The layoff announcements are mounting by the day: 50,000 at Citigroup,
12,000 at AT&T, 6,000 at Sun Microsystems, 2,500 at DuPont, 1,200 at United
Airlines, 850 at Viacom .
In all, major U.S.
companies said in November that they were going to whack 181,671 jobs, the
outplacement firm Challenger, Gray & Christmas reported this week. That was
the most since January 2002 and brought the total number of reductions planned
this year to more than 1 million. On Dec. 5 the Labor Dept. said nonfarm
payrolls fell by a larger-than-expected 533,000, while the unemployment rate
climbed to 6.7%, its highest point since October 1993.
Given the fragile state of the economy, it's not surprising that employers
are more likely to hand their workers a pink slip than a turkey this Christmas.
But perhaps bloodletting isn't the only answer. Certainly, it isn't the only
one that Peter Drucker would prescribe.
Not that Drucker was blind to the need for keeping a lid on costs. Indeed,
he taught that enterprises big and small should always be asking themselves not
how to make a particular aspect of the business more efficient but whether it
should exist at all. "The question should be: 'Would the roof cave in if
we stopped doing this work altogether?'" Drucker explained. "And if
the answer is 'probably not,' one eliminates the operation. It is always
amazing how many of the things we do will never be missed."
What's important, Drucker said, is to make this a routine exercise--not
something that happens only during downturns. "Businesses that actually
succeed in cutting costs," he said, "don't wait until they have to
Investing in Knowledge Workers
In the same way, Drucker believed in investing in productive assets as a
regular, everyday function--and there was no doubt as to where he thought
investment should be channeled in this day and age. "The most valuable
assets of the 20th century company were its production equipment," he
wrote. "The most valuable asset of a 21st century institution…will be its
One person who has acted on these words--with extraordinary results to show
for it--is K.H. Moon, the former chief executive of Korean consumer-products
maker Yuhan-Kimberly. (Full disclosure: Moon, who is now a member of national
Parliament in Seoul,
until recently served on the board of the Drucker Institute, which I run.)
It was during the late 1990s, amid the Asian financial contagion, that Moon
looked around and was disgusted by what he saw. "At almost all
companies," he recalls, "the management just followed the old wisdom--massive
Yet Moon felt that simply to slash employment was irresponsible, and he
began to persuade his colleagues that there was a better way to go--not just to
survive but to grow and prosper. This "was not the time to lose
jobs," he says, "but to build our capability, personally and
To get there, Moon took several bold steps. One was to accelerate a push to
a new staffing system, moving from a three-crew, three-shift arrangement to a
four-crew, two-shift model. By spreading out the work this way--Moon has
likened it to "job sharing in Western countries"--the company figures
it has been able to employ 25% more mill workers than it otherwise would have.
Because of this setup, employees work fewer hours overall. But they're
encouraged not to be idle. Yuhan-Kimberly pays for them to attend classes so
they can improve their technical acumen as well as increase their general
knowledge (through Chinese language instruction, for instance). It's all based
on a philosophy of lifelong learning--what Yuhan-Kimberly Chairman D.J. Lee
calls the company's "true source of competitiveness and sustainable
"It comes down to what Peter Drucker wrote about again and again--to
see people not just as cogs in the wheel," says Edward Gordon, author of The
2010 Meltdown: Solving the Impending Jobs Crisis, which commends
Yuhan-Kimberly's "counterintuitive approach."
The upshot is that by providing a healthier work-life balance, by giving the
rank-and-file the opportunity to enhance their skills continually, and by
taking other steps to create a self-directed team culture, Yuhan-Kimberly has
seen job satisfaction among its 1,700 employees soar. So has productivity
(along with market share and revenue)--so much so that workers' wages have also
Moon, meanwhile, has helped set up a New Paradigm
government-funded organization that is teaching other Korean companies how to
This formula won't work for everyone; implementing it involves real costs
and, thus, real risks. What's more, there's no avoiding the fact that layoffs
are inevitable during a recession, no matter what is tried. Even Drucker, who
so admired Japanese industry for its commitment to lifetime employment,
recognized this ideal was bound to crack amid the unrelenting pressures of
But what Yuhan-Kimberly reminds us is that shedding thousands of positions
doesn't necessarily have to be management's automatic response to a bleak
economy. When things seem darkest, it's time to innovate, not just eliminate.