently published a paper on this topic with the University of Pennsylvania's Edward Bowman. It's part of her continuing research into how corporations nurture--or stifle--creative new approaches to doing business.
"CEOs who push for 'leaner, meaner' companies without really thinking about how the job losses are going to affect the way the work gets done are doing more harm than good," asserts Dougherty.
Downsizing has become almost a mantra among many senior executives. Over 85% of the Fortune 1000 companies reduced their white collar workforces between 1987 and 1991 and U.S. firms announced a record 615,186 layoffs during 1993 alone.
Dougherty and Bowman looked at 12 large and well -established companies for their downsizing study. They tracked how the corporations shed staff and kept a close watch over the effect it had on the organizations' ability to bring innovative new products to market. They interviewed 106 employees, holding a variety of positions at the different firms, to gauge how innovative ideas progressed or perished.
Downsizing tends to target experienced middle managers more than any other category of employee. While middle managers make up 5% to 8% of the workforce, they suffered 18% of the job losses between 1989 and 1991. According to Dougherty and Bowman, the loss of these middle managers is often keenly felt by companies who underestimate the role they play in fostering innovative ideas.
"The people who really get innovations off the ground are the marketing managers, the chief engineers--the worker bees, essentially. These people play a much more important role in that regard than vice-presidents," says Dougherty, a policy specialist trained in sociology.
The specific genius of middle managers is that they often know the informal ways to get important work done that never show up in a company's official flowchart or corporate report. They've built up friendly acquantances over the years with staff in different areas of the company and they're able to use these connections to keep a project on track.
Dougherty and Bowman call this "entrepreneurial networking" and say it's crucial to ensuring that innovative new ideas mesh with a firm's overall activities. Middle managers often know how to knit together the alliances between players in divisions such as research, manufacturing, marketing and sales that can propel innovations beyond the "good idea" stage.
"We kept hearing stories about how Fred from R&D would bounce ideas off Bill from marketing in the cafeteria, or how conversations in the washroom would end up moving a project forward," says Dougherty. "In fact middle managers in a highly bureaucratized system have developed all kinds of ways to get their work done despite the way their organization is set up."
In one extreme case, an innovative idea for improving a production process fell on deaf ears when it was pitched to senior executives. The managers in the unit that came up with the idea shared it with an outside firm which then sold it back to the company. The senior executives only took the idea seriously when it was proposed by outsiders. "Middle managers often know how these things work and how to get around them."
Dougherty emphasizes that sometimes companies do have to downsize. The dilemma is that CEOs often go about it recklessly. Dougherty says that companies on the brink of downsizing need to take a long, hard look at "how the work actually gets done, not how it's supposed to get done" and take steps to protect the entrepreneurial networking in their firms.
"These days, cutting 20% of your staff is a relatively easy decision to take. Carefully studying the impact it might have before you do it--that's hard and it often doesn't happen."
Her advice to corporate decision-makers? Ensure that the people who first come into contact with innovative ideas have the authority to nurture them. Create self-managed teams of key staff from different areas and encourage them to collaborate.
These days the topic of downsizing cuts closer to home as McGill attempts to trim staff numbers. Dougherty isn't sure the University is doing all it should to make the process as pain-free as possible.
For one thing, says Dougherty, faculties still tend to compete vigorously against each other for a share of shrinking resources. That kind of competition can be a disincentive to working together. She adds that the University's decentralized structure tends to create "turfs, where everyone lords it over their own little area."
With funding becoming more scarce and staff numbers dwindling, McGill's faculties should be reaching out to one another and forging interesting new partnerships, argues Dougherty. And the administration has to encourage that process. "I don't think people see any concrete moves from the administration towards cultivating that kind of cooperation. There is some talk along those lines. We'll have to see if it translates into action."
Dougherty, who was asked by a university where she taught previously to help plan its downsizing, says the new master's program in manufacturing management offered by the Faculties of Management and Engineering is one example of the sort of cooperative ventures she believes McGill should pursue. "It's a good idea and one which neither faculty could have implemented on its own."
Dougherty's current research involves examining corporations which are widely respected for fostering innovation. Getting her foot in the door at these companies is proving to be a bit difficult sometimes, admits Dougherty with a grin. These are companies that usually have lessons to offer rather than lessons to learn. "They see no value-added in me coming in and asking questions."