BLOODLETTING and downsizing have a lot in common. The 18th-century practice of phlebotomy as a cure for fevers was as popular as it was ineffective. Today, downsizing continues to be the fashionable treatment, despite evidence that it is about as effective as bloodletting for curing competitive ills.

Evidence from studies by the American Management Association (AMA), Society of Human Resource Management, academic researchers, and management consultants reveals that downsizing generally fails to improve performance, productivity, or profits. Two-thirds of downsized companies have not realized productivity gains, according to AMA research, and most executives who cut back on personnel report unanticipated negative side effects.

Yet, the practice continues unabated. The AMA reports that more companies plan to cut jobs in 1995 than in any year before. Three out of four firms that downsize in one year plan to repeat the treatment during the next. In America, downsizing is expected to continue past the turn of the century, and the downsizing "cure" has begun to hit Europe, Japan, and even Russia.

Sometimes, downsizing occurs because it is a proper treatment, a response to the natural ebb and flow of the economy. When markets shrink, businesses and industries must consolidate and streamline (though smart ones read trends and move into better markets). Technological change and globalization can add pressure to downsize.

Such natural economic forces always have existed and often led to layoffs, but they alone can not explain the magnitude and scope of the trend. Rather, corporate America is caught in a powerful social movement that compels executives to eliminate jobs even when cuts are not justified and to repeat the downsizing treatment even when it causes more damage. The AMA reports that fewer than half of the companies it studied said they downsized in response to current or anticipated business problems.

The roots of this movement lie in corporate reactions to the growing threat of hostile takeovers in the 1970s and 1980s. Under attack by raiders, businesses searched for quick and easy ways to cut costs. They discovered that layoffs of workers and managers could boost short-term profits, make the company appear more efficient, and stave off takeover attempts. This was a novel and innovative use of layoffs, especially as the practice penetrated managerial ranks. Once considered an admission of business decline or defeat, layoffs started to be viewed in a new light — as a legitimate multi-purpose tool to preserve and advance corporate interests. Current names for layoffs — downsizing and the euphemism "rightsizing" — indicate its newfound legitimacy.

The shift in perception of layoffs as a last resort, used only in times of economic desperation, to a first resort, utilized in good times and bad, planted the seed of the social movement. It grew in a process sociologists call "mimetic isomorphism," meaning that organizations come to resemble each other because they observe and copy what each other does. Over time, companies tend to use the same procedures, tactics, policies, and strategies.

The common tendency to imitate is heightened in an environment of uncertainty. Rapid technological change, shifting markets, new competitors, revamped governmental regulations — all create uncertainty about what to do and how to do it. In such times, corporate leaders are more likely to do what everyone else does — like downsizing.

Imitation is reinforced in many ways. Executives socialize and learn from each other, supporting and encouraging the practice. Indeed, those who do not leave themselves open to criticism by shareholders, security analysts, boards of directors, and even fellow executives. Wall Street analysts, for instance, will downgrade a company that is not downsizing, even if layoffs are unjustified, and most such actions produce a jump in stock prices, albeit a temporary one.

Finally, this movement is aided by the types of people who rise to positions of prominence and power. In the last 20 years, more corporate leaders have come from finance. They are more likely to view the corporation as a basket of assets than a social institution and to prefer tactics such as downsizing as a way to solve competitive problems.

Today, downsizing is irresistible because it is firmly planted in business culture — beliefs and norms about what constitutes proper policies and practices. Like most social movements, it is not slowed by negative or ambiguous results. Doomsday cults, for example, do not disband when the date of the world's demise comes and goes; rather, they simply revise their predictions. Similarly, when downsizing does not produce desired results, the recommended treatment is more layoffs.

Many reasons are cited for the failure of downsizing, lowering of morale, exodus of the best people, loss of organizational memory, increased conflict, etc. These results, however, are caused by a deeper problem — the destruction of the corporation as a social institution. Downsizers act as if the organization were a collection of independent individuals — like a crowd. To them, eliminating people simply reduces overcrowding. Yet, what makes an organization different from a crowd is the network of formal and informal relationships people build with each other. This social network makes every organization function, and the right network makes them flourish.

Downsizing devastates social networks. When a person is laid off, an entire personal network of internal and external relationships is lost as well. It destroys informal bridges between departments, disrupts the information grapevine, and severs ties with customers. Moreover, it eliminates the friendships that bond people to the workplace.

It can take a long time to rebuild social networks. When General Motors reorganized a few years ago, it so ruined the informal network that the company never recovered fully.

Just as repeated bloodletting increased, repeated downsizing is very dangerous. Survivors struggle to reorganize and rebuild relationships. Additional reductions nip these relationships in the bud. Eventually, the organization devolves into a sullen, resigned, demoralized crowd.

PERSONAL SURVIVAL STRATEGIES
Those who survive in the new business culture must learn how to work in downsized organizations, how to tell when jobs are in jeopardy, and how to secure new jobs.

Thriving In downsized companies. Because downsizing destroys the social fabric of a firm, the best strategy is to repair it. The most successful people in organizations always have built good relationships; in today's business world, it is more important than ever. The natural tendency is to withdraw, but those who thrive in a downsized organization rebuild networks. A solid network of good relationships makes you a more valuable contributor (and thus lowers layoff odds) and gives you more and quicker information about new openings in the company.

• Rebuild and manage cooperative relationships with superiors, subordinates, and peers around the company.
• Get out of your "silo" and build bridges with other departments, functions, and divisions.
• Become a team builder and active member of multifunctional teams.
• Initiate and nourish external relationships with customers, suppliers, and even competitors.

Are jobs in jeopardy? The answer always is yes. No matter how well your firm is doing or whether it has downsized before, the irresistible social movement means that all jobs are at risk. Losing a job is one of the most stressful events in life. It takes a heavy toll on your emotional and physical health, as well as your financial wellbeing. Job security has been eliminated as a clause in the new implicit employer-employee contract, and now everyone can expect to endure job loss, stress, and bouts of periodic unemployment.

Prepare by looking for general signs that your company may be about to downsize and put all jobs at risk, as well as specific signs that your job may be in jeopardy, whether or not a downsizing is imminent.

• Is your corporation about to merge or be taken over? Are you undergoing one right now?
• What do security analysts say about your business? Do they claim it is undervalued, inefficient, bloated, and/or ripe for take-over?
• Is your firm's financial health poor or declining? Are cost-cutting measures under way?
• Have other corporations in your industry already downsized? Jobs in yours are at risk if competitors have slashed jobs.
• Is your role outside the "core competence" of the company? If you are in a peripheral, non-vital department, division, or work group, it is at risk.
• Are you a loner, or do you work in a loner's job? Without a good personal network, you won't hear about impending job cuts and/or have allies to protect you when the cuts come.

Finding new jobs. More than 75% of all white-collar workers and nearly 100% of blue-collar ones find jobs through personal networks, according to several studies. Those who use networks get better, higher paying, more satisfying jobs that they keep longer.

Build networks now. Start constructing your network immediately even if your position isn't currently in jeopardy. Many managers who thought they had a job for life never took the steps to build a strong external network; when downsizing struck, they lacked the personal contacts needed to find new employment. The best time to build contacts is when you don't need them.

Organized groups such as Forty Plus are excellent ways to get information, find jobs, swap leads, practice interview skills, and get moral support. Join one now even if your position is not in jeopardy and volunteer your services. You will make important contributions to others and be able to build your own network in the process.

Contrary to popular opinion, research on job — getting shows that "weak" ties (such as casual acquaintances) are better sources of information about openings than "strong" ones (such as family and close friends). Weak ties provide better information because they are "bridges" to different social and business circles. Don't forget your strong connections, but focus on building weak ties.

Big companies often have openings in vital areas even when others are cut. IBM is downsizing frantically, for example, but it is hiring in its RISC (reduced instruction set computing) chips area. Build internal networks to find out about such opportunities. Volunteer for committees, task forces, and temporary assignments that put you in contact with other groups, departments, or divisions.

The information highway offers exciting new opportunities to make contacts, locate positions, and find good people for jobs. The Career Center in America Online offers resume templates, a cover letter library, Federal employment services, employer contacts, company profiles, job listings, and more.

Often, the route to the ideal position is found through intermediate positions that move you in the right direction. Establish a trajectory and use such "halfway" houses. Consider internships or part-time work.

Talk with any recruiter who calls. Even if you're not looking for a job right now, get and stay on recruiters' radar screens.

OUT OF THE CRISIS
Downsizing attacks the wrong problem. The real issue isn't number of people. IBM cut 40,000jobs in 1993 and 35,000 in 1994, with the goal of becoming half its peak size. Big Blue's real problem isn't bloat, however. Rather, it's how traditional IBMers interact, work, think, and relate. The corporation suffers from lack of imagination and innovation, caused by a stiff bureaucracy and hidebound culture. That is why IBM formed a strategic alliance with archrival Apple Computer — to get access to the creativity it lacked. Even drastic cuts will not help if the company's culture stays the same.

The way out of the crisis is to focus on creating new forms of organization — the reformation of social networks, not their destruction. When downsizing works, enlightened leaders devote great attention to human resources and network rebuilding. They raise the organization out of the ashes of downsizing, creating new social networks that empower and boost performance.

Establish a clear strategic vision. Successful leaders create a clear vision of the company of tomorrow and manage into that vision. With the right vision, redeployment of resources, not downsizing, is the proper treatment to achieve corporate success.

Manage networks, not Individuals. Running a company as a set of individuals is an exercise in crowd control. This approach leads to many sins, such as downsizing just to reduce headcount. Insightful leaders, though, manage the company as a network of relationships, and strive to revolutionize the way people work together, communicate, and interrelate.

Use downsizing as an opportunity to improve networks. Successful downsizers don't just reduce numbers, they redesign work processes and eliminate unnecessary ones, according to research by University of Michigan professor Kim Cameron. Identify both the positive and negative effects of downsizing on networks and help the organization recover by constructing new and better relationships.

Establish network-building mechanisms, such as General Electric's Work-Out, established by CEO Jack Welch. Modeled after the New England town meeting, Work-Outs empower, eliminate unnecessary effort, and rebuild relationships across levels and functions.

Jerre Stead, CEO of AT&T Global Information Solutions (GIS), abolished the former NCR Corporation's traditional structure and reorganized into hundreds of Customer Focused Teams, each a dedicated, empowered, multifunctional group. A recent Global Alliance Conference built relationships with and among strategic allies.

High-level networks, such as GE's Corporate Executive Council and GIS's Global Operations Team, unite and integrate a diverse company. Learning from the best companies in the world is another relationship building mechanism. Moreover, enlightened leaders help their people learn new ways, new methods, and new networking skills, via massive education, training, and re-socialization efforts.

Some futurists forecast the end of the corporation as we know it. They predict its continued dismantling and replacement with a new cottage industry of small contractors, free-lancers, independent entrepreneurs, and temporary workers. The Hollywood feature film industry — with its army of free-lance producers, directors, screenwriters, and others — often is heralded as a positive role model and harbinger of the business world to come.

This world would be the logical culmination of the downsizing movement, but also would be a bleak and harsh reality. It can be avoided only if courageous business leaders recognize the negative, dysfunctional consequences of downsizing, and then face and remedy the corporation's real problems. The business heroes of the past decade came from finance. The heroes needed today are those who champion human resources, creating the conditions that stimulate and tap human potential, rather than destroy it.