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Subject: Executive Update
Date: Thu, 19 Nov 92 13:26:44 EST
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11/19/92


TITLE Executive Update

#m#gm#m##m#sw#m#Can A Corporate Staff Ever Really Be Too Thin?

No, Say Some Executives, Who Question Nearly All Headquarters
Work Farrell Kramer


When General Motors Corp. unveiled a massive restructuring last
December designed to put the nation's largest automaker in com-
petitive trim, it promised to reduce its corporate staff to 3,500
by the end of 1992.  That's down from 13,500 at year-end 1991.
Cutting 74% from corporate staff ranks - people involved in ac-
counting, Management

communications, human resources and the like - would be a signi-
ficant undertaking for any company.  But isn't the reduced 3,500
staffing level still a lot, considering that such employees don't
directly contribute to profitability?  Some contend it is, and
they say large staffs should be fought like the plague. They hold
that large staffs not only add excessive costs to operations but
that they also tend to diffuse enthusiasm and restrain en-
trepreneurial zeal.  "It gets right to the root core not only of
what's wrong with our private companies, but what's wrong with
our country," said Donald J. Bainton, chairman and chief execu-
tive of Continental Can Co.  "Huge increases in personnel who are
not doing anything to be productive are doing lots to make those
of us who are productive, unproductive.  "I guarantee you, if you
build a headquarters building that can hold 500 people, if you
have mediocre management, they'll have it filled with 500 people
in no time," he added.  Bainton has made sure that doesn't happen
at his company. Continental Can, a packaging concern with revenue
of $293.6 million in 1991, operates with a corporate staff of
just five.  The CEO and chief operating officer jobs are both
handled by Bainton himself. He has a chief administrative off-
icer, who is also chief financial officer and head of human
resources. Then there is a director of communications, a vice
president of manufacturing and technology, and Bainton's adminis-
trative assistant.  When others are needed, Bainton hires consul-
tants, almost always former industry executives on early retire-
ment.  The corporate staff handles overall strategy, capital
budgets and profit-and-loss and cash-flow oversight. All other
responsibilities are pushed down to managers in Continental Can's
operating units.  Bainton doesn't want anything to come between
himself and the company's operating units, which is what he says
huge staffs do at other firms.  "Some of the kinds of staff
structures that we saw growing in the late '60s and throughout
the '70s simply hung around," said Audrey Freedman, president of
Manpower Plus, a New York-based management consulting firm.  "A
lot of that was caused by the conglomeration and diversification
of large corporations," she continued. Those trends led to the
creation of staffs "for analyzing acquisitions and staffs for
analyzing what should be divested and market analysis." Today,
however, companies need to move quicker and analyze less, Freed-
man and others say. Committees of staff employees can provide
ideas, but they can't make decisions and enact policy.  That
takes leaders. Percy Barnevik, chief executive of Sweden's Asea
Brown Boveri Ltd., is one such leader. He is no friend of cor-
porate staffs.  Management guru Tom Peters, in his new book "Li-
beration Management: Necessary Disorganization For the Nanosecond
Nineties," speaks of Barnevik's first days on the job.  Taking
the helm of Asea in 1980, Barnevik reduced a central staff of
2,000 to 200. When the diversified industrial company acquired
Stromberg, Finland's premier industrial enterprise, Peters
recounts, Barnevik cut the headquarters staff of 880 to 25 in a
couple of years.  "Barnevik has gotten the business of reducing
central staff down to a near-science," Peters wrote. "He insists
the head count in any headquarters activity can be cut by 90% the
first year."

And Barnevik heads a worldwide company that generated 1991 reve-
nue of almost $28.9 billion. Far smaller companies have been far
less successful at cutting headquarters staffs.  Perhaps part of
the reason, some suggest, is that staffs alone should not be the
focus. Large staffs are an indication of a problem, not the
cause.  "You have to analyze some of your major business
processes and look at how are they done compared with others in
your industry," said Homer J. Hagedorn, an organization develop-
ment specialist at Arthur D. Little Inc. "The focus should be:
'Are we the best in our industry in terms of the products and
services we put out -and the cost?' " he added.  Companies with
bloated staffs will have difficulty competing, and that will be-
come evident.  Both Continental Can and Asea Brown Boveri are de-
centralized companies, meaning they push much responsiblity down
to the operating-unit level. That way, the corporate staff's
function is minimized and manpower is concentrated in operations.

"You can't have management by committee," said Continental Can's
Bainton. "We don't have committees in this company. We don't have
enough people for committees." Corporations like Continental Can
have done away with large staffs not by forcing operating
managers to do the work previously done by corporate staffers but
by eliminating some of the tasks the staffs performed.  "A lot of
that goes under the umbrella of business reengineering#m#cq#m#,"
said Gary D. Kissler, an associate partner at Andersen Consult-
ing.

"The question that needs to be raised is, 'If (corporate staff
reduction) is such a good idea, why did it take so long to get
here?' " he said. "The reason is the system rewarded people for
building this monster."

One example of the difficulties companies can run into, Kissler
points out, is General Electric Co.'s restructuring in the 1980s
in which many corporate staff positions were eliminated.  "It
made the decision that it was going to go through a massive down-
sizing . . . without getting rid of the work," Kissler said.
"They piled it on the survivors."

That caused new problems. GE subsequently solved those difficul-
ties by eliminating some of the work through a process it called
Work-Out.

Stephen Moss, a vice president at Rath & Strong Inc., a manage-
ment consulting firm in Lexington, Mass., says that for companies
wanting to look at the staffing issue, benchmarking might be ap-
propriate. Look at competitors to see what their staffing costs
are or how they are structured, he says.

"Or you can take this very introspective look," he added. "Look
at,

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