American Telephone & Telegraph Co. announces layoffs of 24,000 employes at its Information Systems group -- nearly one-third of that number will be management. Ford Motor Co. says that it is committed to trimming its management rolls by 9,000 over the next five years. Since 1983, Eastman Kodak Co. has reduced its worldwide work force from 136,500 employes to less than 124,000. It is now "only hiring for selective functions and specialized skills" and is not adding generally to its management ranks.
These anecdotes, multiplied many times throughout American industry, demonstrate the new plight of middle managers in today's cost-conscious, hyper-competitive business environment.
Middle managers, the staff people long thought essential to a smooth-running corporate operation, are becoming increasingly expendable because of the rapid rise in office automation and a new corporate emphasis on pushing decision-making far down into the operations.
There is also a new concept of the value of a manager taking hold in business. Now, companies want managers who contribute directly to the value of the enterprise, through research, product development, manufacturing and sales. That shift spells trouble for managers whose expertise lies in administration or staff support.
"There is a good bit of cost and overhead in the middle-management ranks, and it's being squeezed from two directions," asserted Quinn Mills, a Harvard Business School professor who consults for International Business Machines Corp., General Motors Corp. and Bethlehem Steel Corp.
"The first is the competition both domestically and internationally -- companies simply can't afford to carry people who don't directly contribute to the bottom line. The second is that it's become increasingly clear that, if they reorganize, they can push middle-management functions lower down into the work force and save a good deal of money," Mills continued.
"I think companies are going to continue to seek to reduce the number of employes they have, and I don't think we've seen the end of this."
The pressure on middle management is further intensified by the merger and acquisition binge sweeping across the Fortune 500 landscape. When one company buys another, "whole divisions can be divested," said Audrey Freedman, a labor economist with the Conference Board in New York. "There is an enormous human impact in an acquisition. You have people being divested out of jobs."
But the impact on middle management has perhaps been most brutal on the basic manufacturing industries, where the strong dollar, automation, global competition and a sense of desperation have combined to redefine the nature and the number of middle-management positions. This has most clearly been the case in the automobile industry, the nation's largest manufacturing enterprise. For a variety of reasons, the nation's current automotive work force, production and management will decrease 5 percent a year through 1990, followed by continued but smaller annual declines thereafter, predicts a newly released Arthur Andersen & Co. study titled "Cars and Competition."
"The reduction will affect blue-collar and white-collar workers," said Peter C. Van Hull, director of Arthur Andersen's automotive industry consulting activities. "Most of that white-collar reduction will come out of the ranks of middle management and out of the clerical staffs." The reason? "Many times, the middle-management and clerical groups are involved in work that doesn't add value to the product," Van Hull said. "They tend to become self-perpetuating bureaucracies. In international competition, jobs that don't add value to the product are not needed."
The idea is to renew a focus on the core elements of the enterprise -- design, manufacture and sales -- and eliminate the managerial redundancy that once was the key to assuring that top management edicts were followed. Gone are the days of "checkers checking checkers checking checkers" -- a favorite top-management description of redundancy in middle-management ranks.
Ford, which last week announced that it will cut another 20 to 25 percent of its U.S. employe base by 1990, is taking a "pro-active approach" rather than reactive, according to Van Hull. Ford is pushing its work force reduction program at a time when the company is relatively prosperous. That offers a better opportunity for retraining programs for targeted employes or, at the very least, a chance to leave gracefully, Van Hull said. "Ford is facing the issue. It's better to do it that way than it is to wait until it's too late, and then have to quickly reduce employment because of a loss of market share," he said.
Although Ford's cuts are across the board, they reflect the company's willingness to slice middle-management ranks that once had enjoyed relative immunity to layoffs. Some Wall Street analysts see General Motors, the world's largest car company, still sporting a bulge of middle managers while its domestic competitors have trimmed down. In 1979, the company had 150,000 white-collar workers in the United States -- the same number it has today.
But GM officials and some auto industry analysts say that the figure is misleading. The current white-collar-staff level reflects GM's acquisition last year of Dallas-based Electronic Data Systems Corp., and the resulting shake-up in GM's organizational structure has added to middle management, GM says.
"It is a temporary bloat; and the pressure is on to reduce it," said an auto industry consultant who requested anonymity. "A number of GM departments have business plans to reduce the number of heads in their shops by specific numbers. The pressure is really on."
The capital-intensive, labor-intensive and ultra-competitive automobile industry is just the most obvious and dramatic example of the trend. The high-technology industries -- notably computer and telecommunications companies -- also have trimmed their white-collar rolls in the face of recession, competition and the reality that the value added didn't compensate for the cost. "While it would be inappropriate to single out middle management as the sole target, in the past . . . . layoffs were more or less limited to the manufacturing types," said Marc Schulman, a computer industry analyst for Salomon Bros.
But Schulman stresses that the pattern of hiring in the industry has changed dramatically. "What we're now seeing is a greater emphasis in employment growth in areas that produce sales growth -- sales, product development and research, et cetera," he said.
"The problem was that lots of these firms grew for many years without any problem, and the natural tendency was to get bloated at the staff level."
With the new era of competition and the constant specter of IBM, "I don't think staff positions will expand as the business recovers," Schulman noted.
The employment situation at AT&T Information Systems, the company's computer and telecommunications equipment arm, confirms that. The group announced it would lay off more than 24,000 employes over the next six months -- the largest single layoff in the history of AT&T, a firm that took pride in holding on to its work force come what may.
"There's no question that we're emphasizing cost reduction in our staff area to improve our profitability," said Lawrence S. Conterno, AT&T's director of human resources planning, employment systems and minority hiring. "I would guess that other communications companies in the industry will be doing the same thing."
Admittedly, the breakup of AT&T created a unique opportunity to consolidate redundant positions. But Conterno, who said there were five internal task forces with missions to deal with the employment situation, stresses a more subtle but important point: "Now that we have the opportunity to reorganize, do you really need X levels of management below you?"
Caught between a desire to centralize policy and decentralize authority, the company is facing critical questions of just how many managers it needs to compete effectively. The answer clearly is "fewer." On the one hand, management ranks are thinned when staff functions such as data processing are centralized -- as GM is demonstrating. On the other hand, giving plant managers responsibility for costs, quality and other key factors also reduces the need for staff.
In effect, the classic questions of centralization and decentralization have reemerged as the business environment has changed. In the past, the lower echelons of the company bore the brunt of the trade-offs. In the 1980s, it appears that the pain of retrenchment cuts even higher. Harvard's Mills predicts that the retail industry will be the next target of middle-management retrenchment and the fast-growing financial services industries will be soon to follow.
"The financial services companies seem to be bloated with people, and many of them are inefficient and unproductive," he said. "We're going to see major layoffs there one of these years."
Just as the spread of "steel collar" robot workers and other advanced automation systems have reduced blue- and white-collar ranks in factories, the emergence of the "paperless" office similarly will reduce the need for "paper pushing" clerical and administrative employes in the service sector.