Five questions for Wayne Cascio

Distinguished Professor, CU Denver Business School
Wayne Cascio

Wayne Cascio

While serving in the military during the Vietnam War, Wayne Cascio wasn’t sure what he would do with his life or his psychology degrees. He came across a journal of applied psychology and found the research interesting. A former professor referred him to the head of human resources at General Motors, who in turn sent him along to the man who could become his mentor as he earned his Ph.D. in industrial and organizational psychology at the University of Rochester.

It was the beginning of his illustrious career. Cascio, a professor of management at the University of Colorado Denver Business School, holds the Robert H. Reynolds Chair in Global Leadership, and recently received the honor of Distinguished Professor.

While he was teaching at the University of California Berkeley, he gave a speech in Breckenridge. He’d never been to Colorado before, but found the skiing and the weather “fabulous.” Then-CU President Arnold Webber contacted him and offered him the opportunity to come to Denver and build a business school. At the time, the Denver business school was an extension of Boulder’s school.

“It was 1981 and mortgage rates were 18 percent and I couldn’t afford to buy a house,” Cascio says. “Webber, who was a renowned labor negotiator, said it wasn’t often in academics that you get to be an entrepreneur. He was very persuasive. So I came to this place where there was really no history and I’ve been here ever since.”

He’s won numerous awards and published 10 books. He also has spent a lot of time as a visiting scholar, including at the University of Geneva. He is one of only two U.S. citizens to receive an honorary doctorate from the university, which has a unique program: the IO-MBA. The program is designed to form top managers with the skills and knowledge to help international organizations meet global challenges.

“I teach there every summer; it’s great having 25 nationalities in every class. It’s so rich, I feel like I learn more than the students,” he says.

Cascio came to Colorado partly because of the lifestyle. He still is an avid skier and loves the mountains and all the other outdoor activities the state offers: hiking, biking, rollerblading. He’s never lost his love of the ocean, however, growing up on the south shore of Long Island.

“My dad was a pro baseball player for the Yankees. I was really fortunate in that I was a bat boy for visiting teams at Yankee Stadium. It was Camelot. I was there when Roger Maris broke Babe Ruth’s home-run record. I have great memories of a great childhood.”

1. You recently were honored as a University of Colorado Distinguished Professor and have won numerous other awards as well. Which ones stand out?

To be recognized by the university where you work is a great honor. I’m sure you’ve heard (the saying) that an expert is someone who lives 50 miles out of town, so it means an awful lot to be recognized by my employer, the one to which I’ve dedicated the vast bulk of my career.

Another honor I’ve received is the Michael R. Losey Human Resource Research Award. I received that in 2010 and was only the 8th winner. That one really meant a lot: It’s been described in my field as the Nobel Prize of social sciences. It came with a $50,000 prize, of which I gave 20 percent to charity. And I always cherish my teaching awards. It is one thing to be recognized by your profession, but it’s another to be recognized by your students. To be recognized in both of those arenas means I’m where I belong.

2. You are considered a leading expert in organizational downsizing. When did you begin to research this topic and how did you become interested?

I got started in the early 1990s. During a sabbatical in 1987-88, I took MBA courses at the Wharton School at the University of Pennsylvania. I had a quantitative background but never took courses in finance. Taking those MBA finance courses broadened my horizons. The more I read about downsizing, the more I was convinced, given my knowledge of people at work and with a finance background, that companies were trying to shrink their way to prosperity. They were cutting costs and seeing people as fixed costs. The company mentality seemed to be that if we can reduce fixed cost, we can increase our earnings, and earnings drive stock, so investors will be happy. But I was thinking about the indirect costs of morale and productivity and so forth. I became passionate about this and read 500 articles before I wrote my first piece. These were media articles because there wasn’t a lot of systematic research out there. I wrote the article, “Downsizing: What do we know? What have we learned?” in one weekend; it was published in 1993. It was the only article I ever wrote accepted with no changes and it wound up winning a best paper award from the Academy of Management. That started me off.

It wasn’t quantitative research but it made a persuasive case for why organizations should think twice before laying off people. One of the things we love at CU Denver is interdisciplinary research. I teamed up with a finance professor, Jim Morris, and with a market research professor, Cliff Young, and we looked at what happened to S&P 500 companies over an 18-year period, from 1982-2000. We looked at what happened a year before they made a downsizing announcement and also two years later. Did they outperform their competitors? Did stock prices go up? Were they more profitable? Our published research got a lot of play. We had almost 7,000 observations and the research results showed that firms that lay off people without making other changes are never better off and they don’t do better in the long run. That was an important lesson.

Around the same time, the U.S. Department of Labor gave me a grant to find “good news” in companies that were restructuring. I traveled around, visited a lot of firms, and as I spoke with executives, it took about five minutes to see they settled in one of two camps. One camp was a group that said, “What’s the smallest number of people we need to run this place, to stay in business?” I call those the downsizers. Then there was a much smaller group, about 10 percent of those I spoke with, that had a different view. They wanted to know how they could use the people they had more effectively. Those were the companies I wrote about.

One of the best examples of this thinking is Apple. At the beginning of the “tech wreck,” the markets were way up, but they came crashing down and there were massive layoffs. Steve Jobs was quoted at the time as saying that the company had worked hard to get really good people, so the last thing he was going to do was lay them off. As a matter of fact, he said Apple was going to increase investments in research and development. And that’s exactly what they did. When the economy recovered in 2001, all of Apple’s competitors were weak; they had laid off a lot of people. Apple, on the other hand, introduced iTunes and the iPod and revolutionized the way we buy and listen to music. He did exactly the same thing in the most recent recession in 2007 and 2009. That’s when the iPad and iPhone were introduced. He took a counter-cyclical approach; when others were doing X, he did Y. That’s the kind of thinking I see over and over again with companies that use what I call responsible restructuring. I’ve continued to be interested in this area and try to hammer home the idea that if all you do is cut people and don’t do anything else, you’ll never be better off. That theme never goes out of style.

3.  What are some of the psychological effects of downsizing?

There’s a saying that the first casualty of downsizing is employee morale. People become narrow-minded and risk-averse at the very time when companies need them to take risks and innovate. People become self-absorbed and there’s a tremendous cost in productivity. Research shows they spend as much as two to three hours a day contacting friends, polishing resumes and looking for other jobs. That takes away from innovation and productivity, which is what a company needs when the economy is in bad shape. Another is that a year after downsizing, the percentage of voluntary turnover spikes. In psychology there’s a concept we call the psychological contract. It’s an unwritten set of expectations between the employer and the employee. As an employee, you feel if you do a good job, then you expect to keep that job. In downsizing, people feel betrayed.

4. You’ve done other research in progressive management practices. Do you feel as if some companies aren’t paying attention and only think about the bottom line?

The good news is that a lot of employers are getting the message. A book I wrote with John Boudreau is titled “Investing in People: The Financial Impact of Human Resource Initiatives,” where we quantify the costs and benefits associated with progressive ways of managing people. The university supported my research to develop software that calculates the cost of turnover or absenteeism and the benefits associated with effective training programs, or work-life programs or wellness programs. The software is available for free on the Internet and the beauty of it is that multinational companies can do this in any currency.

The latest data shows that during the last recession, about 40 percent to 50 percent of employers didn’t resort to layoffs, but you heard a lot about the ones that did. There are companies out there that listened and are trying to implement a lot of the research findings that have come out over the past 20 years. If you look at Fortune magazine’s “best employers to work for” list, you can see that a number of the top 100 had no layoffs. There were more than a million layoffs when the 2002 list came out, but of the top 100 companies, 81 did not conduct layoffs. That number has stayed constant.

In the vast majority of cases where companies had layoffs, they actually were profitable that year. That’s the part where they’re not getting that message. If layoffs are seen as a last resort rather than a first resort, I’m happy.

5. You are the author of 10 books, many with multiple editions. Do any of the books stand out as a favorite?

I love them all. Right now I’m working on the ninth edition of “Managing Human Resources: Productivity, Quality of Work Life, Profits.” I first signed a contract for the book in 1981 and it was first released in 1985. It’s for advanced graduate students and MBAs, and covers a broad range of topics from legal issues in employment to staffing and compensation.

If I have to pick only one, however, it would be my first book, “Applied Psychology in Human Resource Management,” which is now in its seventh edition. What I was trying to do was bridge the psychology market and the business market. I wrote that book right after I got out of grad school in 1973; it took five years. At the time, people wrote for one market or the other; nobody was trying to do both. I would get these reviews back that said while the book was technically very good, publishers didn’t know where it would sell, so they would ask me to write another chapter. The book has 18 chapters because I was rejected by 17 publishers. By the time I got to 18, I told them to take it or leave it. Prentice-Hall took a chance and the book sold 40,000 copies in its first edition. Then everyone wanted to be my friend. I kept getting rejected but I really believed in what I was writing; now it’s the most widely used text in graduate programs in industrial and organizational psychology. I began in 1973 and it was published in 1978. In psychology, it’s called delayed gratification. That’s a long delay.