LO and Big Layoffs LO5005

MR GEOFFREY F FOUNTAIN (TFYY93A@prodigy.com)
Sat, 20 Jan 1996 14:52:46 EST

Replying to LO4889 --

David Reed said . . .

> So in closing, I am trying to say that a learning organization does not
> mean employment security as Clyde infers but, rather, it means how to
> learn to deal with change.

This discussion reminds me of a view held by Ely Goldratt in his books
The Goal and It's Not Luck. He refers to the equation

profit = revenue - costs

The normal management response to shrinking profits caused by more
competitive pricing (and therefore lower revenue) is to squeeze the "cost"
downward (ie, lay people off). By reducing costs, the revenue- to-cost
margin is increased, returning the company to previous profit margins. As
I understand him, Goldratt suggests that reducing costs by laying people
off not only breaks a management responsibility to the employees, but is a
short-term quick fix as well since the ability to reduce costs is limited.

Instead, he says management should focus on growing the revenue, which
due to the amount of energy on our planet (he's a physicist by education),
is unlimited in our life times and that of many generations. But doing so
means changing mindsets and how we think, as well as taking a long-term
view and refocusing on providing new solutions (revenue growth) to the
market based on new ways of thinking. Perhaps a true learning organization
would have already anticipated the changes and developed new skills,
markets, and services and adapted, rather than react by laying off.

Goldratt suggests that any company can adopt three equally important
goals as their overall company strategy and create long-term
sustainability. They are :
* make money now as well as in the future
* provide a secure and satisfying environment for employees now as
well as in the future
* provide satisfaction to the market now as well as in the future

He further suggests that all three are necessary to achieve any one of
them. And there are no conflicts between them.

So how does a company survive the boom and bust cycles of the market
without laying off ? Thinking long-term, by making enough money in good
times to carry you through the bad times, by creating market strategies
and products with different cycles and realigning your companies
capabilities to thrive in these different markets. It's not simple and it
places more responsibility on management's shoulders to plan ahead (verses
taking the approach of laying people off) and to segment the market and
create a dominant competitive edge.

Maybe ten or fifteen years from now we will look back on all the
downsizings in the late 80s and the 90s wishing if we had only learned how
to do better before that time.

There are some questions in my mind though. If the strategy is to seek a
dominant competitive edge, that means others are losers. Is it only the
winners that avoid the downsizings ? As long as the strategy includes the
word "competitive", we will always have winners and losers (and therefore
we will always have downsizings). Doesn't the word "collaborative" have
some use in this strategy ? Or is that wishful thinking ?

--
Geof Fountain TFYY93A@PRODIGY.COM