The Common Good
November-December 2002

Lean and Downright Mean

by David Batstone | November-December 2002

'Lean and mean' is the shapely figure to which companies are called to conform these days. It's worrisome that the mantra implies a clever business strategy.

'Lean and mean' is the shapely figure to which companies are called to conform these days. It's worrisome that the mantra implies a clever business strategy. Firing large numbers of workers ought to be considered an admission of failure, a last resort, or perhaps a necessary evil in times of technological change or declining market conditions, not a badge of strong management.

Since World War II, the American corporation and its workers had an implicit agreement. If the company did well, the workers could be more or less assured of job security and rising compensation. That's no longer the case. Very profitable companies now lay off their workers or place a cap on wages and benefits.

Last July, for instance, Intel announced that it would cut 4,000 jobs. Although the company earned $446 million on $6.3 billion of revenue for the quarter, its performance did not meet analyst expectations. Intel executives admitted they were not sure which part of the company would be hit with layoffs, but promised they would make the necessary "cost-saving measures."

One of the more fascinating characters I have met in the business world recently is Charles Fred, the CEO of Avaltus, a company that focuses on "people development" in the corporate enterprise. Fred started his career as an aeronautics engineer at the Boeing Company. During his 10 years, he saw Boeing in the best of times and the worst of times. In the late 1980s, the company profited from an order backlog in the tens of billions of dollars. Fat with cash, Boeing undertook a major re-capitalization campaign, tearing down old facilities originally built during World War II and constructing new factories equipped with state-of-the-art machinery.

Fred was assigned general manager of one of the new plants producing the mechanical pieces that support an airplane engine block. No sooner had he assumed his post than Fred was confronted with a major challenge. The U.S. government desperately wanted to strike a trade balance with Japan. A substantial volume of Japanese-designed automobiles was being manufactured in the United States. Boeing, the world's largest producer of commercial aircraft, could give some symmetry to the manufacturing imbalance. The production of engine parts therefore was put on the list of possible candidates for an offset program.

Boeing's senior management drew a line in the sand for all of the factories that potentially could be out-sourced to Japan: "If your production team cannot improve its efficiency by 25 percent and its overall quality performance, we will transfer your production overseas." To reach his plant's targets, Fred needed to train thousands of workers to learn new skills. Sadly, Fred—as well as several general managers at other Boeing plants—ran out of runway. Senior management claimed it did not have enough financial resources to retrain all of his workers. A good portion of Boeing's production was contracted out to Japan.

TRUTH BE TOLD, most executives do not believe it is possible to achieve a major skill redevelopment of an existing workforce. Strange as it may seem, they will then turn around and go through the costly exercise of hiring a new workforce. "It's ironic, we hire people out of colleges as if they are really proficient and ready to go while every manager knows they're not," notes Fred, "yet we aren't willing to retrain our own people."

When the global recession hit in 1992, Boeing embraced a remedy popular at the time: "Re-engineer your company." In many cases, it was workers' jobs that got "re-engineered"—straight out the factory door. Frustrated that the company was eliminating the jobs of so many capable people with deep corporate knowledge, Fred resigned. As the years passed, he kept an eye on his old company. He was curious: Could Boeing successfully hire a new workforce to meet its restructured goals?

"They went out and hired people who they thought had the right skills," Fred reports, then adds, "But guess what? Four years later the company found itself in the exact same position." As technical changes accelerated, the new people they hired once again lost their proficiency. And once again, Fred contends, Boeing's senior management concluded that they couldn't spend money retraining them and made major lay-offs.

Charles Fred now makes it his crusade to change corporate attitudes toward worker competency. People development, he argues, is a core element of building a successful business strategy, not a costly sinkhole.

Is anyone out there in corporate America listening?

David Batstone, executive editor of Sojourners, is author of the forthcoming book Saving the Corporate Soul & (Who Knows?) Maybe Your Own (Jossey-Bass).

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