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Editorial: Save Your Workforce

August 1, 2001
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The National Association of Manufacturers (NAM, Washington) predicts a slow but steady recovery in manufacturing in the fourth quarter, even though companies continue to be plagued by the high dollar, and rising energy and health care costs.

"American manufacturing is bottoming out and is poised for a modest recovery in the last quarter of this year," says Jerry Jasinowski, president of NAM. As the inventory hangover is worked off, and the cumulative effects of the tax cut and interest rate reductions begin to boost consumer spending, he expects 2 percent growth in the third quarter and a continuing economic recovery with more than 3 percent growth in the fourth quarter of this year.

If this prediction turns into reality, manufacturers that have slashed thousands of jobs during the first half of this year may find themselves facing staff shortages like those they were grappling with less than a year ago. Staffing needs can turn around quickly in the face of increasing demand. Manufacturers that have cut staff may find themselves unprepared to take advantage of rapidly increasing market opportunities, and scrambling to restore their workforce.

"The temptation to overemphasize downsizing and cost-cutting measures for profit growth can lead into a trap," says Pat Graham, vice president of A.T. Kearney Inc. (Chicago). "While this approach may generate necessary and respectable shareholder returns in the short term, overreliance on cost containment at the expense of growth hinders a company's ability to produce high levels of long-term shareholder value."

Rather than pulling back during downturns, Graham believes smart companies should continue to invest in people, R&D innovation and geographic expansion. That strategy prepares them for the future and places them ahead of companies that must play catch-up when the downturn has passed.

There are companies that have resisted the temptation to downsize, and opted instead to protect the substantial investments they have made in finding and training workers. Writing in The Wall Street Journal recently, Clare Ansberry reports on the experiences of several small manufacturers in southwestern Pennsylvania that have been understaffed in recent years, have invested heavily in recruiting and training, and in some cases are recruiting additional workers.

Indeed, Manpower Inc. (Milwaukee) says 60 percent of southwestern Pennsylvania's durable goods manufacturers plan to add workers during the third quarter. This is in contrast with the general outlook in the firm's Employment Outlook Survey for the third quarter, which says the slowdown in hiring will continue generally throughout the nation, as companies across all industries act cautiously in taking on more people.

The companies Ansberry cites have followed Graham's advice, protecting the talent they will need when the economy strengthens. I hope yours is another that will save its workforce.

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