Reversing the Slide: A Strategic Guide to Turnarounds and Corporate Renewal

Chapter 5. Downsizing Is a Tool, Not a Goal

Too often, executives today feel they must have a corporate goal to downsize. In fact, Wall Street sometimes rewards a downsizing announcement with a jump in stock price. The executive him-or herself is almost always given a larger bonus by the board of directors for making such tough and difficult decisions, which may make them not so tough or so difficult. As we'll see later, they are probably foolish! In talking with various CEOs, I often hear they do it because Wall Street analysts expect that behavior. However, does simply ordering an 8 percent or 15 percent across-the-board cut in headcount show real leadership or decision-making abilities? No. In this chapter, we examine the pros and cons of downsizing, ...