Downsizing's Downside

Though downsizing, total quality management (TQM) and reengineering seek to dramatically reshape organizations, many managers say they often don't produce the results they hoped for, a new study by the National Research Council has found.

The study, "Enhancing Organizational Performance," funded by the Army Research Institute and conducted by a committee of academics and management consultants, says that the reasons downsizing, TQM and reengineering often fail are unclear, possibly because the changes they provoke are so transformational that people within organizations instinctively resist them.

"Although the principles and processes of TQM, downsizing, and reengineering are reminiscent merely of commonly prescribed 'good' management practice, a majority of organizations that embark on these change efforts do not accomplish their objectives," the study concluded.

A basic problem with TQM is that it doesn't have a standard definition, the study says. TQM efforts vary widely from organization to organization. One survey discovered companies had used 945 different TQM techniques. Another survey found that 67 percent of TQM programs at U.S. and European firms that were more than two years old died for lack of results.

While TQM has had limited success, the study says that "downsizing as a strategy for improvement has proven to be, by and large, a failure." Seventy-four percent of senior managers whose companies downsized said that morale, trust and productivity declined after downsizing. "The fear, distrust, uncertainty and potential for personal harm may mitigate against any organizational downsizing stategy," the study says.

Of the three change methods, reengineering is the least well-researched. The term was not even used until 1990. The intent of reengineering, the study says, is to "begin again and design new processes from scratch." Reengineering alone, however, will not improve organizational performance, the authors say. Eighty-five percent of companies that embarked on reengineering efforts reported little or no gain, according to a survey of more than 1,500 companies in the U.S. and Europe.

The study says that although many managers are embracing TQM, downsizing and reengineering, each risks "being relegated to the management fad ragbag, however, because none has been rigorously studied in systematic, empirical ways, especially regarding its impact on organizational effectiveness." And, the study concludes, "evidence also exists that each is useless if not harmful."