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Unfortunately most organisations downsize in a way that works against quality improvement and enhanced customer service. It is not surprising to learn then that cost-cutting through downsizing or rightsizing has been singularly unsuccessful as a strategy. Cost-cutting is a one-time gain. Anyone can do this, but it takes a special kind of leader to accomplish business regrowth after such a downsizing. It is not surprising to learn that morale, trust and productivity suffer after a downsizing due to a frequent lack of pre-planning and constant, consistent communication.
Why have the benefits of downsizing not materialised?
For the survivors of downsizing there are initially feelings of loss, anxiety, insecurity, mistrust and stress experienced at the very time when those same people need support and direction. Instead of this occurring, management tends to attempt to drive towards productivity gains and 'doing more with less'.
Some downsizing survivors feel resentment and anger for the way in which management handled the layoffs and for not being given adequate time to say goodbye or acknowledge the loss.
Survivors speak of how the treatment of those laid off has a profound impact on those left behind, by disturbing their own sense of self-worth and trust in their employer. They are left questioning the value of their prior hard work, commitment and loyalty to the company. They feel an acute loss of control over their own destiny. More than anything else, survivors want early, open and constant communication during the planning and implementation of workforce reduction. Many feel like anonymous objects or numbers and had little, if any, one-on-one interaction with management before, during or after the layoffs.
Are you missing the real problems?
Most importantly, you need to address the real problem. Cutbacks may not be addressing the underlying issues in your business. Search out the causes for the revenue declines or profit decreases before you decide to make cutbacks.
Layoffs alone usually will not solve the problem. Are your products of inferior quality? Are they undifferentiated? Does your business model work?
echnological changes, aggregator buying models, e-commerce and the decline phase in your product or business lifecycle may have resulted in permanent changes to your business base. Depending on which part of the market you are in you may experience a business downturn due to either strong or weak economic conditions. If cutbacks become necessary these should be accompanied by a concurrent regrowth plan so remaining staff are involved in positive activities.
Implementing a change management plan
You have done the preliminary analysis, hopefully involving your staff so that they see the need for change. As a result you have determined with them that the business cannot sustain continuing losses or a continued decline in profitability. This exercise should be portrayed as an opportunity instead of a threat, with the opportunity being to create improvements and a better future.
As the leader, your role is to articulate motivating visions of the future and to provide a picture of individual opportunities. The process is not dissimilar to that of strategic planning:
- Assessing marketplace threats and opportunities
- Evaluating internal strengths and weaknesses and finding areas of differentiation
- Reassessing the company mission and direction, and establishing your market position and unique selling proposition (USP)
Engage employees in a job by job and task by task review of business operations while management is conducting a similar top-down review. Redundant functions will be uncovered, efficiencies in business processes identified and any organisational fat removed. Bottom-up reviews foster innovation and improvements, while top-down approaches usually provide consistency, vision and a clear direction.
Transitioning the survivors
A survey by Right Associates showed that 88% of downsizing survivors were given little training or assistance in how to function effectively in the new environment. As you can see, typically in a downsizing, that is where it ends for the survivors. After all, they are the lucky ones, they have jobs! Wrong! This is where your leadership role is important because you now have an 'us versus them' mindset. Often I have seen a culture of blame rather than collaboration. This leads to a fear of risk-taking and as a result staff are less motivated and creative.
Management visibility and involvement during layoffs
Morale, climate and trust are always negatively impacted during downsizing. Leaders must not retreat to their offices during this process but remain visible and, more importantly, accessible to any employee seeking advice or guidance. Daily, they need to interact with staff and listen so that people can express their anxiety or sadness.
Many male leaders are not particularly good at this. The answer is to practise engaging in discussion more often. In many cases there is not a problem to solve, it is just a matter of listening. You can use the discussion to re-emphasise the need for the cutbacks and as part of the conversation speak positively about the new vision for the future. Without such a positive new direction why would anyone want to trust you?
It is also an opportunity to thank staff for working hard on the reorganisation plan and for their ideas. This is a time to exhibit strong leadership, decisive but also participatory. Your role is to inspire and provide trust and confidence.
A word of caution
Do not allow the grieving to go on too long or it will seriously undermine regrowth initiatives. Move on to recreating a positive work environment so staff can build self-confidence in their new tasks, find their new jobs rewarding and achieve at higher levels than they have in the past. Talk positively about the new culture you wish to have after the layoffs and what you must do together to move in this direction. 'Good news' boards, 'smile teams' and weekly published updates on the progress towards the new goals all help to rebuild morale and belief in the new plans. You just cannot communicate enough, and without the constant flow of communication the negative grapevine truly flourishes.
At some point, people - regardless of what you say - will determine whether decisions and the actual layoffs were fair, consistently undertaken and legitimate. In some cases layoffs are just a guise to take cash out of th e business. Constant, consistent communication will lead people to the right conclusions. During and after layoffs do not decrease the amount of group and one-on-one meetings you have been holding. Maintaining constancy is a demonstration of stability.
The new revitalised, regenerated and transformed organisation
A level of staff turnover is a necessary and important part of any business. It provides the continual renewal of skills and experience, which in turn can act as a driver for innovation and long-term profitable growth. Now that you have downsized, your challenge is to rebuild trust, and through people, regrow the business. Broadly speaking, employees will become totally engaged when they are working for an exciting company which is going somewhere, where they are engaged in challenging work and 'where the company (and my manager) is interested in my growth'. This is no different in normal business situations where you are also trying to retain top talent. To enable downsized survivors to soar, you must:
- provide workplace support before, during and after the downsizing
- allocate mentors who are truly interested volunteers to key personnel
- demonstrate inspiring and motivating leadership
- provide opportunities for development and development plans
- communicate, communicate, communicate
You cannot motivate anybody else or grow their careers, but you can provide conditions conducive to self-motivation and personal growth. Motivation and career growth must come from within, but the opportunities for career growth must be available. More so, after a downsizing. Your responsibility as a manager or supervisor is to provide conditions conducive to self-motivation and career growth. The link between staff development, employee satisfaction and staff retention has been established for some time and is the foundation for improved retention after a downsizing. Mutual trust and respect must be earned. Earning that trust and respect takes time and is easily upset. Take the time to rebuild trust after the layoffs through actions, not just words.
The best downsizing practices emphasise downsizing as a means to the end, as well as the end in itself.
Improving productivity and enhancing competitiveness can be two great by-products of using downsizing as the basis for organisational redesign to re-compete in making market share and profit gains. HRM
The author, Denis Orme, is the founder of www.leader-success.com
How to rally your survivors after downsizing
· Be upbeat and positive each day and boost morale by talking positively about the vision, mission and the excitement of moving forward
· Provide rewards and recognition. Be creative and have fun
· Continue programs, events and sponsorships just as you did before the cutbacks
· Set up a series of new programs, events and sponsorships. Staff can look at these new initiatives and what has occurred since the layoffs in a positive way
· Continue to emphasise the positive goals you can achieve this year
· Increase company activities that will restore employee harmony, friendship and trust. Build those new traditions
Downsizing strategies
Typically downsizing has been related to three primary implementation strategies:
· Workforce reduction - where the tactics may be early retirement, transfers and outplacements, attrition, layoffs or firings in order to quickly reduce the headcount. Such an approach makes it difficult to determine who will be eliminated and who will remain, and therefore what knowledge or skills will be lost to the business
· Organisational redesign - In addition to reducing the workforce, functions may be eliminated, combined or hierarchical structures dismantled. The objective here is work redesign and reduction as is necessary, rather than pure workforce reduction
· Systematic strategies - This approach redefines downsizing as a way of business life, an ongoing process as a basis for continuous improvement instead of a program of job reduction. Downsizing in this case is an exercise where all employees are held accountable for reducing costs and finding improvements. Exceeding customer expectations is the overarching consideration and not just a reduction in headcount. This has been the most effective approach
Will downsizing give you the desired results?
Desired outcome % of firms achieving desired results
Reduced expenses 46%
Increased profits 32%
Improved cash flow 24%
Increased productivity 22%
Increased ROI 21%
Increased competitive advantage 19%
Source: The Wall Street Journal