INDUSTRIAL AND
COMMERCIAL
TRAINING
CORPORATE DOWN-SIZING:
AN AMERICAN TRAINER'S
AFFLICTION
Gerald D. Cheek and Walter
BACKGROUND
The shape of America's large private and
public organisations has been changing
during the past ten years. The corporate
pyramid is flattening because the middle is
being reduced in size. Managers at all levels,
especially at the middle, have been laid off in
large numbers. Chief Executive Officer
William Morin, of the out-placement firm
Drake Beam, says, "More companies are
putting resources into positions that are
directly and visibly productive, such as
marketing and sales. There is a greater
emphasis on jobs that affect the bottom line
than positions that analyze, filter, and report
on data"[1].
In the United States, reducing the number
of employees in an organisation is commonly
called "down-sizing". Few large organisations
have escaped such workforce reductions.
Exxon sold its headquarters building and
reduced its senior staff from 1,400 to 320.
When International Telephone and Telegraph
sold many of its operating units, it reduced
its 900 New York headquarters staff by
approximately 70 per cent[2]. Shortly after
General Electric purchased RCA, all 500 of
RCA's headquarter jobs were eliminated[3].
Reductions at Eastman Kodak went well
beyond the cut-backs at its headquarters.
Approximately 13,000 employees at all levels
in Kodak's worldwide operations were
terminated or accepted voluntary separation
offers. Salaries of many of the retained
executives were reduced [4].
Management reductions have also affected
many newly formed industries. Tektronix
reduced its workforce by 10 per cent. Salary
cuts were also included for senior
26
Cameron
managers[5]. Hewlett-Packard provided early
retirement packages for 1,000 of its
employees [6].
Media companies have not been spared
management cut-backs. Major television
networks have attempted to make their
operations lean and more cost-effective.
Among the three major networks, several
thousand individuals were laid off. Time, Inc.
reduced its staff by 5 per cent. This
reduction reached the high level of assistant
publisher[7].
While many American businesses have
used down-sizing as a solution to one or
more perplexing problems, cut-backs do not
always address what is really wrong.
Companies may have been weak competitors,
produced inferior products, provided poor
service, attempted to sell outdated
technology, had inadequate logistics, or
lacked customer support.
Additionally, federal, state, and local
governments have felt the sting of the
Gramm-Rudman-Hollings Act. The Act
established specific targets over a multi-year
period to force reduced deficits. Because
targets for deficit reduction were not met,
there have been across-the-board cuts which
have reduced growth and constricted the
number of employees.
Cameron et al.[8, 9] cited problems that
created conditions which resulted in down-
sizing. Those listed were: (a) shrinking
markets, (b) increased competition, (c)
budget cuts, (d) decreased revenues, (e)
decreased profits, (f) stagnation, (g)
deteriorating win-loss records, (h) loss of
legitimacy, (i) maladaptation to an
environmental niche, and (j) disgruntled
 VOLUME 22 NUMBER 4
1990
customers. These are just a few of the real
problems that should be addressed before
deciding to down-size.
TOO MANY MANAGERS?
It is difficult to understand why an
organisation would intentionally create a
structure that requires an overabundance of
managers. Yet, organisations grow and the
number of managers often becomes more
than can be supported by existing conditions.
Internal problems can lead to an excessive
number of managers in large organisations.
These problems accumulate over time and are
not the result of one bad decision.
Age, Prosperity, and Size of Organisation
There is a direct relationship between over-
staffing and the length of time an
organisation has been in existence.
Additionally, the more profitable an
organisation is, the more it tends to create
unnecessary managerial positions. Moreover,
this situation is more complex than just time
and success. Managers in older organisations
believe they have a social objective to
increase the number of positions. They
believe more managers are warranted because
they need help to co-ordinate and control the
organisation's functions. When more
managers are added, the number of support
staff also increases. This phenomenon tends
to slow the reaction to warnings that
economic troubles are coming. Slower
reaction times will cause more penetrating
problems resulting in more lay-offs than
originally required.
□ Expanding Markets and Lack of Expertise
DEPARTMENTAL MANAGERS
ESTABLISH PRIORITIES WHICH OFTEN
DO NOT SUPPORT THOSE OF THE
ORGANISATION
□ find. To offset this dilemma, several
After a company becomes large enough, it
may departmentalise. Internal competition
between departments can de-emphasise
organisational priorities and lead to
additional hiring. Departmental managers
establish their own priorities which often do
not support those of the organisation.
Numerous corporations have established
27
departments to manage such issues as energy
conservation, product quality, work-life
quality, productivity improvement, and
employee empowerment. To meet new
obligations and increased internal
competition, each unit may increase its
numbers in order to gain an advantage.
Consequently, the number of managers and
staff is increased unnecessarily.
Diversification and Decentralisation
Beginning in the 1960s and continuing
through the 1970s, corporate growth in the
United States was accomplished following a
preferred course of diversification.
Corporations became diversified through
acquisitions and start-up enterprises. They
often took on unrelated business ventures in
which senior managers had little or no
expertise. This resulted in the proliferation of
new layers of managers to cope with the
diversification. This action can become more
complicated by attempting to decentralise
authority. Not wishing to lose control, new
layers of managers are added and senior
managers surround themselves with assistants.
Government Regulations
During the 1970s, the number of government
regulations increased dramatically.
Regulations dealing with the environment,
safety, equal opportunity, etc. increased
managers' work-loads. Many corporations
have created special positions to respond to
the government's requests for compliance
with regulations.
International expansion and competition have
added to the complexity of problems in many
corporations. Special divisions were staffed to
handle expanding markets. However,
individuals with knowledge and expertise in
dealing with overseas markets are difficult to
individuals with partial competence are hired
rather than a single competent individual.
Mistrust within the Corporate Culture
A perplexing internal problem exists in
American corporations which is responsible
for hiring too many managers. The culture
within the American corporate structure
 INDUSTRIAL AND
COMMERCIAL
TRAINING
ensures that managers learn early that it is
not in their best interest to trust one another.
They may withhold information that will
shed a bad light on a situation, show failure,
reveal declining profits, customer
dissatisfaction, over-estimates of consumer
demands, etc. They often hide the truth
rather than learn from it. Instead of finding
a solution and correcting the problem, many
top executives hire "safeguard units" that
have special avenues of communications to
the top. Often outsiders or consultants are
used to bring out the bad news without
highlighting the good. This behaviour is
inefficient, costly, and demoralising.
Additionally, it adds to the number of
managers an organisation must support[10].
□ as having little value. Parallel to this training
THE QUICK-FIX TENDENCY HAS
PROVED TO BE NO SOLUTION
□ with, especially in smaller companies which
Above are reasons for the expansion of
corporate bureaucracies. Adding layers of
managers has been an attempt to solve
problems which have in many instances
resulted in new ones. The quick-fix tendency
to cope with change by inflating the
managerial staff has proved to be no
solution. Over-staffing can be traced to
human resource development practices in
American corporations. There has been a
lack of documented decision-making policies
related to increasing management positions.
IMPLICATIONS OF DOWN-SIZING
Down-sizing is accomplished using a variety
of techniques. Besides simply discharging
unneeded managers, companies use hiring
freezes, demotions, salary reductions,
redeployment, and early retirement packages.
However, when corporations down-size, they
often do so without proper planning. They
discharge many of their managers, then
attempt to formulate reorganisation plans for
those remaining. These new plans are
developed without considering the human
costs. Companies may improve their financial
performance, but at a price. The organisation
is left with managers who will continue to be
concerned about their job security. When the
threat of job loss exists, anxiety and job
stress increase[11]. Lack of job security
reduces employees' commitment to the
28
organisation and their effectiveness in
carrying out duties and responsibilities.
Through these troubling times,
organisations may lose those whom they wish
to retain. Managers may leave the company
before personnel decisions are made and
down-sizing commences. They are positioned
to have prior knowledge of reductions and
know the probabilities for reductions or
permanent closing. As many as 75 per cent
of managers and executives have been known
to leave for other jobs before the company
closes its doors[12].
Trainers should know how down-sizing will
affect them and their training efforts. Down-
sizing affects more than just those who are
displaced [13]. For those who were retained
but still fear job loss, training may be viewed
problem, workers who are anxious about
their jobs will resist change. They become
more rigid in their thinking and avoid risk
taking. This is difficult for trainers to deal
require a more flexible employee with a wider
range of skills[14]. Retained managers in
smaller companies that have down-sized must
be cross-trained or retrained for difficult
responsibilities. However, they may resist such
training since they may view these attempts
as another way to reduce their numbers.
□
THE NUMBER OF TRAINERS AND
TRAINING FUNCTIONS HAS
INCREASED EVEN THOUGH
COMPANIES HAVE DOWN-SIZED
□
Additionally, the lowered self-esteem of
previously laid-off employees, those with
salary reductions and demotions, is another
problem for trainers. The disappointment of
losing a job, having a salary reduction, being
transferred, loss of status, etc., coupled with
bleak prospects of finding another position
as good as before can lead to depression,
family problems, drinking, drug problems,
and other disorders. All of these will
adversely affect the participants' willingness
and abilities to be retrained.
TRAINERS' RESPONSE TO DOWN-SIZING
Even with the problem of down-sizing,
American businesses have begun to look at
 VOLUME 22 NUMBER 4
1990
ways of developing their human resources.
Proportionally to the number of employees,
the number of trainers and training functions
has increased even though companies have
down-sized. This situation has developed
partially because of international
competition. An analysis of the impact of
human resource development in other nations
has shown that it has helped them gain a
competitive advantage in some areas. Since
business interests are being focused on how
to develop human resources rather than
utilise them for short-term gains, training is
viewed as a vehicle to develop individuals.
□ the natural maldistribution between cause
LEADERSHIP MUST COME FROM
THE TOP
□ large percentage of the favourable effects
However, training departments are by no
means immune to reductions in staff.
Training specialists must demonstrate the
critical role they play if they are to survive in
shrinking organisations. Odiorne[15] provided
some ideas on how training departments
could respond to down-sizing. Some of his
key ideas were:
(1) Revise goals. Trainers must assume they
will be building new, lean programmes to
help employees and managers to operate
moe effectively. Trainers should evaluate
existing training programmes and
determine those that are making a
difference in performance. Trainers must
concentrate on training goals that provide
the most impact in an effective, efficient
manner.
(2) Use more technology. Trainers should use
or adapt off-the-shelf training materials
which can be delivered by technology
already owned by the company. At the
same time, requests for additional funds
for capital equipment, especially for
devices that promise to cut labour costs
should be made.
(3) Use systematic training. Systematic
training requires the studying of
relationships between inputs and outputs.
When training inputs — budget,
personnel and materials — are cut,
trainers must plan to produce the same
or more output with less. Owing to the
physical limitations of doing this, trainers
29
must change the way they conduct their
activities. Trainers must rearrange,
simplify and question everything about
what has been done in the past. The
relationships between inputs and outputs
must be reviewed constantly and the
lowest output services must be dropped.
(4) Avoid the activity trap. Trainers can lose
sight of their goal because of involvement
in the processes and procedures of an
activity. Thus the activity may become an
end in itself and the training goal may be
forgotten.
(5) Apply the 80/20 rule. This rule projects
and effect: 80 per cent of valuable results
are produced by 20 per cent of the
efforts designed to produce the results.
Applied to training, this would suggest a
of training comes from a small
percentage of the courses, seminars or
efforts of a training staff. Trainers must
concentrate on training that has the most
favourable cost and profit impact.
FUTURE PLANS
American companies are making progress in
the process of integrating human resources
and strategic planning. Even though
personnel experts have a role to play in
integrating the two, it is unrealistic to expect
them properly to implement it. Leadership
must come from the top. Additionally, it is
more logical for some companies to move the
training function out of the personnel
department and group it with other units
such as information systems and
communications.
□
CROSS-TRAINING SHOULD BE
ENCOURAGED AND INDIVIDUALS
REWARDED
□
Ideas offered by companies that have made
some successful changes in the way they
perceive human resource development were
discussed at the Positive Employee Practices
Institute held in Atlanta, Georgia, during
October 1989. Successful practices offered by
companies which are determined to stay lean
 INDUSTRIAL AND
COMMERCIAL
TRAINING
and really develop their human resources
included:
(1) Make hiring more important than filling
positions. Use detailed selection criteria
for new hires to ensure their fit with
organisational culture as well as job
requirements. In addition, contractors
and part-time employees can be used as
buffers to absorb the swings of a cyclical
business.
(2) Make it easy for poor performers to
leave. Put teeth into the performance
review process. Managers need to ensure
that how a person accomplishes a job is
rated as well as what is accomplished.
Input is obtained by having subordinates
rate managers and staff members are
rated by their internal customers, as well
as by their supervisors. Results of
performance reviews are used primarily to
improve performance, not to make
decisions on raises.
(3) Design career paths that go horizontal as
well as vertical. Include more functional
levels than hierarchical levels. Cross-
training should be encouraged and
individuals rewarded for being proficient
in other functions. Some companies are
not assuming that all good performers
will remain for their entire careers or
even that the situation is the most
desirable for all workers.
CLOSING REMARKS
Down-sizing has become a way of life in
American corporations. It is being used to
solve economic problems. Many of these
problems were the result of shrinking
markets, increased competition, budget cuts,
decreased revenues, decreased profits,
stagnation, loss of legitimacy, disgruntled
customers and the like. At the same time
American companies have increased the
number of their managers. Increases have
come about owing to corporate maturity,
diversifications, government regulations, new
technologies, expanding markets, mistrust,
etc. These factors have fuelled the fires of
bureaucracies by adding too many managerial
and staff positions.
In many cases, corporations have been
overzealous in their attempts to reduce the
number of their managers and staff and are
now paying the price. Without proper
planning, down-sizing has left those
remaining many unnecessary hardships.
30
Trainers are now being given the task of
making things work with fewer resources and
they are dealing with employees who may be
less willing to learn. Trainers can be effective
but they must work smarter than in the past.
Trainers must also become involved in
research to find ways to improve training
effectiveness. Associated with the problems
of down-sizing, the following questions must
be answered:
(1) What are the deterrents to training
effectiveness during and after
down-sizing?
(2) What are superior ways of training
individuals who are anxious about their
jobs or disappointed in their
achievements within the organisation?
(3) What are the factors that lead to mistrust
among managers? What are the
deterrents to the elimination of mistrust
between/among affected groups?
(4) What are the most effective training
techniques for preparing employees to
accept change, to become risk-takers, and
to be less rigid in their thinking? Is this a
problem for managers only, trainers only,
or for both managers and trainers?
(5) What are the benefits to training
departments in companies having
horizontal career paths versus vertical
career paths?
Most certainly, down-sizing will result in
smaller companies which will require more
flexible managers with a wider range of skills.
It is also important to help them become less
rigid in their thinking, not to resist change,
and to continue to be risk-takers. Without
these qualities, the down-sizing will be a
trend that will continue into the 1990s.
□
References
1. "Corporate Victims", American Demographics,
May 1989, p. 19.
2. "Cost-saving Efforts Spread", Washington
Post, 19 September 1986, p. G2.
3. Banks, H., "The New Ways of Firing at the
Top", Forbes, 25 August 1986.
4. Armon, D., "Kodak Plans Major Lay-offs, Cost-
cutting", Washington Post, 12 February 1986,
p.F1.
5. Tharp, M., "Tektronix Sets Lay-off of 2,000",
Wall Street Journal, 22 May 1986, p. 4.
 VOLUME 22 NUMBER 4
1990

6. Schlender, B., "Hewlett to Offer 1,800 a

Program to Retire Early", Personnel Journal, 13
June 1986. Seibuet, E.H. and Seibert, J.,
"Benefits: Look into Window Alternatives",
PersonnelJournal, May 1989.
7. Vamos, M., "Trouble in Paradise: A Jolt of
Reality at Time Inc.", Business Week, 17
February 1986.
8. Cameron, K.S., Kim, M.U. and Whetten, D.A.,
"Organizational Effects of Decline and
Turbulence", Administrative Science Quarterly,
Vol. 32, 1987, pp. 222-40.
9. Cameron, K.S., Sutton, R.I. and Whetten, D.A.,
Readings in Organizational Decline:
Frameworks, Research and Prescription,
Ballinger, Boston, 1988.
10. Tomasko, R.M., Down-sizing: Reshaping the
Corporation for the Future, AMACOM, American
Management Association, New York, 1987.
11. Kahn, R.L., Work and Health, Wiley, New York,
1981.
12. Gordus, J.P., Jarley, P. and Ferman, L.A., Plant
Closings and Economic Dislocation, W.E.
Upjohn Institute for Employment Research,
Kalamazoo, 1981.
13. Perrucci, C.C., Perrucci, R., Targ, D.B. and Targ,
H.R., Plant Closing: International Context and
Social Costs, Aldine DeGruyter, New York, 1989.
14. Becker, F.D., Workspace: Creating Environments
in Organizations, Praeger, New York, 1981.
15. Odiorne, G.S., "Training in a Time of
Downsizing", Training, September 1989.

Bibliography
Greenhalgh, L., Lawrence, AT. and Sutton, R.I.,
"Determinants of Work Force Reduction Strategies
in Declining Organizations", Academy of
Management Review, Vol. 13, 1988, pp. 241-54.
Sutton, R.I. and D'Aunno, T., "Decreasing
Organizational Size: Untangling the Effects of
Money and People", Academy of Management
Review, Vol. 14 No. 2, April 1989, pp. 194-212.
Willis, R., "What is Happening to America's Idle
Managers?", Management Review, January 1987.

Gerald D. Cheek is Professor and Head of

the Department of Technological and Adult
Education, and Walter Cameron is Professor
and Director of the Office for Human
Resources Development, Department of
Technological and Adult Education, The
University of Tennessee, Knoxville, USA.

31