It is known as downsizing, rationalizing, streamlining and, perhaps most commonly, restructuring. With a bow to the diet culture, some prefer to call it just plain slimming down. By whatever name it goes, a compulsion is sweeping through corporate America to bring about fundamental, long-lasting changes in the way it does business. U.S. corporations have always undergone periodic cutbacks in times of recession or strain, but this time the tone and scope of the effort are vastly different. Says Keith Stock, a partner in the Manhattan-based McKinsey & Co. management consulting firm: "What we're seeing is nothing less than a transformation of American industry."
Forced upon business by unprecedented global competition and financial turbulence, the change is so swift and powerful that it is churning across the business landscape with the force of an army of bulldozers. American companies have started the huge task of rebuilding themselves from the ground up, erecting a sleek new operating architecture to replace the unwieldy processes of the past. At corporate headquarters and on factory floors from New York City to Los Angeles, newly cost-conscious executives are on a relentless examination of the efficiency and effectiveness of everything they do. They are tearing up organization charts, selling off unsatisfactory product lines and closing down unprofitable plants at a rate never seen before. Their aim: to produce streamlined, combative concerns that can withstand the frenetic, competitive pace of the late '80s.
The task has the general aim of sharply cutting back on costs to make dramatic and durable improvements in long-term profitability and growth. Restructuring's theme is "back to basics." That means, among other things, an end to the corporate ethos of expansion for expansion's sake. It spells farewell to the notion, always more imagined than real, of the corporation as a kind of private-sector welfare state, with unlimited perks and unshakable job security. It also involves frequently deep retrenchment, as U.S. corporations cut back on marginal operations, strip away unnecessary layers of management and staff and refocus their attention on proven areas of profitability. Says James Brown, an executive director of the Conference Board, a business-sponsored research group: "Everybody is cracking down."
So far in the '80s, well over half of the names on the FORTUNE list of the 1,000 largest U.S. corporations have undergone some form of significant reorganization. Gulf & Western in the past four years has spun off some 65 diverse subsidiaries worth more than $4 billion. IBM has closed three domestic plants, cut back on employee overtime, and is reducing its U.S. work force 7%, to 225,000, through attrition and early retirement incentives. AT&T last year cut 32,000 out of a work force of 322,000, in an effort to save $1 billion annually. Among the jobs lost were 11,600 management positions. Many of those who left were coaxed along by payments of up to a year's salary.