KodakEastman Kodak1 Since George Eastman first started the company at the turn of the last century, Eastman Kodak has been one of the most important corporate citizens in the Rochester, New York, community. Over the 1900s, Kodak developed a reputation as one of the leading proponents of welfare capitalism. In fact, the company maintained its reputation for paying high wages and providing lifetime job security into the 1980s. However, during the 1980s, the company embarked on a diversification and acquisition strategy by purchasing Sterling Drug Company and expanding into a wider range of products, such as office copying machinery. Increased competition in its film and camera markets and the ...view middle of the document...
Millions of dollars were frittered away on research with no practical application. Damn the costs, Kodak was determined to be an industrial fiefdom in the 19th-century mold.
Key Events Several key events serve as milestones in Kodak’s attempt to redefine its social contract with employees: repeated downsizings in the late 1980s and early 1990s; the inauguration of a new CEO, who refocused the company on its core product markets; a major restructuring effort to cut costs; and an explicit, new social contract initiative. Repeated Downsizings As its market position deteriorated in the late 1980s and throughout the 1990s, the company’s lifetime employment and integrated structure and strategy fell under increasing pressure. At first, the company resisted the push to make major changes and
This case is contained in, “Rebuilding the Social Contract at Work: Lessons from Leading Cases,” Thomas A. Kochan, Institute for Work and Employment Research, MIT Sloan School of Management, Task Force Working Paper #WP09, May 1, 1999. The longer article, including bibliographic references and footnotes omitted from this version of the case, can be found in the CasePlace.org References section.
instead undertook periodic downsizings that slowly eroded Kodak’s lifetime security promise. The layoff decisions made in the 1980s have been criticized for their poor execution and lack of overall vision. Layoff decisions were often based on an employee’s most recent performance review, meaning recently hired talent was lost. A “one-time” buy-out program offered in 1983 was designed to reduce staff by 3,100; 5,000 employees accepted the offer. What was expected to be a one-time cut was followed by additional downsizings in 1986 (12,000), 1989 (4,500 announced as the target; 6,000 actually left), 1991 (3,000), and 1993 (10,000). The New CEO: Refocusing on Core Products George Fisher’s first strategies upon arriving at Kodak in 1993 were to grow the company out of its problems by focusing on its core film and imaging business and to implement at Kodak the disciplined, quality-focused manufacturing processes he presided over at Motorola. By 1995, however, further downsizing was announced—and this time 4,000 jobs were cut. Still, Fisher stopped short of a major restructuring. In the mid 1990s, the company decided to refocus more narrowly on its core markets for film, cameras, and emerging imaging technologies. It sold Sterling Drugs and completed the separation of Eastman Chemical into a separate company. It also created a number of joint ventures or partnerships with firms such as AOL, Picture Vision, and a consortium of four other companies working to develop an “Advanced Photo System” for linking images and magnetically embedded information on negatives. Major Restructuring Efforts and a Focus on Costs By 1997, under considerable pressure from investment analysts, Fisher and his management team realized that the company could not grow out of its...