“Downsizing” as 21st Century Bloodletting

Until two centuries ago, bloodletting was a common treatment for all sorts of illnesses. Physicians who didn’t know what to do were inclined to draw blood, sometimes killing their patients. We know better now, at last in medicine.

Not in management. Bloodletting has come back, with a vengeance. These days, corporate executives who don’t know what to do are inclined to fire great numbers of workers, and that is killing societies and economies. This goes by the polite name of downsizing, despite the havoc it inflicts on people’s lives. But since so many companies are doing it, surely it must be OK.

Downsizing is popular because it’s easy. Just sit atop a corporate hierarchy and deem some number that ends in three zeros—say 5000. Leave the messy part, and the guilt, to the middle and bottom managers who have to convert these zeros into human beings. Jack and Jill did nothing wrong, other than working for the wrong company. But out the door they have to go, carrying all the angst for themselves and their families, while the company carries merrily along.

As for the human resources left in the company, they have to pick up the extra work, until they burn out. While so doing, they had better lay low, lest they get downsized next. So much for pride in work, so much for dedication to the enterprise, so much for an enterprising economy.

Sure, a company that is in deep trouble has to save itself, even if that means eliminating some jobs, to preserve others. But most downsizing is not about that at all. It’s about a dip in earning that has to be corrected if the executives are to keep getting their bonuses. The scent of a company missing its numbers brings out the wolves of Wall Street, baying for the bones of thousands of workers. Providing that brings costs down quickly so that profits can go right back up, at least long enough for those in the know to cash in their stock and run.

This doesn’t correct the real problem (unless that is perceived to be protection of the stock price). But it’s a lot easier than, say, improving the quality of the products. So mass firings have become the order of the day.

Think about it: all of a sudden thousands of workers become redundant. Was no-one aware of this a few weeks earlier? Who has been managing the company anyway? It’s quite clear who has been leading it: probably the same person who is now deeming the downsizing. This fact alone is testimonial to his or her incompetence. It’s the downsizer who should be downsized, the executioner who should be executed.

Of course, we all know that most of these downsized workers haven’t been redundant at all, just convenient pawns in the global game of Shareholder Value. They serve a system that is sick, with its use of a practice that is sickening. The treatment has become the illness.

So what’s to be done instead? How about the exercise of some serious leadership, in the form of engaged management? Some years ago, the editor of a division of a major publishing company was told that he, like his colleagues in the other divisions, had to cut 10% of his staff. He protested, pointing out that his division was doing very well, indeed had been promised more staff, not less. He had no redundancies—of that he was well aware, since he was a leader who managed. Nevertheless, he was taken before the boss of all bosses—the CEO of this large company—who told him personally that if he didn’t fire the others, he would be fired instead. He refused, and was fired.

He went on to create a new company, to be run as he thought a publishing house should be. It has become a bit of a legend in this business. The mentality is rather old-fashioned: its people believe in books beyond sales, causes beyond Shareholder Value, the authors’ ideas beyond their reputations. The place is run as a community of engaged human beings--people stay, and are enthusiastic. When the company decided to raise some money, it issued what could be called an IAO—an initial author offering. All the authors were given the chance to buy shares: 60 of them did! No wolves of Wall Street bay at this door. The company is called Berrett-Koehler.

© Henry Mintzberg 2015. HM is the proud author of four Barrett-Koehler books: Managers not MBAs (2004), Managing (2009), a shorter version of this called Simply Managing (2013), and Rebalancing Society (2015).