Grist for the General Mills

Every time cereal manufacturers face tough times, headlines say they’re feeling the crunch. We’re not saying that, of course, because we’re better than that.

However, the soggy economy appears to be taking a bite out of General Mills. The cereal maker announced this week that it’s going to eliminate 850 jobs, or about 2.4% of its global workforce. That news came as Hewlett-Packard unveiled details about its own, much steeper job cuts: 27,000 employees, or about 8% of its rolls.

Wise cuts or panicked cuts? We can’t know for sure. But we do know that Peter Drucker supported moves like this under certain conditions. Downsizing can be “a powerful tool,” he wrote in Managing In a Time of Great Change. In the mid-1980s, Drucker found that “middle managements today tend to be overstaffed to the point of obesity.”

At HP, Chief Executive Meg Whitman said that “while some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution” and to “streamline operations.” General Mills sounded a similar theme, as a spokeswoman explained that most of the reductions will come from “administrative and support positions”—an area that Drucker singled out as particularly problematic.

“It isn’t only in the armed forces that ‘support’ has grown to the point that it overshadows the combat troops and employs many more people,” Drucker wrote. “A good many businesses large and small have become equally bureaucratic and equally suffer from gross overweight around the midriff.”

Of course, in a time of high unemployment, like now, it’s harder to argue that too many companies are flabby. And in any case, Drucker also warned against being too hasty in cutting jobs. “Management picks up a meat-axe and lays about indiscriminately,” he observed. “In many if not most cases, downsizing has turned out to be something surgeons have for centuries warned against: amputation before diagnosis. The result is always a casualty.”

Far more successful were the companies that “turn things around, by rethinking themselves,” Drucker wrote. “They did not start out by downsizing.”

What do you think: Is most downsizing today “amputation before diagnosis,” or are companies smarter than that?