Intercom Online......October 22, 1998

Albert A. Vicere, professor of business administration, lectures to officials of nationally known companies as well as government officials about management systems and how to run them more effectively.Photo: Greg Grieco

Mergers fuel middle
management comeback

By Paul A. Blaum
Public Information

Mega-mergers, such as the one between America's Chrysler Corp. and Germany's Daimler-Benz, are helping middle management make a comeback, said a Penn State management expert.

"All this talk about merged companies becoming even leaner and meaner has a scary ring to it," said Albert A. Vicere, professor of business administration in The Smeal College of Business Administration. "But there's definitely an upside to this."

Vicere and Robert M. Fulmer, W. Brooks George professor of business administration at the College of William and Mary, are co-authors of the book Leadership By Design: How Benchmark Companies Sustain Success Through Investment In Continuous Learning, recently published by Harvard Business School Press.

"The global economy has certainly forced companies around the world to become more competitive -- and more creatively competitive," Vicere said. "Many corporations have responded to this by restructuring themselves as what we refer to as shadow pyramids."

In a shadow pyramid, companies "outsource" or contract out many essential but not core functions such as bookkeeping, data-processing, maintenance and sometimes even manufacturing. In this way, the core company can develop top-notch products and services while establishing partnerships with other companies to expand market opportunities around the world.

"From the corporate standpoint, the union of Chrysler and Daimler-Benz is a marriage made in heaven," Vicere said. "The merger will result in a shadow pyramid that make the most of both external and internal partnerships and pools the different markets and strengths of both companies. Chrysler, for instance, specializes in design, Daimler-Benz in engineering. Chrysler is one of the best in the auto industry when it comes to outsourcing and working with vendors and suppliers. Daimler-Benz has far less experience with outsourcing and can learn from Chrysler.

"A shadow pyramid is indeed flatter, leaner, more focused. A company is pared down to its essence," said Vicere. "It represents only those competencies and processes in which the company excels on a worldwide basis. All other activities are conducted through contracts, partnerships and alliances."

But contrary to what some doomsayers think, this is good news for middle management and indeed for most employees willing to reinvent themselves vocationally.

Because of the shift in worker values, the issues of employee loyalty and motivation are critical within a shadow pyramid. A company of this kind requires a radically new definition of the employer-employee compact, one more focused on open communication, personal involvement and professional development, Vicere said.

"This individualistic focus has, of course, its pitfalls," Vicere said. "If left unchecked, it can lead to the emergence of an army of mercenaries at the heart of the organization, opportunists more concerned with promoting themselves than advancing the company."

On the other hand, a shadow pyramid allows individual employees to contribute more to the finished product, provide a continuous flow of fresh ideas and make their mark on the organization.

"This system particularly favors mid-level managers and professionals who are the true backbone of the organization. Without their commitment and involvement, the organizational network would simply fall apart," Vicere said. "One of the most challenging tasks faced in a shadow pyramid is professional development of middle management."

For the labor force in general, the big change is that shadow pyramids are unlikely to offer lifelong employment with one company. The employee's skills have to be state-of-the-art and portable, since he or she will advance not by moving up the corporate ladder of one company but by moving laterally from one company to another, said the researcher.

"I believe this is more of a negative for companies than for workers," said Vicere. "This revolving door is hard on companies, which ultimately must rely on intellectual competencies and human relationships developed by those in the middle of the organization. Because of this, people in the middle are getting a great deal of attention, since the technical and organizational skills of a company, as well as the contacts, are concentrated within middle management."

Study finds link between
employee turnover, theft occurrence

When fast-food restaurant employees give their employers two weeks' notice that they're going to quit, supervisors might be better off to pay them for the two weeks and allow them to leave at the end of the work day, said researchers including Peg Thoms, assistant professor of management at Penn State Erie.

"Employees who have given their two weeks' notice may be more prone to theft than employees who plan to stay on the payroll," said Thoms.

Thoms and other members of the research team found a significant correlation between turnover and theft in one of the largest fast-food restaurant chains in the country.

"If a restaurant has tight management controls against theft, the average amount of theft may be so low that it may not be worth losing two weeks of productive labor when an employee gives his or her notice," Thoms said.

But when store managers or employees with access to valuable equipment and supplies resign, it may be in the organization's best interests to allow them to leave immediately when they give their two-week notice.

For more details, check the Web at http://www.psu.edu/ur/NEWS/news/employeetheft.html.

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