Is Downsizing the Route to Rightsizing or Capsizing?

School Administrator, June, 1996 by Judith Berg, Gene Hall, Gerald Difford

Central offices are a favorite political target. Often seen as the obstacle between effective schools and failing schools, central offices have been termed "bloated," "tradition bound," "bureaucratic," or worse.

In some Colorado school districts, the response to these claims has been to downsize central offices. Downsizing proponents see it as a way to be more fiscally accountable while moving the locus of decision making to school sites. One major consequence is a reduction in force focused on district-level administration.

Downsizing, a buzzword adopted from corporate America, refers to "reducing the number of employees through attrition or layoffs in an effort to operate within a target budget." While the phenomenon is fairly new to public education, American corporations have been plagued by wave after wave of downsizing. Five of every six companies have downsized in the past decade, according to a Laborforce 2000 study, yet The Wall Street Journal has reported, "Corporate downsizings have failed to produce what was expected."

Two-thirds of the companies that downsized one year did it again the next year because the process set off a downward spiral of reduced sales and profits. Business and industry now acknowledge that corporate downsizing has its repercussions. Mitchell Marks, author of the 1993 work Building the Competitive Work Force, said downsizing exacted an especially "heavy toll on organizational effectiveness and employee wellbeing" that led, in some instances, to the onset of what has been termed "corporate anorexia," and a psychological phenomenon called "layoff survivor syndrome."

To better understand how restructuring and downsizing of school district central offices evolve, we conducted a multiyear study of selected school districts. The primary study sites were four medium-sized school districts in Colorado that have been under pressure to downsize for several successive years. These districts are characterized by annual budget cuts, increasing enrollments without parallel increases in funding, stability in the position of superintendent, and boards that have not succumbed to extreme conservative elements.

We reviewed documents and interviewed personnel in the central offices and schools. In addition to the superintendent, we talked with central-office administrators, certificated staff, and support staff. At the school sites, we interviewed principals, assistant principals, and office staff. Planning documents and related office memoranda were compiled and reviewed.

Strategic Options

School districts used a variety of strategies to respond to pressure to balance their budgets and address public demands for a leaner central office. In selecting a strategy, school system leaders considered several factors: how long was the situation likely to last, where would the loss be felt the least, what likely would be the impact on classrooms, and how would the changes be perceived. One tendency with unforeseen consequences was for districts to delay cutting two areas: pupil/teacher ratio and teacher pay.

We observed a fairly standard and, in hindsight, predictable sequence to the options selected. One more adventuresome strategy was to immediately transform key structures and functions. This approach would begin by examining what currently is done, deliberately abandoning some things and developing entirely new ways of staffing and operating. Instead, the districts we studied instituted an evolutionary set of strategies on an annual basis as budget and public pressures continued.

Brief descriptions of these strategies are presented below along with examples of the tactics used to pursue each strategy.

* Strategy 1: Picking up "loose change."

Typically the first strategy involves reviewing all accounts. School districts, often through their fiscal services staff, begin the systematic search for unspent dollars in the previous six months to two years. A district internal audit group may be established to comb every line item for potential savings that will result in little or no change in actual service delivery. The decision then follows that those areas were not in need of the unspent funds. However, since 85 percent of most districts' budgets are spent on wages and benefits for staff, usually the loose change fund is limited and has only a one-year impact.

* Strategy 2: Instituting tighter budget control.

Strategy 1 is followed closely by implementation of new budgeting systems and procedures. In this phase managers are asked to find ways to save dollars but leave services intact. Tactics used here include purchasing new computer systems and implementing revised accounting procedures in an effort to gain tight control over spending.

Improved systems to keep track of funds encumbered and spent also are incorporated. One result is up-to-date and accurate-to-the-minute budget reports for administrators and the board. As one central-office administrator put it: "There sure won't be any more accounts with large sums of unspent money in them."