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"Reengineering and Dumbsizing: Mismanagement of the

Knowledge Resource``

To understand the reasons Ior the radical restructuring process that has recently been
occurring in the most modern organizations, people Iirst need to appreciate the underlying
transIormation oI their environment. This is an unusual era oI change. Although the Greek
philosopher Heraclitus noted that, "There is nothing permanent except change," back in 500
B.C., the nature oI change itselI has recently changed.

Paul Shay, a Iuturist and Iormer vice president oI a prestigious think tank, concluded that,
"There are rare times in history when changes are so proIound that it amounts to a change oI
kind, rather than degree; and this is the Iourth such change in the history oI Western
civilization! (The Iirst was the transIormation Irom barbarianism to Greek civilization, the
second was the Renaissance, and the third was the Industrial Revolution)."

In the past, change was predictable, incremental, and evolutionary. In other words, it was
linear. In modern times, however, change is the opposite: It's "nonlinear." It's unpredictable,
rapid, and revolutionary. ThereIore, it's considerably more challenging.

The main driving Iorces behind this Iourth transIormation oI change were the development oI
the personal computer (PC) and global telecommunications technologies. In the span oI less
than two decades, these technologies have totally revolutionized the world. For example,
more new inIormation has been generated in the past 30 years than in the previous 5,000
years, and the total amount oI new inIormation being generated is now doubling in time
Irames oI less than Iive years.
While the amount oI new inIormation is increasing, product
liIe cycles are shrinking. What once took a generation Ior Ford's Model T is now down to
several months Ior PCs.

The PC and telecommunication technologies have not only changed the processes used to
produce goods and services, but also how those processes are managed. For example, the
traditional management hierarchy no longer makes business sense because the critical wisdom
and inIormation needed to run the new processes are no longer containable at the top. In
addition, automation and other advances have reduced the number oI employees needed to
produce goods and services, resulting in unemployment.

In sum, there has been an evolution Irom an industrial economy, which is based on natural
resources and manual labor, to an information economy, which is based on intellectual capital
and knowledge workers. Dealing with rapid, nonlinear change has been a challenge Ior both
management and employees. This challenge is compounded by the erosion oI personal time
Ior rest, reIlection, and planning. By 1989, the average American was already working the
equivalent oI an extra month per year as compared to his or her counterpart 20 years

The bottom line is that companies have had to retool their businesses without the beneIit oI
historical precedents and without adequate time to properly assess all oI the critical Iactors.

by ur Poward Llsenberg
1hls arLlcle was publlshed ln Lhe May 1997 lssue of CuallLy rogress and ls copyrlghLed by lLs ubllsher
Amerlcan SocleLy for CuallLy
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&nderstandably, some major errors were made, but too many companies are continuing to
make the same mistakes. They are Iailing to understand the basic concepts oI knowledge
management, which enable sustainable proIitability.

Deep ecology and successful corporate cultures

Since organizations are composed oI people, it is instructive to examine how living systems
successIully adapt to changing environments. In %e Web of Life, physicist and philosopher
FritjoI Capra describes the scientiIic discoveries underlying the paradigm shiIt Irom a
mechanistic view to a holistic systems view oI the world.
In the holistic systems view, which
is called "deep ecology," the world is perceived as an integrated whole rather than a
dissociated collection oI parts. Thus, deep ecology requires:
O A shiIt in values, Irom selI-serving egocentrism to a concern Ior the well-being oI
O A shiIt in power, Irom domination over others to inIluence oI others
O A shiIt in social organization, Irom hierarchies to networks
Companies can beneIit by adapting the deep ecology view when running their businesses.
Capra identiIied several basic principles oI deep ecology Ior sustainable organizations,
O nterdependence. Interdependence is about mutual dependence. The success oI a
whole community depends on the success oI the individual members, and the success
oI each member depends on the success oI the community as a whole.
O lexibility. Flexibility results Irom multiple Ieedback loops that bring the system back
into balance whenever there is a deviation Irom the norm. The greater the Ilexibility,
the greater the ability to adapt to changing conditions.
O iversity. Diversity yields greater resiliency Ior adapting to changing conditions, since
there are many inIormation sources and resources with which to cope with problems.
In summary, sustainable organizations are intelligent systems that learn and apply what they
have learned.

These three basic principles oI deep ecology are scientiIically based concepts, but more
important, they are also exempliIied by research data on corporate perIormance. James
Collins and Jerry Porras oI StanIord &niversity set out to discover what makes truly
exceptional companies diIIerent Irom all oI the others. They examined 18 exceptional
companies that were the premier institutions in their industries, were widely admired,
averaged being in business nearly 100 years, and had outperIormed the general stock market
by a Iactor oI 15 since 1926. They then compared each company to its top competitors. The
results were published in their book uilt to Last. Successful Habits of Jisionary Companies.

Collins and Porras discovered that the exceptional companies shared several timeless
O %ey ave core values. These core values Iorm solid Ioundations that do not change
because oI current Iads. (They seem to Iunction like DNA: They organize the
processes required Ior thriving and enable the transIer oI eIIective design knowledge
to Iuture generations, ensuring long-term survival.) It is important to note, however,
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that iI exceptional companies stray Irom their core values, they deenergize their
employees and lose their competitive edge. Such was the case with IBM, when it lost
is audacious boldness Ior investing in the Iuture and became more conservative and

O %ey are driven by more tan making money. The exceptional companies pursue a
cluster oI objectives; while making money is one oI those objectives, it is not
necessarily the primary one. Yet, these exceptional companies are more proIitable than
their competitors, which are driven primarily by making money.
O %ey focus on continuous improvement. The companies Iocus more on continually
improving themselves rather than on beating the competition.
O %ey learn from failures. The companies rely more on trial-and-error experimentation
than on academic strategic planning.

These qualities combine to Iorm an organizational culture that is conducive to success--and
proIits. Similarly, in their book Corporate Culture and Performance, John Kotter and James
Heskett oI Harvard &niversity demonstrate that there is a relationship between organizational
culture and proIitability.
In their analysis oI more than 200 leading companies, Kotter and
Heskett Iound that an "adaptive" corporate culture has a signiIicant eIIect on long-term
economic perIormance. (An adaptive culture is characterized by visionary leadership, walking
the talk, attentiveness to all stakeholders, empowerment oI employees, and dedication to
continuous improvement.) In terms oI Iinancial perIormance, those companies with adaptive
cultures increased their revenues over an 11-year period by 682 and improved their net
incomes by 756 compared to 166 and 1 respectively, Ior those companies that were not
adaptive to change.

Given these Iigures, it's ironic that many executives regard values and culture as "soIt"
Iactors. Most likely, these executives also don't understand the real value oI the knowledge
resource in their employees. David Packard, one oI the Iounders oI the Hewlett-Packard
Company, put it succinctly when he said:

I want to discuss why a company exists in the Iirst place. In other words, why are we here? I
think that many people assume, wrongly, that a company exists simply to make money. While
this is an important result oI a company's existence, we have to go deeper and Iind the real
reason Ior our being. As we investigate this, we inevitably come to the conclusion that a
group oI people get together and exist as an institution that we call a company. Now they are
able to accomplish something collectively that they could not accomplish separately--they
make a contribution to society, a phrase that sounds trite but is Iundamental.

The concepts oI making a contribution to society, interdependence, Ilexibility, and diversity
are more oIten the exception rather than the rule in companies today. Companies more oIten
Iocus solely on making a short-term proIit, view employees as disposable commodities, and
create unadaptive cultures. A stark example oI this is the recent trend oI reengineering.

The problems with reengineering:

Reengineering is the radical redesign oI a company's processes, organization, and culture to
achieve breakthrough increased perIormance (vs. the slower, incremental improvements
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associated with total quality management). The classic book on the subject is Michael
Hammer and James Champy's book, #eengineering te Corporation. A Manifesto for
usiness #evolution. In their introduction, they not so humbly purport to replace the basic set
oI organizing principles Ior business oI the past 200 years. They state that, "In business
reengineering, all job titles and old organizational arrangements--departments, divisions,
groups, and so on cease to matter. They are artiIacts oI another age...How people and
companies did things yesterday doesn't matter to the business reengineer."

Although "reengineering" is not the same semantically as "downsizing," in practice, the two
terms have become relatively synonymous. For example, an article Irom the Wall Street
Journal reIerred to Hammer as, "the management guru whose ideas launched tens oI
thousands oI pink slips."
Some oI the other widely used synonyms are "reorganization,"
"restructuring," "rationalizing," and "layoIIs." Then there are the Orwellian euphemisms, such
as "rightsizing," "delayering," and "dehiring." The bottom line is that reengineering is usually
applied Ior expedient cost cutting rather than Ior value-added objectives and growth.

Hammer and Champy's book launched a Iad that caught on in many companies. While the
concept oI taking a Iresh look at a company's underlying business processes instead oI just
continuing to do things the same way is sound, the business reengineers inexcusably suIIer
Irom a major blind spot. They Iail to see that a business is a business because oI its people and
that it exists by serving the needs oI the people. Surgically cutting away part oI the employee
body and leaving the remaining employees hemorrhaging dangerously impairs the company's
vitality. Three years aIter the publication oI #eengineering te Corporation, Hammer
admitted that he "wasn't smart enough" about the importance oI Iactoring in people. He
blamed his own engineering background and said he had not been suIIiciently appreciative oI
the human dimension.

The damage, however, had already been done. Companies had hopped on the bandwagon,
with oIten disastrous results.

egative side effects of reengineering on the company

Instead oI making companies lean and mean, reengineering more oIten makes them lean and
lame. Reengineering negatively aIIects both a company's bottom line and its Iuture vitality.

Here is a sample oI reports on how reengineering has aIIected companies' bottom lines:
O In their article, "Business Process Re-Engineering RIP," Enid MumIord and Rick
Hendricks revisited some oI the supposed success stories in #eengineering te
Corporation such as Capital Holding Corporation, Hallmark, and Mutual BeneIit LiIe.
What they Iound was Iailure. They wrote: "This is the story oI the rise and Iall oI
business process re-engineering in the &.S. It is a tale oI Iashion and Iads, oI
unIulIilled promises and Iinancial catastrophes."
MumIord and Hendricks Iound that
many oI the companies were eventually leIt with processes that were more diIIicult to
manage than the previous ones. In addition, their costs had increased, they were
getting poorer returns on assets and equity, and their employees were demoralized.
MumIord and Hendricks concluded that, "values are as important, iI not more
important, than they have ever been. Yet many companies tend toward short-term,
issues-Iocussed, expedient managerial behavior. These approaches, together with
short-term contracts, longer working hours, and increased stress, can produce an
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alienated work Iorce which has little or no identiIication with its employer. All the
promises oI improved quality, better service, and a stronger customer orientation are
brought to nothing."

O %raining & evelopment magazine reported that reengineering was Iailing in about
70 oI organizations because oI inadequate consideration oI the human Iactor.

O According to surveys by the American Management Associations, every year since
1988, at least 30 (and sometimes more than 50) oI large and mid-size &.S.
companies have downsized. But 66 oI the constricting companies did not report any
increase in productivity and 55 did not improve their operating proIits.

O A survey oI 1,468 companies by the Society Ior Human Resource Management Iound
that productivity had actually deteriorated Irom downsizing in more than 50 oI

O The &niversity oI Wisconsin conducted a study oI the relationship between layoIIs
and proIitability in #%& 100 companies. It revealed that Iinancial perIormance
over a Iive-year period actually worsened because oI downsizing.

O A survey oI 1,005 downsized companies by Wyatt Associates Iound that 68 were
not successIul in increasing their proIits.

Besides the bottom line, reengineering attacks the vitality oI companies. There are may
instructive analogies on how reengineering drains the liIe out oI an organization. For
example, reengineering has been compared to:
O Anorexia nervosa. The organization becomes thin, but less healthy. First, the
organization's Iat is depleted, then its muscle, and eventually even its brainpower.
O loodletting. Reengineering is akin to the not-so-old but pseudoscientiIic medical
practive oI bloodletting, which was supposed to help rid patients oI harmIul
substances, but actually weakened them.

O Computer viruses. Just like a computer virus, reengineering decreases organizational
memory because layoIIs are oIten covertly targeted to older, usually more experienced
employees (i.e., over 40 years oI age). Loss oI organizational memory also occurs
when desirable, highly trained employees decide to jump ship because they are oIIered
the liIeboat oI an early retirement package or because their Iaith in the company's
Iuture is shattered. Finally, the destruction oI the inIormation grapevine and the
inIormal bridges between key employees oI various departments results in loss oI the
tacit knowledge embedded in the working institutional memory.
The remnants oI the reengineered companies are no longer vital social institutions. There is
little heart leIt to recharge the stressed-out employees who survived the downsizing or to
rebuild the bond between them and their companies. SpeciIically, reengineered companies

Deterioration of teamwork. Although company leaders usually call Ior an increased
emphasis on teamwork and communities oI practice, in reality, teamwork actually
deteriorates. For the shell-shocked survivors, inIormation is power, so they don't voluntarily
share it with others. Employees guard inIormation, believing that it will make them less likely
to be let go in the next wave oI downsizing. The net result is a decrease oI collaborative

Teamwork also deteriorates due to the use oI technology to replace human interaction. For
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example, voice mail is used to replace secretaries, while telecommuting and "virtual teams"
take the place oI in-person meetings. The reduction oI Iace-to-Iace contacts, however,
substantially reduces the employees' willingness to put themselves out Ior others.

Delayed decision making. Decision making suIIers because the stressed employees Iear
making a bad judgment call and, as a result, tend to postpone decisions until the dust settles
(oI course, it never does). So analysis paralysis and passing the buck oIten occur at a time
when there is a need Ior Iast, decisive actions.

Crippled support functions. Human resources, education and training, and other support
Iunctions oIten Iall victim to reengineering because they are usually perceived as being too
soIt. The human resources Iunction tends to regress back to the personnel department. What
staII and money are leIt are usually devoted to the Iinancial and legal issues surrounding the
downsizings, such as employee termination, early retirement packages, outplacement
programs, wages and beneIits, and disability claims. As a result, there is little or no support
and training Ior the survivors, both oI which are crucial Ior their eIIectiveness and resiliency
to cope with Iuture changes.

Decreased creativity. Reengineering creates conditions oI anxiety and anger that hinder
creativity, resulting in lost opportunities Ior the company.

egative side effects of reengineering on the survivors

Aside Irom the tragic personal costs to those who become unemployed, reengineering also
negatively aIIects the remaining employees. It is gradually being recognized that the survivors
oI downsizing also suIIer Irom stress. In Iact, sometimes they Ieels as iI they ended up with
the poorer deal in terms oI not obtaining an attractive beneIits package, being burdened with a
heavier workload (as they usually have to do more with less), being in a less congenial
workplace, and not having Iuture job security. In addition, they are less likely to receive stress
and change management training and counseling, which is oIten made available only to
downsizing victims through outplacement programs.

Survivors are also plagued by a sense oI guilt. For example, they might Ieel guilty Ior not
standing up more Ior the downsizing victims or Ieel they were less qualiIied than those who
were discharged. On top oI the guilt, they might Iear not being able to adjust to the new tasks,
roles, and relationships. Hence, they become the walking wounded, physically, emotionally,
and behaviorally.

The manifestations of stress

Stress is the automatic reaction that people experience emotionally and physiologically when
they have to adapt to any situation. Hans Selye, who is known as the Iather oI the stress
concept, Iound that when the "adaptation energy" oI laboratory animals became depleted as a
result oI their trying to cope with excessive change, they became more vulnerable to various
In addition, it was Iound that even merely worrying about change can trigger
stress, deplete liIe energy, and cause vulnerability to illnesses.

In the 1960s, Thomas Holmes and Richard Rahe took Selye's research a step Iurther when
they studied the relationship between the amount oI change humans could endure in a year
and what happened to their Iuture well-being. As Selye had theorized, they Iound that once
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somebody had experienced an excessive drain oI energy Irom trying to cope with the stress oI
change, they were much more likely to become ill. They also Iound that there was oIten a lag
time oI up to two years between when the stressIul changes were actually experienced and the
resulting development oI the illness.

Holmes and Rahe's research suggests that the stress-related illnesses now being seen in
employees Irom reengineering are just the tip oI the iceberg; more will soon be emerging. The
impact will be like a tidal wave because the downsized organizations will no longer have the
slack to Iill in Ior those who become sick, which will result in even greater stress loads and
more illnesses Ior the remaining employees.

In addition to the impact on manpower, stress-related illnesses will take its toll Iinancially.
(According to the &.S. Health Care Financing Administration, companies are projected to
spend more than 60 oI their aIter-tax proIits on the provision oI medical care Ior their
employees by the year 2000.
) Consider these reports:
O The American Institute oI Stress estimates that job stress now costs the &.S. economy
about $300 billion per year.
(This is a composite Iigure representing lost production,
medical expenses, Workers' Compensation, and disability costs.)
O A 1991 survey on employee stress by the Northwestern National LiIe Insurance Co. oI
Minneapolis, MN, Iound a 200 increase in stress-related disability claims between
1982 and 1990. In addition, the stress-related disabilities had become more severe and
were less responsible to rehabilitation (i.e., the success rate decreased Irom 88 in
1982 to 33 in 1990). The impact was worst in those companies that had undergone

O Stress claims is the Iastest rising category oI Workers' Compensation payouts.

O SaIety experts have Iound a strong correlation between restructuring and the rise in
costs Irom increased sick time and accidents.

O The incidence oI people suIIering Irom severe anxiety is rapidly increasing due to the
higher levels oI stress in modern society. About 25 million American adults currently
suIIer Irom this condition, and it is projected that about 65 million people (nearly 25
oI the population) will suIIer Irom an anxiety disorder at some point in their

O Anti-anxiety drugs are among the most widely prescribed drugs oI any type. In just the
past two years, the number oI prescriptions Ior Prozac and related antidepressants has
jumped 20.
Plus, there is "selI-medication," with about one in seven adults in the
&nited States being a problem drinker.

O More people seek relieI Irom depression each year than Irom any other medical
condition, including the common cold. The Medical Outcomes Study Iound that
depression is associated with as much or more disability than major medical
conditions, including heart disease.

Stress not only aIIects people physically, but also emotionally and behaviorally. Their
emotional and behavioral reactions are partially explained by Abraham Maslow's hierarchy oI
human needs. People have various levels oI needs that they seek to meet in progressive order
oI complexity. For example, people will try to meet their need Ior Iood and water (a lower-
level need) beIore their need Ior selI-actualization (a higher-level need). Along with Iood and
water, security is one oI the most basic needs; consequently, since reengineering threatens
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people's need Ior security, they Iind it to be a very stressIul situation.

Reengineering can also threaten people's need Ior selI-esteem (a higher-level need).
Organizational changes threaten employees' attachments to Iamiliar roles, relationships, skills,
territories, schedules, processes, and power. These attachments are oIten an integral part oI
their selI-identity and selI-worth. In other words, Ior many people, who they are is largely
deIined by what work they do. By changing the work they do, reengineering threatens how
they view themselves and their worth.

SuccessIully coping with change requires the sequential and complementary processes oI
detachment and then reattachment (i.e., letting go oI the old and moving on by adjusting to
the new). As they deal with the processes oI detaching and reattaching, employees usually go
through Iour stages: denial, resistance, resignation, and involvement. (Some, however, never
progress all the way through to the involvement stage.)

Ideally, employees should be allowed to discuss their Ieelings oI grieving and Iear during the
detaching and reattaching processes. Such discussions provide a release as well as validation
and support. Employees also need time (and, in some cases, assistance) to make the transition
through the Iour stages.

&nIortunately, "dysIunctional organizational denial" is the operative norm in many
reengineered companies. There is an implicit message to employees not to acknowledge their
Ieelings, but rather to just accept the changes. But denial only deepens employees' Ieelings oI
hurt, Iear, and anger, which could result in a wide range oI undesirable emotions and
O Employees become preoccupied with their Ieelings, causing them to daydream or
O Employees become deenergized and less committed, causing them to work slower and
make more errors.
O Employees become distrustIul and irritable, causing morale and teamwork to
O Employees might sabotage the company by intentionally not communicating,
sacriIicing quality, being inconsiderate oI customers, stealing, publicizing proprietary
inIormation, or bad-mouthing the company to customers and suppliers.
Managers can experience similar Ieelings and display similar behaviors. They are, however,
in a double-bind because oI their sense oI loyalty to their staII and their responsibility to
senior managers. In addition, they oIten are leIt with the responsibility Ior doing more with
less resources. Consequently, they oIten end up Ieeling drained and cynical.

The situation is usually very diIIerent Ior the senior executives, because they are the doers
rather than the victims. They oIten obtain positive psychological stroking when the stock
market praises them Ior having the judgment and courage Ior doing "what had to be done"
and then rewards them by increasing the market value oI their companies (albeit temporarily).

ealing the wounds

What can be done in the aItermath oI reengineering to avoid stressing out the survivors?
Many comprehensive studies have demonstrated that the return on investment oI corporate
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wellness programs in which stress management is the key Iactor ranges Irom 3-to-1 up to 10-
But, unIortunately, most reengineered companies tend to overly Iocus on cost-
containment Ior medical expenses rather than preventative measures. (This is in contrast to
the conventional business practices oI investing in preventive maintenance and risk
reduction.) In an eIIort to lower costs, many reenginerred companies tend to restrict medical
coverage, especially Ior mental health care beneIits. This is shortsighted. Not only are many
employees increasingly impaired emotionally Irom the stress oI reengineering, but studies
also reveal that mental health counseling actually reduces the subsequent use oI more costly
medical treatments.

Those companies that do oIIer assistance to reengineering survivors usually do so
inadequately. For example, most programs are poorly Iunded, are oIten staIIed by lesser-
trained counselors instead oI psychiatrists or psychologists, Iunction in a mostly reactive
mode, and are allotted insuIIicient time. Hence, they are restricted to oIIering more oI a Band-
Aid than the truly comprehensive solution that is potentially available with state-oI-the-art
stress management training.

Another Iactor restricting the wider acceptance oI stress management training is Iear, both on
the part oI the companies and potential attendees. Companies Iear admitting liability Ior
exposing their employees to unhealthy levels oI stress; employees Iear admitting vulnerability
by seeking help.

But given the Iact that stress now costs the &.S. economy billions oI dollars each year, it
would be smarter Ior companies to Iace their Iear and invest in properly caring Ior the
survivors because they can and should be considered as appreciating assets.

As previously stated, even merely worrying about change can trigger stress and deplete vital
energy. ThereIore, a key point in stress management training is to teach employees to be
resilient by adopting a more appropriate attitude. This can be accomplished through:

!ersonal growth. In this era oI relenting change, people must learn to more properly deIine
their sense oI selI-worth and satisIaction in terms oI who they are internally (i.e., their
accumulated wisdom and the alignment with their values) rather than by what they have in
their external environment.

Ideally, people should expend their personal energies productively by solving problems and
exploiting opportunities rather than worrying about what they cannot change. This wisdom is
aptly represented in the paraphrase oI the popular "Serenity Prayer" by the Minister Reinhold
Niebuhr: Give us the serenity to accept what cannot be changed, the courage to change what
should be changed, and the wisdom to know the diIIerence. The underlying notion is that
sometimes it is wise to let go and instead apply one's energy to what is controllable, where it
will really add value.

Spiritual growth. The workplace has become the primary source oI community. It is the
place where employees spend most oI their time, have some oI their most meaningIul
relationships, and deIine themselves.

Despite the Iact that employees bring most oI their emotional needs to the workplace,
companies are becoming increasingly antihumanistic and insecure environments.
Consequently, in these stressIul times, employees would probably be well served by regularly
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practicing inward reIlection and contemplation to achieve calmness, wisdom, and resiliency.
They should also heed the wisdom oI Selye, who concluded that developing an "altruistic
ego" was one oI the most powerIul antidotes against stress.
Developing an altruistic ego
essentially means caring about other people's needs and committing personal resources to help
them. This dovetails with Packard's notion oI why companies exist in the Iirst place.

Organizational leaders, meanwhile, would be well served by accepting their stewardship
responsibilities and realizing that employees are not simply earning a living, but also making
a liIe Ior themselves. They need to bring spirituality into the workplace to Ioster personal
growth, to convey a sense oI heartIelt community, and to make meaningIul contributions to
the betterment oI society. As the December 1996 issue oI the Harvard usiness Scool
ulletin stated, "For many managers today, the greatest business challenges are no longer
technical; rather, they involve Iiguring out how to put more 'soul' into the workplace."

Spirituality, in essence, is about the experience oI depth in liIe and concern Ior purposes that
extend beyond oneselI. This notion oI spirituality is convergent with the modern scientiIic
conception oI deep ecology, particularly in terms oI its basic principle oI interdependence.

Another application oI spirituality in business is the use oI intuition. It's ironic that surveys
reveal the dependency oI most successIul leaders on intuition rather than on extrapolations
Irom experiences or logical analyses oI current data when making decisions.
Yet they are
shy to speak openly about their source oI guidance and instead cloak it in a logic trail.

Nevertheless, in this current era oI nonlinear change, intuition is the means Ior innovative
thinking and cultivating inspiring visions to take employees Irom Iear to hope and to engage
their commitment Ior success.

dvice to lead by

Leaders who are about to take the reengineering and downsizing plunge should heed this
advice: ont do it if tere are oter practical and creative alternatives. For example, leaders
could instead:
O Reduce the organizational Iat in terms oI processes rather than people (e.g., eliminate
unproductive meetings, poor communication, lack oI accountability, excessive
response time, or excessive waste oI material resources).
O Reduce or eliminate bonuses.
O Reduce the work Iorce through attrition.
O Reduce the use oI temporary workers.
O Reduce the use oI external contract services.
O Restrict overtime.
O Shorten the work week (e.g., work one day less every one or two weeks).
O Reduce beneIits (e.g., cost-oI-living increases or vacation pay).
O Institute leave without pay.
O Reduce pay levels.
O Retrain and transIer employees so they can add more value.
O &se job banks.
II leaders believe they have to reengineer their companies and downsize the work Iorce, they
should at least Iollow these guidelines:
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O ont do it repeatedly. Repeated reengineering and downsizing is akin to death by a
thousand cuts.
O Provide as muc advance notification as possible. Employees should not be kept in
limbo; they need time to make appropriate preparations.
O Communicate directly, onestly, and empatetically wit employees. Such
communication will minimize their distress and help them successIully go through the
detaching and reattaching processes.
O nsure tat management walks te talk. When words and actions are in conIlict,
people are inIluenced more by actions.

O stablis two-way communication rater tan oarding information at te top and
releasing it on a top-down, need-to-know basis. Two-way communication takes the
steam out oI the rumor mill and provides potentially corrective Ieedback.
O Justify te need for te cange. Leaders should explain that is the positions, not the
employees, that are no longer viable or needed.
O Honor te past by acknowledging its rigtful place in te companys development.
Doing so will help employees avoid Ieeling that their previous work and
accomplishments have been a waste oI time.
O Present te downsi:ing process as part of a clearly articulated vision of a desired
future for te organi:ation. Leaders should show how the changes will beneIit the
organization, the employees' Iuture prospects, and the customers.
O nvolve employees in designing and implementing te reengineering process. The
organization will beneIit Irom employees' collective wisdom, and the employees will
have a vested interest in the success oI the process.
O ownsi:e gradually. A study by the &niversity oI Michigan Iound that most
companies that achieved organizational improvements Irom downsizing did so
because they used a slow, studied, and participatory approach. Whereas, in contrast,
most companies downsize quickly (i.e., less than two months Ior planning and
implementation) and are unsuccessIul.

O Provide safety nets for tose wo will be laid off to ease teir transition. SaIety nets
can include adequate lead time and beneIit packages that include extended health
coverage, counseling, stress and change management training, new skills training, and
outplacement services. SaIety nets also lower the stress on the survivors by reducing
their guilt and anxieties about their own Iutures.
O Act in a socially responsible way to minimi:e te adverse effect of layoffs in te
surrounding communities. For example, a company could provide resources to
community social workers, support groups, and agencies as well as assist community
leaders in recruiting new companies to the area.
O #educe te workload in accordance wit te reduced work force. Leaders should not
expect the survivors to do more with less.
O #einforce risk taking. The survivors will tend to become protective and cautious, so
the leaders must reinIorce risk taking Ior innovation by Iollowing W. Edwards
Deming's precept to "drive out Iear."

1. D. Runes, editor, ictionary of Pilosopy (Paterson, NJ: LittleIield Adams, 1963).
2. Keynote address by Paul Shay at the 1991 Annual ConIerence oI the Organization
Development Network in Los Angeles, CA.
3. Presentation by Gerald Haman at the 1992 Annual ConIerence oI the American
Society Ior Training and Development in New Orleans, LA.
age sur

4. Study conducted by Juliet Schor and Laura Leete-Guy oI the Economic Policy
Institute in February 1992.
5. FritjoI Capra, %e Web of Life (New York, NY: Doubleday, 1996).
6. James Collins and Jerry Porras, uilt to Last. Successful Habits of Jisionary
Companies (New York, NY: HarperCollins, 1994).
7. Ibid.
8. John Kotter and James Heskett, Corporate Culture and Performance (Indianapolis,
IN: Macmillan, 1992).
9. Taken Irom a speech that David Packard gave to a training group in 1960.
10.Michael Hammer and James Champy, #eengineering te Corporation. A Manifesto
for usiness #evolution (New York, NY: HarperCollins, 1993).
11.J. White, "Re-Engineering Gurus Take Steps to Remodel Their Stalling Vehicles,"
Wall Street Journal, Nov. 26, 1996, p.1.
13.Enid MumIord and Rick Hendricks, "Business Process Re-Engineering RIP," People
Management, May 1996, pp. 22-29.
15.Richard Wellins and Julie Schulz Murphy, "Reengineering: Plug into the Human
Factor," %raining & evelopment, January 1995, p. 33.
16.R. HenkoII, "Getting Beyond Downsizing," #%&, Jan.10, 1994, p. 58.
17.R. HenkoII, "Cost Cutting: How to Do It Right," #%&, April 9, 1990, pp. 17-19.
18.Kenneth DeMeuse, Paul Vanderheiden, and Thomas Bergmann, "Announced LayoIIs:
Their EIIect on Corporate Financial PerIormance," Human #esource Management,
Winter 1994, pp. 509-530.
19.Kim Cameron, "Strategies Ior SuccessIul Organizational Downsizing," Human
#esource Management, Summer 1994, pp. 180-211.
20.Wayne Baker, "Bloodletting and Downsizing," xecutive xcellence, May 1996, p.
21.Hans Selye, %e Stress of Life (New York, NY: McGraw-Hill, 1956).
22.Ogden Tanner, Stress (Alexandria, VA: Time-LiIe, 1976).
23.Thomas Holmes and Richard Rahe, "The Social Readjustment Rating Scale," Journal
of Psycosomatic #esearc, August 1967, pp. 213-218.
24.Kenneth Pelletier, "A Review and Analysis oI the Health and Cost-EIIective Outcome
Studies oI Comprehensive Health Promotion and Disease Prevention Programs at the
Worksite: 1991-1993 &pdate," American Journal of Healt Promotion,
September/October 1993, p. 51.
25.Jean Wallace, "Reduce Job Stress BeIore It Reduces You," Safety & Healt,
November 1992, p. 40.
26.Ron Zemke, "Workplace Stress Revisited," %raining, November 1991, pp.35-36.
27.Bernard Kottage, "Stress in the Workplace," Professional Safety, August 1992, p. 25.
28.J. Witherill and J. Kolak, "Is Corporate Reengineering Hurting Your Employees?"
Professional Safety, May 1996, pp. 28-32.
29.Paul Foxman, ancing Wit ear. vercoming Anxiety in a World of Stress and
&ncertainty (Northvale, NJ: Jason Aronson, 1996).
30.Deborah Franklin, "Treat Depression With More Than Drugs," Healt, April 1997, p.
31.Lecture by John Renner Jr. on "Alcoholism" on Sept. 30, 1996, at Harvard &niversity
in Boston, MA. The lecture was part oI the post-graduate continuing medical
education program, "Psychiatry: A Comprehensive Review and &pdate."
age sur

32.Lecture by Jane Murphy on "Psychiatric Epidemiology" on Oct. 1, 1996, at Harvard
&niversity in Boston, MA. The lecture was part oI the post-graduate continuing
medical education program, "Psychiatry: A Comprehensive Review and &pdate."
33.Howard Eisenberg, Cost/enefit Analyses of Wellness Programs (Stowe, VT: Syntrek
Inc., 1995).
34.Richard Friedman, David Sobel, Patricia Myers, Margaret Caudill, and Herbert
Benson, "Behavioral Medicine, Clinical Health Psychology, and Cost OIIset," Healt
Psycology, November 1995, pp. 509-518.
35.This is based on the author's experiences in designing and Iacilitating stress
management programs.
36.Selye, %e Stress of Life.
37.President and Fellows oI Harvard College, "Meditations on the Bottom Line,"
Harvard usiness Scool ulletin, December 1996, p. 36.
38.Jagdish Parikh, Friedrich Neubauer, and Alden Lank, ntuition. %e ew rontier of
Management (Cambridge, MA: Blackwell, 1994).
39.D. Stewart, Hecker, and Graham, "It's More Than What You Say: Assessing the
InIluence oI Nonverbal Communication in Marketing," Psycology and Marketing,
Vol. 4, 1987, pp. 303-322.
40.Cameron, "Strategies Ior SuccessIul Organizational Downsizing."
41.RaIael Aguayo, r. eming. %e American Wo %augt te Japanese About Quality
(New York, NY: Simon & Schuster, 1991).

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