Downsizing: The Ultimate Corporate Fix
A Fix that's Broken
Many organizations when running into problems find layoffs to be a way to quickly shave of the excess and save some money. While if handle properly downsizing may indeed help the company prosper in times of their economic despair, but the majority of corporations continue to see losses well after the downsizing had been implemented (Cornfield 1983). First a definition of downsizing, according to Appelbaum, Delage, Labib, and Gault (1999) downsizing is a planned elimination of jobs where work reduction, cost management, and further growth come into play as reason behind the fixes. Brockner, Grover, O'Malley, Reed, and Glynn (1993) say that, "the organization may have no choice but to downsize in the face of eroding market share, rising competition and labor cost, and obsolete technologies." A great deal of research has however shown that downsizing doesn't seem to fix the problems that the organization faces. Applebaum et al (1999) using a survey put forth by K.S. Cameron showed that out 1005 organizations that downsized between 1986 and 1991 only 46 percent reduced expenses, 32 percent increased profits, and 22 percent increased productivity. Taking in circumstances, even with a major recession, these numbers are not very impressive since expenses, profit, and productivity are the things that are supposed to be fixed.
The Big Plan is Cracking
Obviously a great deal of thought must go into planning events of this magnitude within an organization. Poorly planned layoffs often exacerbate circumstances that leave the currently employed and the newly let go employee feeling somewhat unjustly treated. If an organization doesn't maintain good communication, trust, fair rules used to pick those who had been laid off, and having a future outlook readily examinable for employees (Brockner, Grover, Reed, DeWitt, O'Malley, 1987). Meeting these simple criteria can help ensure that the organization and the surviving employees maintain a strong commitment to each other. Though, the problem remains that most organizations have a belief that once the layoffs are over that the survivors will just be happy still having their jobs. Surviving employees often come out of downsizing feeling lost, angry, and having a complete loss of where they belong within the organization. Thornhill, Saunders, and Stead (1997) research has lead them to five steps that can help an organization mitigate the feeling of surviving employees.
1. Planning process
2. Line management styles and skills
4. Senior management commitment change
5. Clarity of future direction
These steps mainly open doorways to trust and communication between management and the employees. Firstly the planning process should be well organized, talked through with the employees, and posted in an area where it's easily accessible for them to read. In this way there will be nothing to catch the employees off guard. Line management styles and skills is an especially important area as these are the people the organizations employees are in contact with each and every day. Thornhill et al (1997) maintain that managers need to be straight, and upfront with workers, be accessible, treat those who have be let go with care, and the survivors must be supported.
Further more communication must have an open and honest air. If employees feel that the organization is hiding or misleading them they will become resentful. This will lead to motivation tanking and a loss of commitment that will hurt the company. Two way conservations must be made to allow maximum input on both sides this will guarantee that each employee knows where they stand now, and where they will stand after the organizational restructuring. Senior managements commitment is a very serious step, they have the job of convincing the employee that the changes that are taking effect are the right course of action. Senior management must also show their commitment to the company, employee, and the future of both. Maintaining goals with a strong single mindedness helps give a clear future direction to the organization. This will ensure that the confusion is at a minimum while giving employees hope in the future of the organizations security. These five simple steps have been shown to great reduction in the amount of anxiety, stress, and anger before, during, and after an organization begin restructuring.
Survivors' Loss of Motivation
The Loss of Co-workers and Friends
Survivors often come out of downsizing with a whole new outlook on their organization. They are often anxious, angry, insecure, and view their organization with mistrust and disgust. It can be a pretty traumatic event for an employee watching coworkers, possibly friend asked to leave work for good. With the loss of co-workers and friends survivors can often feel out of place at work. Guilt can worm its' way in, and they are often left wondering what caused these people to be let go and not themselves. With this worry employees find that maybe the positions they have work toward for the majority of their working lives are not as secure as they once thought. In the end this will lead them to question whether or not this is the right company for them. The commitment loss can lead to an organization searching for a great deal of new employees as the survivors decide they would rather take their chance with a company that promises them more security in the future. With restructuring their surrounding can become alien to them forcing the survivor to withdraw productively, socially, and psychologically. The organization often ignores employees after downsizing believing it's enough for them to just still have a job. This should motivate an employee to work harder, while there is some evidence that initially this may be true in the long run it falls short causing damages that are hard to fix.
Using equity theory, that is when an individual sees themselves as over-rewarded or under-rewarded they will become distressed or anxious and will in turn try to return to a state of equity within the organization. In the case of survivors positive inequity is most often felt after downsizing. According to Brockner et al (1986) positive inequity within the equity theory brings out guilt, and motivates the employee to change there behavior and psychology in an attempt to cover that guilt. Setting conditions using merit and random layoff Brockner et al (1986) studied the effect and to what degree this played on their subjects feeling of guilt. They found that merit and random layoffs, through seemingly unfair conditions, brought out feeling of guilt in the subjects. While there are differences between how the two reacted to the situation. Randomly downsized people seemed increase the amount of output that they were working on, while merit based layoffs used the fact that they had performed better to restore equity. Survivors within a downsizing situation that have been lacking in motivation and commitment due to feeling of guilt may benefit from being to that the prior layoffs were based in a merit plan. This would lead them to believe that they had more of a reason to actually be there than their counterparts that had been released, leading the survivor to a point where guilt is dismissed, while commitment and motivation is restored.
Coping of Survivors
Wiesenfeld, Brockner, Petzall, Wolf, and Bailey (2001) use a study to show that downsizing is a direst threat to ones self integrity. In their conclusion a survivor should be able to reaffirm themselves and thus restore their commitment to the organization. Restructuring in an organization often leads to new positions individually, as well as with groups within the company. This change can drastically change the way that a person looks at their lives within that company. Wiesenfeld et al gave some of the subjects of the experiment that opportunity to write and recall something at work that made them feel good about themselves. In the results the people who were allowed to reaffirm their self integrity showed signs of new motivation and commitment.
In another study by Armstrong-Stassen (1994) she suggests there are two types of coping taking place after downsizing. Control coping involves taking action, reevaluating ones thinking, and having an attitude of taking charge. Escape coping where a survivor avoid thinking about, or taking action in their environment. She also found that, what she calls emotional discharge, or in other talking to somebody about the current situation has a great relieving affect on the survivor.
Organization could take the initiative prior to layoff and hire a counselor to talk to survivor after the layoff has taken effect. Making it a requirement of the layoff plan could go a long way in supporting those that are left and giving them an outlet to dump their problems. This would in turn relieve stressors at work allowing the employee to have higher motivation and commitment. This in turn would help the company stay ahead in their planning rather than falling into the percentages of companies that fail at their layoff attempts.
Surviving employees are often left in a bewildered state after a layoff. Companies all too often ignore the extent to which the problem is embedded within the organization. Perhaps if a little more communication, a logical system to who gets laid off, and proper training were to be provided to those who are left companies wouldn't be seeing losses after a major restructuring that was to provide gains. Surviving employees can easily feel lost allowing them to think that maybe this isn't the place they want to be for their working lives. To a great extent the organization can take the preventative measures need to alleviate the stressor causing their workers problems and turn the negative into something positive.
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