The case of the downsizing decision

New CEO Charles Rampart's decision to make deep across-the-board cuts at Universal Products Company, Ltd. presents division manager Andrew Jordan with a thorny problem. Plagued by slow growth, a declining stock price, and an increasingly skeptical investment community, UPC needs to control costs and control them fast. But Jordan's division is the most profitable in the company, and the 11% cut proposed by Rampart could destroy already shaky morale and seriously threaten the division's ability to compete. "There comes a time in every manager's career when he has to fight a bad decision made by his boss," argues Sam Godwyn, Jordan's vice president for marketing and sales. "To cut across the board is to take a blunt axe to the company when a surgeon's scalpel is called for." He suggests it is better to line up support for an alternative plan that links cuts to a long-term strategy and that differentiates between successful and unsuccessful divisions. "It would be a terrible mistake for us to focus only on the narrow needs of the division when the future of the whole company is at stake," counters Mary Wyatt, Jordan's vice president for finance. Yes, the downsizing will hurt the division in the short term, but the real issue is getting behind the new CEO. Supporting the downsizing decision is a necessary investment in this future credibility and effectiveness--whatever the short-term costs. Four commentators debate Jordan's dilemma and how he should resolve it.     

Services under siege--the restructuring imperative

Recent job losses in the U.S. service sector do not reflect a temporary recession. Those jobs are gone, the result of a massive restructuring of the sector that is just getting under way. The explanation for the restructuring is quite simple. Until recently, services have been shielded by regulation and confronted by few foreign competitors. They have allowed their white-collar payrolls to become bloated, their investment in information technology to outstrip the paybacks, and their productivity to stagnate. Now competition is heating up and exposing these inefficiencies. Just as intense competition forced the restructuring of Smokestack America in the 1980s, deregulation and foreign direct investment are shaking out service companies that cannot confront their shortcomings. The need for sweeping change in the service sector may come as a great shock to Americans who saw services as the means to continued economic prosperity. But there is a painful irony at work: job creation, the very thing proponents use to demonstrate the U.S. service sector's strength, is in fact a symptom of the sector's chronic neglect of economic efficiency. It is precisely that neglect that makes the service sector vulnerable as the race for market share intensifies and new players shift the terms of competition. Services must respond to the new competitive environment, but not by indiscriminate cost cutting. Instead, they should balance financial discipline with a comprehensive and immediate reexamination of strategy.     

Electronic data interchange: a strategic approach

The potential of EDI is virtually unlimited, but the success of any EDI initiative hinges on its ability to directly support strategies that achieve your institution's business objectives. At its most fundamental level, EDI technology automates current business practices, speeding up the exchange of business information. This application of EDI most often is found in a hospital's material management department. But EDI integrated internally within a hospital and externally with suppliers and vendors has the potential to go beyond simple automation and to transform processes. This is where the full value of EDI can be realized. No matter which level of EDI participation hospital management decides is appropriate to fulfill its business objectives and strategies, EDI will affect the entire institution's exchange of information with its internal and external audiences. The question management must answer is: Will the hospital's EDI strategy be offensive and managed, or defensive and reactive? Today's environment leaves no room for a "no-strategy" EDI option. The options are either to proactively shape EDI, or reactively play catch-up. EDI can work for you. Adequately developing an EDI game plan in support of your business objectives and calling on your suppliers and other trading partners to work with you will ensure EDI is an asset to your facility.     

Designing a guideline-based utilization management program

Many public and private organizations are developing and publishing clinical guidelines to assist health care providers and patients in making appropriate medical decisions. Unless clinical guidelines are part of a well-designed managed care program, they have little effect on physician practice styles. This article explores integral components of an effective guideline-based utilization management program. Initial evaluation of this program suggests that, as part of a well-designed utilization management program, clinical guidelines can inform patients and physicians, and create appropriate incentives for effective health care delivery.     

Growth and equity effects of changing demographic structures in the Netherlands: simulations within a social accounting matrix

"This paper deals with the economic consequences of a changing demography in an industrialized country, namely the Netherlands. The analytical framework chosen is that of general equilibrium as statistically given by the social accounting matrix (SAM) in which we introduce households by size for the present economic demographic situation (1981) and for a future simulated situation (2010) featuring in particular a relative increase in one-person households (individualization). The income (output) multipliers of both SAMs show a positive growth bias towards three and more person households and towards mining, public utilities, trade and banking."