Additional Insight for Myth 10
Our theory is true

Downsizing as 21st Century Bloodletting

(Adapted from mintzberg.org/blog, 2 April 2015)

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

Not in management, where bloodletting has returned, 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.

Downsizing is so popular because it’s so 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 angst. Jack and Jill did nothing wrong, other than working for the wrong company. But out the door they must go, carrying all the angst for themselves and their families.

As for those 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 too. So much for pride in work, dedication to an enterprise, even 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 much 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 workers. Satisfying this may bring costs down quickly, so that profits can go right back up, but both are temporary—long enough for those in the know to cash in their stock and run.

Think about it: all of a sudden thousands of workers become “redundant.” Was no-one aware of this earlier? Who has been managing the place anyway? Most likely the same people who hired the people now being fired. This fact alone may be testimonial to the incompetence of the management. Hence, it’s the downsizers who should be downsized, the executioners who should be executed.

Most likely, these downsized workers haven’t been redundant at all. They have just become the convenient pawns in the global game of Shareholder Value. They serve a system that has become sick, wherein the treatment has become the illness.

So what’s to be done instead? Here’s an example. 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 downsize—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. 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 book publishing house should be. It has become a bit of a legend in this business. Its culture is rather old-fashioned: its people believe in books beyond sales, causes beyond Shareholder Value, authors’ ideas beyond their reputations. The place is run as a community of engaged human beings–people are enthusiastic, authors return. 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 at this door. The company is called Berrett-Koehler. Bust those Management Myths is my eighth book with them.