Will they resist the urge to downsize?

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The Independent Online
ALMOST since the last recession, the pundits have been agreed that the route to sustained success lies through innovation and growth rather than through a concentration on cutting costs.

The idea has even caught on with some company executives, hence all the kind words about such initiatives as the RSA's "Tomorrow's Company" project. This - though mainly noticed for its comments on stakeholding - is actually largely about recognising the importance of people to corporate performance.

Of course, when the going is good, it is easy to say that cutting jobs is not just bad for communities but bad for business. History indicates that companies are less inclined to take such an approach when conditions become tougher.

So now that increasing numbers of commentators are convinced we are facing some kind of recession in the months ahead, what are the chances of the prosper-through-growth approach winning out over the cut-and-cut-again attitudes of the past?

On the face of it, the omens do not look good. In recent days, for example, hundreds of City workers have lost their jobs and the spectre of factory closure is looming over the Rover workforce. But will others follow suit?

Not necessarily. The City has always been a special case. Increasingly, the banks operating in this world find themselves walking a tightrope between huge gains and equally substantial losses, and the US hire-and- fire approach has readily taken route there. Rover, meanwhile, has - in spite of dramatic improvements in working practices - struggled for years. As a straggler, it was always going to find things hard when competitive pressures bit.

But a good many organisations these days are as lean and mean as they can get without hiving off whole operations.

And there are encouraging signs that the knee-jerk down-sizings of the past will not be repeated. For example, a survey published last week by the management consultancy Towers Perrin indicates that European companies "are looking to innovate and grow at the same time as reducing costs and improving customer service" - rather than down-sizing.

That all sounds grand, but it does give rise to certain concerns. First, innovation is still something with which British companies, in particular, have difficulty. Second, one of the factors behind the worsening economic outlook is the exposure of companies from Britain and other industrialised nations to emerging economies.

Moreover, organisations are often good at talking about cutting costs, but less effective at doping it. Sacking full-time employees and taking on contractors, often at higher rates, is just one example.Finally, customer service is hardly a strength in Britain or any European country.

But the real issue is that we are only at the top of the downward slope. If in the months ahead companies resist the urge to cut still further into the bones, the gurus will have something to shout about. The subjects of all those studies really will be living by the notion that - as Towers Perrin puts it - "only through effective development and deployment of people will companies create a virtuous circle ... in which delivering more value to customers funds growth, enables cost reductions and leads to greater profitability".

But if they do not, all those chief executives and their sound words about having faith in their people will resemble nothing so much as Gordon Brown and his words on ending "boom and bust".

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