To 12,700 of the 70,000 3m employees who received it last year, the blandly worded letter spelled doom. They were about to be spun off to a new company being formed around 3M's money-losing data storage and medical imaging divisions. The outcasts would have to teach those old dogs some profitable new tricks. The outfit's products, ranging from floppy disks to X-ray film and magnetic resonance devices, were well regarded but caught in viciously competitive markets. When Gallup polled the spun-off workers about their fate, typical responses included "shocked," "betrayed" and "apprehensive."
There was, in truth, plenty to be scared about. 3M (1995 sales: $13.4 billion) has long been the Ma Bell of Minnesota companies--a revered and maternalistic giant that gave the world Scotch tape and Post-It notes, where jobs for life are still a norm. The spin-off, called Imation, a $2.3 billion business that became an independent, publicly traded company last month, offered no such security. Only 3 of 4 people who worked for the new company's divisions when they were part of 3M made the move to the Imation payroll. Gone were two management layers, five manufacturing plants, seven labs and jobs ranging from clerk to scientist. Many older workers, apprehensive about the new company, took early-retirement packages. There was no going back to the mother ship either. "Imation designees," as they were known, can't work at 3M for two years.
The survivors find themselves--anxious, exhausted and excited--parked in comfortable if cramped quarters in a warren of cubicles. It's all part of the latest disruption of career life in the Nothing-Is-Sacred Nineties. When corporate behemoths spin off divisions, they often cite the need to "focus on our core competencies" (translation: "We couldn't run this thing") or to "unlock value for investors" ("We made stupid acquisitions, and now we're dumping them"). 3M had to make hard choices about where to invest its money. Imation lost out because of its lousy earnings compared with other businesses. So out the door it goes, with a bunch of products and patents and three years of prominent use of the 3M brand name with them.
The spin-off trend picked up momentum last year, when U.S. companies loosed a record $48 billion worth of ventures into the marketplace. This year, with AT&T casting off its manufacturing division as Lucent Technologies, the value of spin-offs is expected to reach $70 billion. Last week Dial Corp. sent its $1.5 billion consumer-products division spinning.
For Imation, based in a former 3M office building flanked by cornfields in suburban St. Paul, separation from the 3M way of doing things represents not only a threat but also a chance to shine. In addition to slashing costs, chairman and chief executive Bill Monahan vows to create a lean, quick-strike culture that tailors its products to the needs of its customers. "Anybody and everybody will be interacting with the customer," he says. Monahan's ambitious goal is to post a total of $150 million in "economic profit"--defined as operating income after taxes and deductions for the cost of capital--by the end of 1998.