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5 Ways Downsizing Can Suck the Life Out of an Organization

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In the past decade during rocky economic times many businesses and other types of organizations made the decision to scale down their budgets and expenses through reducing the number of people they employed. 

While the choice to let people go may not easy for managers, it is not easy for the employees either. The effects of organizational downsizing can have a significant impact on those who remain, often creating ripple effects. For people who have lost their jobs, they are now experiencing the devastation of a layoff. For those who remain on staff, while they still have their jobs, the effects of seeing their colleagues let go can also be devastating.

Anytime someone loses a job is distressing. When it happens to yourself or someone you know, the grief and fear can be pretty hard to deal with. All employees feel the effects of downsizing in many different ways, and the knowledge and reality that a loss of jobs is occurring in an organization can lead to other issues.

1. Extra Stress

Stress is another issue that emerges when a company lets groups of employees go from their jobs. In an organizational structure everyone has a role and, once a gap occurs, the job description doesn't end, someone has to pick up the loss and perform the tasks. When organizations downsize, decision-makers do this with no immediate intention to fill positions, nor will they slow down production (unless a whole department or other segment of the business has been cut). If anything, a common scenario is to do more with less as businesses look for ways to profit.

This can have a traumatic impact on employees who are expected to pick up the pieces, continue their own jobs and the jobs of their former colleagues as well. The daily stress can be very difficult to cope with.

Credit: Geralt via Pixabay CC0 Public Domain

In the aftermath of a layoff, the remaining employees may feel very stressed. Not only over the thought of being caught in a future round of layoffs, but in the immediate time frame too since they'll have to absorb the work their colleagues used to do.

2. Low Morale

Working in an environment where layoffs are a reality can be pretty demoralizing to employees. 1 Spirits are often dampened due to fear of being included in the next round of layoffs, guilt for being kept on the payroll while colleagues lost their jobs, or experiencing the stress of having to absorb the jobs of those who are now gone.

The effects of downsizing are not only evident on morale during the period of layoff itself, but can also continue long afterwards.  As a result, organizational downsizing can have a dramatic and significant effect on staff members who remain employed. These issues can be pretty difficult for those who survived the layoff and should not be taken lightly.

3. Lowered Productivity

If statistics are any indicator, loss of productivity can occur after a round of layoffs and it’s not necessarily because there are less people to spread the work around to complete. And, if statistics are any indicator, remaining staff don't work harder out of gratitude of having a job.

Credit: Leigh Goessl/All rights reserved

Lowered morale in the workplace can lead to work moving at a much slower pace. Studies show employees don't necessarily work harder out of gratitute for having a job or fear of losing it. If anything, productivity drops.

According to a 2015 study by Leadership IQ, a whopping 74 percent of employees who kept their jobs after a downsizing responded admitted their own productivity declined. 2 Sixty-nine percent said the quality of a business’ product or service also suffered. Additional findings:

  • 87 percent of remaining staff said they were “less likely” to recommend the workplace for employment
  • 64 percent said their colleagues’ productivity levels also suffered
  • 81 percent felt the quality of customer service declined
  • 77 percent said more errors were made after the layoffs

The emotions associated with hindered productivity were cited as “guilt”, “anxiety” and “anger” in an open-ended survey question.

4. Guilt

Survivor guilt can happen in any organization for those who have retained their jobs, however this often is more evident when layoffs occur in a workplace where colleagues worked in close proximity to one another, or were very friendly.

Feelings of guilt surfacing for surviving the layoff can result in sadness, depression and, in some cases, difficulty being able to perform their daily duties. This is a natural reaction to downsizing, and survivor guilt is a very real emergence in a layoff situation; people often don't know how to act or react and, even if they do, have difficulty coping.

5. Fear of Being Laid Off

As indicated above, fear of losing a job is a very real and scary emotion. It is one thing to hear or read in the news that layoffs are occurring, but it truly hits home when the reality of the situation unfolds in front of an employee's eyes.

Empty cubicles
Credit: Billy Bob Bain via Flickr/CC by 2.0 https://www.flickr.com/photos/astros/20141937

It can be hard on employees to walk through their workplace seeing empty spaces where colleagues used to be. Empty spaces bring the realization that layoffs can happen again. Fear and questions emerge of when it will happen again and who will it affect next?

It is natural to feel fear of job loss because the fact is it already has occurred. Sometimes company management may try to give reassurance to remaining employees their jobs are safe, but that nagging fear of future job loss is often going to remain present.

If layoffs cannot be avoided, management should make attempts to help employees get through this transition phase and keep employee morale up. Ignoring the situation will likely end up impacting productivity and ultimately, profitability. Good leadership will recognize their decisions to scale back will impact others and will use motivational approaches to cope; threatening approaches are seldom effective.

Organizational downsizing creates intended results, but can create unintended results too.



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  1. "Report summary: Employee Morale During Downsizing." Institute for Employment Studies. 20/03/2016 <Web >
  2. "Don't Expect Layoff Survivors to be Grateful." Leadership IQ. 20/05/2015. 20/03/2016 <Web >
  3. "Last person standing: What it's like when the axe falls in your office." CBC. 02/12/2015. 20/03/2016 <Web >
  4. "Culture and engagement The naked organization." Deloitte University Press. 27/02/2015. 20/03/2016 <Web >

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