Cycles of fat and lean organizational capital

From Why are corporations cutting managers? and why were they hired in the first place? by Arnold Kling.

He starts out by observing a recent Wall Street Journal report that corporations have thinned their managerial ranks by some 5% in the past couple of years.  

Garett Jones once pointed out that a large share of a company’s work force does not produce widgets. Instead, they produce organizational capital.

[snip]

When a company’s revenues are growing, it is tempting for senior executives to try to invest in organizational capital. It is tempting to put off worrying about excess bureaucracy.

I believe that a corporation’s senior management can only focus on a few major efforts at a time. If it has enough on its plate, and if costs are not killing the company, senior executives will not focus on bureaucratic undergrowth. But at some point, the significance of bloated costs rises relative to other issues facing senior management. Restructuring then becomes one of the top two or three initiatives that senior executives undertake in a given year.

Perhaps what happened in recent years is that senior executives could not see how to boost revenues quickly enough to satisfy shareholders. So they looked for ways to cut costs. The thing is, you can only do that so much. At some point, there are no more corporate initiatives to be terminated and no more bureaucratic bloat to be eliminated. There are not likely to be new major cost-cutting efforts every year.