Corporate Downsizing

Circuit City is the latest company to shut its doors and lay off thousands of workers. Who knows why. That’s not a question, but rather a statement – because there is one answer that most companies will flatly deny. Some companies are happy to have a recession hit as those are the companies that see payroll as a cost, not an investment. These companies think that by reducing their payroll they’re saving costs (they like to think of it as some perverse kind of amortization) rather than realizing that by eliminating the people they’re eliminating the new ideas and hard sweat that will get them through this economic downturn.

Remember that old giant, Arthur Anderson? They had a delightful corporate policy of “up or out” – meaning you either got promoted or fired. While working there one of my friends said she firmly believed that the highest tiers of the company were occupied by the most mediocre of talent. Her logic was quite sound – the brightest saw the company for what it was and got out quickly, the slowest were figured out by the company and jettisoned. As time went along, the best and least were winnowed out, leaving the truly mediocre as the partners in charge. (I left and went independent, a year after a manager actually asked me if I was in the right field – I had to ask her to look at my personnel file to confirm I had a masters degree in what I was doing. She did look at my file, which to my surprise was in her desk drawer, not in the HR department – another sign of a truly dysfunctional environment.)

I believe this is true with many of our largest companies – the bright ones leave for either smaller (less risk-averse) companies, or start their own. The dullest are winnowed out which leaves those companies with the middling crowd – and apparently the ones who believe that because they’ve survived to the top pinnacles they are owed something more than a basic salary. True, in many cases there are people fired because their manager is intimidated by them – but those are the ones who should have seen the writing on the wall and left earlier.

Have you ever been unfortunate enough to be amongst those folks in the rarified air of “upper management”? They create their cocoon of entitlement simply from having survived. They believe they are entitled to the large salaries that they vote for each other because they managed to get rid of everyone else in their way – either by boring them to death, or eliminating them. In one job as an HR manager I knew it was going to be short term from day one. After I got the job my boss told me as long as the big league players’ salaries and annual bonuses were taken care of properly I didn’t have to worry about anything else. Silly me – all that time I thought Human Resources was about taking care of ALL of the people in the company, not just the Top 10 Salaries.

I have since left that field (BIG surprise there) as without fail each company I worked for saw Human Resources as a cost, not an investment. So it’s no surprise to me now that companies are throwing their employees out the window with both hands, thinking it will save them money. The smart ones are keeping their employees and finding better ways to make use of them and other resources. Once the economy starts to pick up they’ll be in desperate need of the intellectual capital that they so glibly discarded as a cost-saving measure.

And what of the thousands of employees fired by Circuit City? My guess is that places like Best Buy and others will find excuses to clean house of their lesser performers (or those who are too grating to their supervisors) and replace them with the best of the jettisoned Circuit City folk. A downward spiral, to be sure. But then that’s what the Free Market is all about really, the ability to Freely eliminate workers without any sort of ramifications to those folk in the upper echelon, who are more interested in their pay and bonuses being correct than in any other aspect of their company.