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THE DOWNSIDE OF DOWNSIZING IT'S CALLED SCIMONOCE (THAT'S BACKWARDS ECONOMICS)

By Published on .

We're not in the economics business-at least not directly-but a recent news story bothered us for its implications for business in general.

A major American corporation announced a second wave of job cuts on top of the 8,5000 jobs it had eliminated over the last two years. The reason given by the corporation to its employees for this latest move was the poor performance of the company's stock. A company spokesperson was quoted as saying, "The restructuring will involve the elimination of a substantial portion of our cost structure ..."

So there you have it; this gigantic multinational corporation's product is its stock price. And an employee is a cost structure, not a person, not a worker.

Seems to us there's something terribly wrong here. This corporation has it all backwards. We may be out of touch, but we've always thought a company's stock price was influenced by how good its product or service is and how well it markets those products or services to consumers. At least that's what the analysts on Wall Street tell us. It would seem logical that working backward from a stock price would eventually lead the company right out of business; as the stock price goes down and "cost structures" are eliminated, the product suffers and the stock price goes down further, and on and on.

An even more disturbing aspect of this corporation's announcement was how it intended to use its remaining employees-excuse me, "cost structures." They will reduce the size of the corporation staff to "that required to perform corporate functions only."

We know what that means. The remaining people will have to take on additional responsibilities and duties previously performed by others. And that is a sure formula for reduced productivity if not disaster.

When a person is required to wear two or three new hats it is highly likely that those hats don't fit. They will have jobs they are not qualified to perform. They become title holders, not performers.

When people are forced into incompetency the results are instantaneous.

One of Murphy's Laws: If you tinker with something long enough, eventually it will break or misfunction.

Mr. Kay is senior VP-director of media operations at Kelly, Scott & Madison, Chicago.

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