(FORTUNE Magazine) – EVERY BUSINESS DAY since the beginning of the year, an average 2,389 American workers have learned that they would be losing their jobs. The layoffs of 255,000 employees announced in the first half of 1993 represent an increase of nearly a third over layoffs for the same period of recession-plagued 1991, according to tabulations by the ironically named Chicago outplacement firm Challenger Gray & Christmas. Cuts at 68 more companies in July added another 98,736 to the body count, including 60,000 at IBM. The chiefs of America's biggest companies seem caught in the grip of what might be called wee-ness envy -- my company's work force is smaller than yours. The terms ''downsizing'' and ''right-sizing,'' suggesting a one-time correction, have become passe. Executives bent on euphemism now say that their companies are ''decruiting.'' The big shrink at big manufacturing and service companies has less to do with tepid economic recovery in the U.S. and recessions in major export markets than with deep structural changes. The new mindset among job-cutting companies is that the world economy faces a sustained period of slow, low-inflationary expansion and global overcapacity, an era in which they cannot easily raise prices to expand profit margins. An example of the new way of thinking: Arvin Industries, a manufacturer of automotive components in Columbus, Indiana, has reduced its employment by 10% since 1990, to just under 16,000. This year orders for its shock absorbers and MacPherson struts are strong as the company benefits from the cyclical rebound in the auto industry, and security analysts estimate that company profits will grow at an annual 20% rate through 1995. Time to add workers? No way. Arvin will continue to trim its payroll, says human resources director Ray Mack. ''To remain globally competitive, we must continue to streamline operations and keep a tight rein on labor costs.'' Big-company layoffs may slow a bit, says Henry P. Conn, an expert on work force trends at the A.T. Kearney consulting firm. But he forecasts that they will continue at a high rate for at least another two years -- assuming, that is, that the economy continues to grow. Joseph E. McCann, business school dean at Pacific Lutheran University, surveyed human resources managers at 170 large employers (average payroll: 40,000 workers). Nearly 60% of them reported that the bulk of their companies' work force restructurings were behind them. But, warns McCann, ''the remaining incremental reductions could still add up to several thousand more layoffs, and some companies have yet to begin.'' One can already spot plenty more layoffs on the way. The Bureau of Labor Statistics forecasts that scheduled cuts in defense spending will result in over 300,000 fewer jobs at major military contractors -- and nearly a million more positions lost at their suppliers -- through 1997. Troubled airlines -- big job shedders of late -- are canceling orders or stretching out delivery for new aircraft, foreshadowing likely employment cuts at Boeing and McDonnell Douglas.

Even industries that had been reliable job creators in the past -- computer manufacturers and drug companies, most prominently -- are shrinking payrolls. Massive reductions at IBM, Digital Equipment Corp., Amdahl, and Wang Laboratories resulted from collapsing sales of mainframes and minicomputers. In addition, cutthroat price wars in the personal computer business have forced former highfliers like Apple Computer and Compaq to trim. The threat that the Clinton health care package would impose price controls has helped push drug industry layoffs beyond 10,000 over the past year. Among the cutters: Johnson & Johnson (3,000), Marion Merrell Dow (1,300), and Merck (1,100). Every day it becomes clearer that layoffs, 1990s-style, are unlike those of the past. In the 1980s employers used layoffs as a blunt instrument to cut costs. They shed employees to reap one-time, often transitory, savings. As business picked up -- or as management hoped it would -- many companies would start hiring again. Bloat crept back in. That's what happened at Eastman Kodak, the film and imaging-equipment maker. A paternalistic employer of some 115,000 worldwide, it was led by a reluctant hatchet man, CEO Kay R. Whitmore. Whitmore and Kodak made passing attempts to reduce the company's work force -- by some 16,000, through layoffs and generous inducements for employees to take early retirement in the course of the Eighties -- but he stubbornly refused to acknowledge that the company's long-term growth potential had slowed. Year after year Kodak based its business and staffing plans on forecasts of revenues growing at better than 7% a year. Spending for corporate bureaucracy and on R&D -- the highest in its industry -- grew apace. But invariably those hoped-for sales gains vaporized as generic, no-brand film cut deeply into Kodak's market share and profit margins. B. Alex Henderson, an analyst at Prudential Securities, calls Whitmore's approach to downsizing ''bulimic management.'' Says he: ''Kodak would feed and feed, then purge and feed again.'' LARGE INVESTORS, disgusted that Kodak earnings had dropped from $5.71 a share a decade ago to $3.53 last year, wanted the company to cut R&D spending drastically and bring administrative costs in line with more realistic revenue growth prospects of around 4% a year. In January, Whitmore named Christopher J. Steffen, an outsider with a reputation as an aggressive cost cutter, as the company's new chief financial officer and announced that Kodak would cut 2,000 employees. But when Steffen suddenly resigned after just 11 weeks on the job, shareholders revolted and began unloading Kodak stock. Finally, Kodak's restive board dismissed Whitmore in early August, and days later the lame-duck chairman announced that the company would reduce its work force by 10,000, or nearly 9%, by 1995. This may be only a beginning. Analysts who follow the company expect that as many as 30,000 more employees ultimately may go. Companies that get into decruiting begin not by targeting workers so much as the work itself. Their new techniques for finding cost-cutting efficiencies go by a variety of names -- total quality management, work redesign, and (the favorite of late) process reengineering. Whatever they call it, companies willing to commit to the sustained effort that these new approaches require find that they keep discovering opportunities to make quantum improvements in productivity. Almost inevitably, however, as the work is squeezed out, employees become casualties -- permanently. The companies that reap the competitive advantages that result, moreover, turn up the heat on their rivals to embark on similar efforts. How far can the process go? Union Carbide, the chemicals manufacturer in Danbury, Connecticut, started on a reengineering program in 1990. A laggard performer in an industry saddled with too much capacity for its major products, polyethylene and ethylene glycol, Carbide ordered its unit managers to scrutinize their production, administration, and distribution systems. The aim: eliminating $400 million a year from the cost structure. Carbide's ambitious, overarching goal, explains Joseph S. Byck, vice president for strategic planning, is to ensure that the company generates returns exceeding its 12% cost of capital throughout the business cycle, something Carbide achieved in the past only when demand boomed. Such is the nature of continuous improvement that the further the company delved into the details of its business in search of process refinements, the more potential savings it discovered. In July, CEO Robert D. Kennedy lifted the bar, targeting a total of $575 million in annual savings by 1995. ''The objective is cost elimination, not people elimination,'' says human resources vice president Malcolm A. Kessinger. Still, as work processes were streamlined -- or eliminated entirely -- employees melted away. Since 1990 employment has dropped some 22%, to 13,900. It could fall by that much again in percentage terms before the cost-reduction program ends -- or by more if management raises the goal again. The ever leaner Carbide's successes have made the company beloved of investors. Its stock was the best performer among the Dow Jones industrials in 1992, rising 92%. CEO Kennedy hopes to repair Carbide employees' shattered morale by spreading the message that the layoffs have helped pave the way for a buoyant, sustainable expansion. The company invested heavily for tomorrow throughout the agonizing cost-cutting program. For example, Carbide will open a new plant in Taft, Louisiana, that will produce 650 million pounds of polyethylene annually by 1995. Adding capacity makes sense because the factory will feature a proprietary new technology that should make Carbide the industry's most efficient producer. The new production method could add $100 million to annual pretax profits -- a rock-solid foundation on which the Carbide work force can grow in the future. The company hasn't said, however, when it will begin adding much to its payroll, or how many former employees will be invited back. LARGE-SCALE LAYOFFS are new to America's largest service companies. Through economic boom and bust, their payrolls swelled. During the 1980s expansion, employment at FORTUNE's Service 500 companies climbed by nearly one-third, to 11.4 million in 1990. But it hasn't grown since. Instead of adding more employees to keep up with growing demand for services, companies have concentrated on raising employee productivity and using the information technology they acquired willy-nilly in the 1980s more intelligently. For example, First Interstate Bancorp of Los Angeles, the nation's 13th- largest bank holding company, was driven by crisis to cut. A leading commercial lender in the 13 Western states where it operates, the bank saw nonperforming assets grow alarmingly as its region fell into recession and borrowers defaulted. With losses rising to $288 million in 1991, the bank saw no alternative but to cut deeply into its payroll, which totaled 35,192 employees in 1990. CEO Edward Carson, a 40-year veteran of the bank who started as a teller, was determined that the bank's financial woes be used as a great motivator for First Interstate to regain lasting control over its costs. Even as they stabilized its balance sheet, managers began streamlining the company's unwieldy structure. For years the bank's 13 state divisions had operated as separate fiefdoms, a relic of old federal banking regulations. In 1991, Carson consolidated the 13 colonies into four regions. Now Carson and crew are bringing efficiency to the backroom operations. First Interstate has reduced its 11 scattered deposit-clearing centers, which together process some five million transactions daily, to just two large installations. The new operations employ advanced technology but only 650 workers, some 1,500 fewer than in the past. The $110 million a year in resulting savings helped lift First Interstate's profits to over $282 million in 1992. The consolidation and the elimination of redundant administrative functions have reduced total employment at the bank by 9,000 jobs, or over 25%, to date. But the rationalization did more than simply wring out excess. Says Lillian R. Gorman, executive vice president for human resources: ''For the first time, First Interstate was able to see itself as one company with a common strategy.'' Even if the economy picks up steam, other big service companies will be slow to start hiring. Insurance firms, still struggling to shore up portfolios of crumbling real estate holdings, are striving to improve customer service and profitability by cutting unneeded steps out of claims processing. In retailing, the overbuilding of stores in the 1980s is forcing merchants to squeeze more profits out of existing outlets. And the competition unleashed by deregulation continues to force airlines and truckers to hold down costs as a matter of survival. ( Layoffs, the inevitable byproduct of the new drive for cost-lowering efficiencies, may ultimately render big companies more fit to combat tenacious global competitors. But will they ever begin to create jobs in significant numbers? And where are the displaced employees to find work? No country has found a successful answer, and the question continues to be the most vexing one confronting the global economy.

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