Corporate middle managers have enjoyed a pretty sweet run over the past few years. With their companies buoyed by a strong economy and a stock market that seemed to know no bounds, men and women in the trenches filled their offices with new hires, took chances on new products, and equipped their staffs with the latest tech gadgets -- all the while worrying little that their bosses would turn off the spigot. Sure, lots of work needed to be done, but there was also money to do it.
It was good while it lasted. Today, the economic downturn is walloping companies from Silicon Valley to the Northeast Corridor, prompting corporate bean counters to rejigger budgets and send middle managers missives with a simple message: Party's over. For these managers -- many of whom cut their teeth during the heyday of the New Economy -- adjusting to leaner times may be more frustrating than trying to get a clear connection on a cell phone. "It's easy to look like a genius during boom times," says Darrell Rigby, director at management-consulting firm Bain & Co. "It's times like the present that separate good managers from great managers. We're going to see that shakeout."
Doing more with less is the challenge facing middle managers across all industries, from high tech to manufacturing, insurance to publishing. Their anxiety seems to be rising accordingly, says Anne Chamberlain, principal at Buck Consulting in New York. "The orders are coming down to execute -- [make] workforce reductions, streamline costs, sell off a piece of the business," she says.
One thirtysomething middle manager at a brokerage firm doesn't have to be told that cash flow has slowed to a trickle. When she joined the company earlier this year, she was told not to order business cards because they weren't considered "critical" to her job. She and her five direct reports now share a single cell phone (they've worked out a schedule so everyone gets their turn). And while she snagged a computer to work from home, her team members must make do with three laptops between the five of them.
Thanks to a hiring freeze instituted a few months ago, the manager can't get extra help for her primary project -- even though it's considered a top priority at the company. "We don't have the luxury anymore of calling a [staffing] agency and saying, 'Fill our order,'" she says. Instead, she's looking internally for people with the necessary skills -- and worrying about layoffs. "As we get closer to our deadline, and we realize that there's a risk of losing people, the stress has been there," she says. "Everybody keeps telling me, 'Don't worry -- we've been here for the good times. We just have to weather the storm.'"
Some executives think the storm is hardly over. In a new poll of 800 senior managers by the American Management Assn., nearly half said their companies won't meet revenue targets set at the beginning of the year. Two out of three have already eliminated jobs, curtailed new investment, implemented hiring freezes, or taken other cost-cutting measures. And many are reviewing plans that could further scale back operations.
For Susanne Hite, director of corporate communications at telecom provider NewSouth Communications, the financial nips and tucks started back in December when the privately held company laid off 141 employees, about 12% of its workforce. She lost six members of her eight-person staff -- a serious hit considering she had hired seven of them in the prior 12 months. Hite, employee No. 53 when she joined NewSouth in 1998, says her PR budget has shriveled to $400,000 this year from $850,000 last year.
One line item -- funds for sponsorships -- has plummeted to $10,000 from $100,000. While Hite says she suffered shell shock when she first learned how deep the cuts would be, she has since learned to make do. Exhibit A: An inner-city elementary school in Greenville, S.C., headquarters of NewSouth, recently came calling for a donation. Hite told the school that the company "couldn't do money," but she agreed to start a volunteer-tutoring program instead. "It didn't cost us a dime, but it helps the community, and our people feel good about it, too," she says.
Cutbacks notwithstanding, America's corner offices expect the sort of service they've grown accustomed to. At NewSouth, word came down recently that senior management was miffed the company hadn't been mentioned in a list of telecom-equipment providers published in a regional-business journal. When Hite had eight staffers, she says, it was easy to monitor closing dates for such lists and make sure NewSouth got included.
But with limited resources, it isn't so simple -- a fact her boss, Marketing Vice-President Penn Gaines, apparently recognizes. "He defended me, and told [senior management] that we weren't on the list because we're lacking people power," she says.
Other bosses are less forgiving, says Brandt Allen, associate dean for executive education at the University of Virginia's Darden Graduate School of Business Administration. Among middle managers, he says, "there's a real fear that they're going to make a mistake. People are under great pressure [because] the penalties for making a mistake are much harsher."
Allen has heard of one senior manager recently fired after losing $2 million while developing a project for his company. Other factors likely contributed to the firing, he says, but the "rumor mill is not going to have that data. The rumor mill only knows that he lost $2 million and got canned."
Indeed, in lean times, middle managers must have a clear picture of cost-chopping goals. "Know what's sacred and what's not," advises Arky Ciancutti, chief executive of the Learning Center, a San Anselmo (Calif.) company that helps clients with team building. "Make sure you're in complete agreement with your boss on that one." If you're not, speak up, but be ready with plan B, Allen adds. "Middle managers have to figure out a way to manage upward so they can shape what's going on."
Of course, if shareholders are grousing about company performance, it's unlikely a senior executive will appreciate a middle manager who declares she can't squeeze another ounce of productivity out of her department. "Senior management is going to push them pretty hard," says Bain's Rigby. "[They'll ask questions like:] 'Have you looked at partnership opportunities with vendors?' 'Can you improve on on-time deliveries?' 'Have you looked at indirect costs like rent and supplies?'" The conversation could also take a threatening turn, he says, if executives say: "You've got to do this, because if you don't, I'll find someone else who can."
One middle manager at an insurance company in the Northeast just became that "someone else." A few weeks ago, he took over as head of his office after the guy before him unceremoniously split. He has since combed through three years of profit-and-loss statements, trying to figure out how the company wound up in the red for the past two years. To move it back to profitability, he plans to slash monthly expenses to $200,000 from $270,000. Possible cuts include relocating to less-expensive offices, terminating leases on computer equipment, returning unnecessary office furniture to a rental agency, and finding a cheaper garage where his 21 employees can park.
"It's a big number to find, but we have to get it done," he says. "I'm glad to be in this position. It could be worse. If I had taken over when it was extremely profitable, there would be no way to go but down."
While it's common for middle mangers to hole up in their offices when facing a budget crunch, they need to explain the new reality to others and get their support, according to experts. Hite at NewSouth says sales folks routinely call her to ask for help manning booths at local trade shows.
In her most polite Southern accent, she tells them she can't afford to send a staffer to the show -- but she'd be happy to ship them the booth (and directions on how to assemble it). "There's not a fairy princess to set it up for them anymore," she says, adding: "Some of them have renewed respect for what a support staff does."
Even a stray paper clip can become a needless expense. The middle manager at the brokerage firm worked for a credit-card company last year that was tightening its purse strings. To shave costs, she raided the desks of her 55-person staff, scooping up extra pens, highlighters, boxes of tissue, and other supplies that had been squirreled away in drawers. "People hoarded all kinds of stuff," she says. "No wonder all that money was going out the door." She estimates her idea saved the department $5,000 in office supplies in one quarter. Will she try the same tactic in her new job? Let's just say she's keeping her eye on the staples.
By Jennifer Gill in New York