THE NEW ERA HOW WILL WE LIVE WITH THE TUMULT? Continuous business revolution will upend millions of American lives -- and require big changes in values.
By Stratford Sherman

(FORTUNE Magazine) – WHEN IBM spun off its PC-printer and typewriter business in 1991, ''We concluded that we had to change nearly everything in our business to be successful,'' says Marvin Mann, CEO of the new company, Lexmark International. It parted ways with roughly half its workers, reorganized the rest into new, customer-focused units, gave every employee stock options, and created a strict system of performance measurements that forced accountability. The Mann revolution at $1.8-billion-a-year Lexmark has produced striking financial results, in this case a five-percentage-point increase in gross profit margins and a huge reduction in debt ahead of schedule.

But what about all those who lost their jobs? The era of revolutionary corporate change -- still just beginning -- promises enormous economic improvements at an exceptionally high cost in human pain. Make no mistake: Companies must transform themselves radically to survive and become more competitive. One result is structural change in the labor market, with downsizing continuing even in a period of economic recovery. Says Kathleen Stephansen, senior economist at Donaldson Lufkin Jenrette: ''We can't count on economic growth to absorb the excess supply of labor. The social costs will be enormous.'' The four companies whose CEOs are on the cover of this magazine have shed upwards of 250,000 jobs under their present leaders while creating $104 billion of new wealth. Companies can cause incalculable stress to workers who merely fear losing their jobs, or can't navigate new organization structures, or can't handle their new responsibilities. The only way to deal with 20 direct reports, for example, is to delegate more, but many veteran managers seem unable to let go. Job-related suicides are up, along with employee violence ranging from sabotage of computer systems to bloody rampages with assault weapons. How will society handle such convulsions as competition forces businesses into radical change over the next decade? This workplace revolution -- most advanced in America, though coming everywhere -- may be remembered as a historic event, the Western equivalent of the collapse of communism. But as corporations abandon the unwritten contract of lifetime employment in return for hard work and loyalty, the social fabric of the U.S. seems weaker than at any point in the postwar years. Is America up to the changes it must make? LOOK FIRST to the individual. To absorb shocks, people need a sense of identity healthy enough to enable them to view outside events objectively; ideally, one's self-esteem bounces back after the loss of a job. Abraham Zaleznik, professor emeritus of leadership at the Harvard business school, believes growing numbers of Americans simply aren't that strong. ''Unsettled family relations and disappointment with authority figures create infirmities,'' he says. ''People doubt themselves, and so can't react when things change.'' If a society is a mechanism to produce individuals capable of surviving challenge, America's needs tuning. Stable families have become a rarity in the U.S.: Unwed mothers account for one-quarter of all births; marriages and cohabitation arrangements are so fragile that, says James Taylor, president of survey firm Yankelovich Partners, ''Seventy percent of all children will experience the trauma of being 'under new management' at least once in childhood.'' One-fifth of children are born into poverty and will have a hard time getting out. For nearly two-thirds of all children under 18, either both parents or the only parent is in the work force. Judging by the alienation of Generation X, day care and TV make poor substitutes for parental attention. A solid education system can help reclaim kids damaged at home. But the Department of Education's National Adult Literacy Survey says over 47% of Americans can't even decipher a bus schedule. Sitting in circles and trying to feel good about yourself is no substitute for accomplishing something in class -- especially when education is becoming critically important in the workplace. After layoffs hit, says Ronald E. Kutscher of the U.S. Bureau of Labor Statistics, ''the ones left holding the bag are the uneducated.'' Especially in stressful times, people need bedrock beliefs they can build on. Yet just now, many Americans see the bedrock shifting, sometimes crumbling. ''The value system is being torn apart,'' warns industrial psychologist Dee Soder, president of Endymion Corp., a counselor to top executives. ''Your stockbroker has just been thrown in jail and your priest is being accused of child abuse. Where do you go for a source of values?'' Oddly enough, one place some people are finding values is in corporations -- often the very ones undergoing radical change. At companies from AT&T to Tenneco, leaders are finding that shared values are the essential glue that holds newfangled organizations together. ''To get the job done, we have to have the same values,'' says Lawrence Bossidy, CEO of AlliedSignal. Once the bureaucracy is gone, the organization flattened, and workers empowered, shared values provide the only practical way to ensure that everyone is pointed in the same direction. And the values these corporate folk espouse sound good: candor, integrity, facing reality, taking responsibility, being accountable, investing in education, respecting diversity. SOME MAY regard as a mind-boggling switcheroo the notion that corporations can serve as bastions of sound values in a disintegrating society. In the traditional lineup, it is society that promotes sound principles of behavior while businesses pursue their own interests -- even when, as in the case of pollution, they are socially destructive. Has corporate America suddenly cleaned up its act to such an extent that it can be counted on to lead some sort of ethical renaissance? Not really. The agonizing upheavals we're experiencing in the workplace result in part from managerial failures that made these businesses less competitive. Workers who gave loyalty under the old system have suffered under the new. Not surprisingly, employee cynicism is growing. Soder regards it as justified: ''Everyone can see what needs to be done in these organizations, but very few leaders have been able to implement the changes.'' Executives are having big trouble walking their talk. The best corporate leaders in times of dramatic change are those, like Lexmark's Mann or AlliedSignal's Bossidy, who really believe in the values they espouse and have the courage to back them up with consistent action. To the degree that they instill in employees the self-respect that comes with accomplishment, organizations like these may indeed become forces for social progress. But in the era ahead, such winners probably will remain exceptions to the rule. And even the best organizations can't do much more for the people they leave behind than be compassionate. The burden of caring for the millions threatened by workplace change will continue to rest primarily with society. The value most needed is a sense of community -- loving your neighbor as yourself. That idea took a licking during the 1970s and 1980s, but a comeback seems possible. Charitable giving is up substantially, and as a percentage of personal income the 2.01% level reached in 1992 marks a 20-year record. Family values may finally be coming into fashion: Yankelovich's Taylor says that enduring marriages are a status symbol in the 1990s. ''People are respected for the toughness to get through bad times, and for valuing the stuff that matters,'' he says. More reassuring than such frail tokens of improvement is the harsh near- certainty that society will be forced to respond to the challenge of the workplace revolution. That will require acting on a new set of values: a heightened regard for education, for the well-being of one another, and for the preservation of the family. Large-scale economic dislocations make large- scale social change almost inevitable. Given the depth of America's social problems, that's not all bad.