SAN FRANCISCO — As they emerge from a painful--and not especially productive--period of downsizing, Western business leaders, including a sampling in Southern California, have optimistic expectations for the next two years.
Despite a national backdrop of slowing economic activity, nearly half the executives interviewed recently by Yankelovich Partners Inc. expect their companies to grow by a robust 9% or more in 1995 and 1996.
However, many of these same executives acknowledge that the downsizing and re-engineering steps their companies took in recent years to cope with market changes and recession have failed to improve competitiveness or profitability as much as hoped.
The key to spurring future growth, they said, will be a focus on developing employees' skills and rebuilding morale--the latter a commodity often sadly lacking in today's lean-and-mean environment.
"What companies are realizing is that you cannot re-engineer and downsize yourself to prosperity," said Frederick D. Sturdivant, managing director at the San Francisco office of Gemini Consulting, which commissioned the survey.
The executives agree that what is called for is a more holistic approach to company change, with the revitalization of personnel as crucial as improving work processes, finances and customer focus. A commonly recognized obstacle: Companies have burdened employees with too many management initiatives designed to achieve change.
Yankelovich interviewed 101 senior business executives in Southern California, the Bay Area, the Pacific Northwest and Colorado. Sturdivant said the survey was undertaken to determine whether Western business leaders are still in a "mode of retrenchment" or were feeling more expansive.
Despite the relatively small sampling, he added, "the results were . . . pronounced in the direction of growth."
Among companies queried were 36 in Southern California, including Allergan Inc., a producer of eye-care products; American Honda Motor Co.; Beckman Instruments, which makes medical laboratory systems; Broadway Stores; Community Psychiatric Centers; Fluor Corp.; Hughes Aircraft Co. and Hughes Communications; MacNeal-Schwendler Corp., a producer of software for computer-aided engineering; Sanwa Bank of California; Sizzler International; Southern California Gas Co.; Teledyne Inc.; Times Mirror Co., publisher of the Los Angeles Times, and Wyle Laboratories.
About 45% of Southland executives said their companies are planning for sales growth of 9% or more this year, with 43% expecting that level of expansion in 1996. Two-thirds of those strongly optimistic companies are in information industries--computers, electronics, content and communications--a crowded field that many observers say will inevitably experience a shakeout.
Those rosy growth projections will not necessarily translate into a job boom, however. Half the Southern California executives said revenue growth is either unlikely to or definitely will not create new jobs. Only 19% said sales growth definitely will lead to hiring.
Even so, the Gemini consultants see executives' shifting attitudes toward people as a positive sign.
For many companies, re-engineering and downsizing have been helpful partial solutions that in many instances were unavoidable, said Francis J. Gouillart, a Gemini senior vice president in Boston. But cost cutting alone, he noted, cannot help companies create new products or find new markets--vital components of growth.
"Companies are moving away from the hard-asset, engineering view . . . into a much more organic world" where people's skills are more important, said Gouillart, co-author of "Transforming the Organization," a new book about integrated approaches to corporate change. "Executives are beginning to realize that growth is people-generated."
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Nearly half of West Coast executives are predicting that their company revenue will grow 9% or more in 1995 and '96, according to a survey by Yankelovich Partners. A breakdown of the predictions, by growth rate:
1% to 2%: 1995: 8% and 1996: 7%
3% to 5%: 1995: 13% and 1996: 23%
6% to 8%: 1995: 12% and 1996: 11%
9% or more: 1995: 49% and 1996: 48%
No growth: 1995: 10% and 1996: 3%
Not sure: 1995: 8% and 1996: 8%
* Source: Yankelovich Partners