Corporate Downsizing

In recent times, downsizing has become an intrinsic managemen strategy as organizations strive to optimize opportunities and conserve limited resouuces in the 1990s — a decade that will be characterized by unprecedented change and challenge.

Organizations are becoming increasingly sensitive to their changing environment, and how quickly they respond to these changes will often spell the differenceceetween success or failure. Mergers, acquisitions, global competition, free trade, changing technology and new organizational theory will continue to keep us on our toes.

We are experiencing what management consultant Tom Peters, in his book Thriving on Chaos, describes as an era of unprecedented uncertainty.

While most organizations have experienced significant reductions in the number of employees in recent years, few recognize this is becoming a structural, as opposed to a cyclical, phenomenon.

Downsizing can almost be likened to a “shake-out” process that will produce winners and losers. The loss of one’s job through downsizing can lead to feelings of anger and betrayal. The reaction is similar to grieving. The individual goes through a cycle of denial, anger, depression and anxiety before finally accepting the event.

The impact on the “surviving” employees can be equally disturbing. They experience feelings of guilt as their fellow employees are laid off. They feel vulnerable as they wonder whee their turn is coming. A lack of trust quickly develops and everyone in the organization begins to reassess his position. With this uncertainty and “jockeying” for position, loyalty to the organization is undermined and resentment is often directed toward existing management staff who participated in the decision that led to staff cuts. Subsequent low productivity and poor morale can often be as destructive to the company as the situation that caused the cut in the first place.

There are a number of strategies that, if adopted early enough, can significantly minimize the need for downsizing. A proactive approach to manpower planning will enhance flexibility and lead to less crisis management. Understand your organizational demographics, skills inventory, ssccession possibilities and the way your corporate strategy affects staff requirements In other words, have a solid organizational plan.

Examine every staffing initiative ruthlessly (before hiring). Ask yourself the following important questions:

* Is the position itself absolutely necessary or can it be eliminated?

* Can we staff the position on a temporary or contract basis?

* Is there an internal employee who could better fill the position?

Once you have answered these questions and you still must recruit outside, hire wisely.

If possible, engage individuals who are flexible and capable of learning new skills. Often individuals cannot remain when downsizing occurs because their skills are either too limited or too specialized.

Examine the benefits of downsizing — short term versus long term. If short term, what creative approach can you adopt to weather the storm (e.g. job sharing, reduced hours)? Remember, the investment you have in your employees is significant. In a crisis, some firms may be prompted to use “productivity consultants” who calculate fees as a percentage of cost-saving they have achieved. Typically, they will convince you to cut heavily in areas where the damage to the company will only become apparent long after they are gone (short-term gain for long-term pain).

Finally, if you must downsize:

* Ensure that you plan, plan and plan for the termination(s).

* Consider the type of re-employment assistance to be made available. Professional re-employment assistance can significantly reduce the trauma, resentment and the time “between jobs.” It will also provide an important message of support to the survivors.

Some employees, while not ready for early retirement, have an age or experience profile that may make it difficult for them to re-enter the workforce. In these cases, counselling and life planning assistance should be offered.

Even with the best of corporate intentions, some situations become litigious. The terms and conditions for settlements or wrongful dismissal suits change with regularity, so corporations should stay current with acceptable practice and legal requirements.

Finally, plan for the survivors. Downsizing is quickly becoming an integral part of organizational change. It is critical, therefore, that when it becomes necessary to terminate employees, it be done with the highest degree of sensitivity and compassion. Furthermore, there is need to be aware of and address the feelings of the surviving employees.