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Bosses Kill Loyalty: What Happens Now?

By David R. Francis / November 24, 1995



EMPLOYEE loyalty to corporations is dead. It has been shattered by the massive wave of downsizing, reengineering, right-sizing, and restructuring - all usually involving major layoffs, says management consultant Steve Bookbinder.

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Management excesses and overly tough practices can add to the atmosphere of fear and disdain. Anecdotes abound.

In Oxnard, Calif., Teamsters Union officials last year charged Nabisco with preventing women working on an assembly line making A-1 Steak Sauce and Grey Poupon mustard - many of them Hispanic - from using restroom facilities when needed. Some women felt forced to wear diapers to continue working, they say. A complaint was filed last week with California's Department of Fair Employment and earlier with the federal Equal Employment Opportunity Commission. Nabisco spokeswoman Caroline Fee says, ''We are denying the allegations.'' The union's Joseph Fahey says that after the bathroom issue was publicized, the company improved its bathroom privileges. But in retaliation, Mr. Fahey charges, Nabisco is moving the operation to Cambridge, Md. Ms. Fee says the move is ''totally unrelated.''

Boeing Company machinists Tuesday rejected a contract negotiated by their union partially in annoyance at the ''greed'' of five executives in getting stock options worth $2.5 million.

When an employee complained recently of too much unpaid weekend overtime at a New England book publisher, the boss fired the young man on the spot and had a company security official usher him immediately out of the building.

''If we stick only to fear, our companies are not going to benefit very much,'' says Lotte Bailyn, a professor of management at Massachusetts Institute of Technology, in Cambridge, Mass.

Employees survive, however. A survey of 3,300 employees of large companies by Towers Perrin, where Mr. Bookbinder heads the firm's organizational research consulting practice, found that 75 percent of these workers said they were motivated to help their companies be successful and believe they can have a day-to-day effect on company success. Further, the generation Xers were just as determined as the baby boomers to work hard and do a good job.

What has happened, says Bookbinder, is that employees become involved in company affairs through a belief in themselves, their own careers, and in helping the customer. ''They are engaged out of self interest,'' he says. ''They want the company to be successful, and success provides some security.''

That doesn't mean employees won't jump at the prospect of a better job without any sense of guilt. Employers ''broke the contract'' with employees - loyalty in return for security - by the dramatic layoffs, many done while companies prospered.

Academic research finds that downsizing gives an immediate kick to corporate earnings, a boost that prompts investors to hike the price of the company's stock. That often will financially benefit the corporate executive ordering the layoffs, noted one analyst. Many executives receive stock options that become more valuable when the company's share price rises. Two years after a layoff, studies find, these companies are doing no better than comparable companies that did not go through downsizing.

Towers Perrin's survey found that only 39 percent of survivors of corporate downsizing figured that business had improved, 41 percent said business was about the same, and 20 percent saw it as worse. Some 40 percent say their company's cost-cutting efforts have had an adverse impact on customers. Some three-quarters signaled that they were able to handle the pressures of more work resulting from downsizing. Of downsizing survivors, 46 percent didn't believe work-force policies are handled fairly, compared with 34 percent of those with no downsizing experience.

Bookbinder points out that although three-quarters of employees are ''stress hardy'' and motivated to do a good job, one-quarter - a large percentage - were not. Employers' actions, he says, are crucial in engaging employees on a consistent basis.

A ''new deal,'' he says, requires employees to develop and enhance their skills and actively seek ways to sustain and help grow the business. Employers must provide pay and other benefits based more on merit, help employees develop their skills, provide reasonable flexibility in work conditions, involve employees in decisions about their work, and clearly spell out company goals.