Delayering in a Shrinking Economy

In a discussion on Tim Morgan’s blog, he says:

… de-layering is going to eliminate huge numbers of white-collar jobs, and lots of intermediate/intermediary businesses, though I doubt if even the biggest corporate players really understand this yet.

Not a subject which is reported much.  And yet layering was a key element of the growing economy of the UK.

The economy grew by creating layers of bureaucracy which then split into departments.  For example, I had an uncle who was a Borough Engineer in a local authority.  In the 1960s, he had responsibility for local roads, water, housing, swimming baths, town planning, a race course, building regs and planning.  All would now have their chief officer.  Sometimes, a group of them will now have a Director above them in a Chief Officers Management Team, which was how chief officers created a higher layer.

The underlying growth mindset of individuals in large organisations was satisfied by adding subordinates.  In due course, they morph into sub-departments and the status and income of the individuals who created them are enhanced.  It was a “natural” process.   Those within the system understood it to be how things were.

Where a department was operating within specific legal powers, they each had the knowledge and a technical language specific to their activity or profession.

Now that the economy is shrinking and staff numbers have to be reduced, there is no”natural” way to reduce the numbers. There is no understanding of how to do it.  No wonder there is a muddle.

Departments are adopting ad hoc ways of reducing their staff.  Part-time working is common.  Outsourcing to commercial contractors enables redundancies to be made more easily than before.

Private sector organisations in discretionary (non-essential) markets cease to exist when they are no longer financially viable.  In the public sector, discretionary services which ought to be abandoned struggle on, adding to the muddle.

Financial shrinkage occurs naturally when wages do not keep up with inflation.  But QE allows the end to be delayed.  Yet more muddle.

The problem is the unwillingness of individuals and organisations to admit that the economy is no longer growing.  This has to happen sooner or later.  In the meantime, there is a general denial of what is happening.