Consultant Says Layoffs Not the Answer
By Richard Lee, Staff Writer
Stamford, CT Advocate, December 2000

Companies facing budget shortfalls typically look at cutting positions as the first option in climbing out of their financial hole, but the owner of a Connecticut consulting firm says that strategy is a mistake.

Those financial savings are only temporary, said Woodbridge consultant Perry Ludy, owner of LudyCo International, who spent more than 25 years as a senior executive with several major corporations.

Ludy, author of "Profit Building, Cutting Costs Without Cutting People," said companies who lay off staff are, instead, reducing their opportunities to save their financial futures.

"We continue to lay off large numbers of people who are the key resources essential to improving profitability, and we do not effectively train management to improve profits," said Ludy, who has worked for Proctor & Gamble and Pizza Hut, a division of PepsiCo, among other major corporations.

Instead of reducing their work forces, Ludy said, these companies should be using their employees as a resource to increase profitability, recommending ideas and ways they can be incorporated into the functions of the company.

Creating five- to eight-member profit-building teams, which include a cross section of knowledge covering operations, marketing, finance, information technology, human resources, telecommunications, and administration, is key.

Members must have demonstrated the ability to think creatively, said Ludy, suggesting that a larger group is likely to get bogged down in company politics.

Teams can include all levels of employees—from assembly workers or secretarial staff to executive managers, said Ludy, who will discuss his theories in business management at 8:30 a.m. Dec. 19 at the Sheraton Stamford Hotel.

"People on the floor can offer a unique perspective. They can give you ideas on how to streamline operations," said Ludy, 48, who has a bachelor's degree in political science from the University of California at Santa Barbara.

Ludy chose Stamford for a breakfast seminar because of its strong business climate, said his wife, Lynda Ashby Ludy, vice president of marketing for business development of LudyCo International.

"We took a look at the top five cities in Connecticut. We just thought that Stamford is so pro-business. We liked what we saw in terms of business activity. This is such a perfect application for them," she said.

Ludy, who also has held management positions at Emerson Electric, Imperial Bank U.S. Autoglas and Environmental Systems Products, started his consulting business about a year ago. His book, published by Berrett-Koehler Publishers Inc. of San Francisco, was released in October.

Ludy has got the right idea, said Albert Cannella Jr., assistant professor of strategic management at Texas A&M University's College of Business Administration, commenting that Jack Welch, who will step down as chief executive officer of the General Electric Co. next year, was a strong proponent of the committee strategy.

Cannella is president-elect for business policy and strategies at the Academy of Management, a professional society of 10,000 college professors, students, and business executives that promotes the practice of management.

"There needs to be ways to have employees have input. You have to make sure management doesn't ignore them. It stops it from being an us vs. them thing." Said Cannella, echoing Ludy's contention that layoffs in most cases do not benefit a company in the long run, especially if they involve management. "Layoffs become really destructive because of the special skills they've (management) developed. They're not that replaceable."

Companies should be open with their employees whenever possible, and developing committees to address problems is one avenue, said Steven Floyd, Cizik professor of strategic technology management at the University of Connecticut who has written two books on the importance of retaining middle management.

Middle managers were a target of downsizing in the early 1990s, Floyd said. "Companies then turned around and realized they didn't have anyone to get things done. Human capital doesn't get recognized as an asset on the balance sheet. You have to share strategy with everyone in an organization. People will get on board. Give them the big picture," Floyd said. "It's certainly better than the alternative."

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