Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Nine Smart Ways to Downsize and Five Things to Avoid

17.12.2008
Companies considering downsizing as a strategy for surviving the current economic recession should know one thing about the experience that many companies had with downsizing:
It didn't work.

"Research shows that downsizing very seldom works," says Dr. Clint Chadwick, an associate professor business strategy at The University of Alabama in Huntsville. Simply cutting payroll without having a plan for improving productivity and efficiency dooms many downsized companies to reduced productivity, demoralized employees and shrinking income.

"One problem is that the finance people look only at the numbers instead of thinking of the business as a system," Chadwick said. "Then you get these long-term, unintended consequences because you thought of a complex system too simplistically."

Research into the dynamics of downsizing led Chadwick to develop two lists to help managers plan staff reductions that cut costs without sending their companies into a potential "death spiral."

NINE SMART WAYS TO DOWNSIZE
(In no particular order)
1) Strategically redesign the organization's systems for creating value
"If a firm is failing, that is the environment telling you that your strategy is failing. Tossing employees out the door doesn't fix the strategy. If you don't fix the strategy you could find yourself with fewer employees and the same problems."

2) Be explicit about the criteria used to select employees who are released

"If you aren't, employees will fill in the information gaps. They will make their own, potentially harmful inferences. If they decide staff cuts are arbitrary, for instance, they might panic. You might as well give employees the real story."

3) Give employees who are to be released advance notice

"Employees will infer what is going to happen to them in the future based what on you do to their colleagues. If you toss people out on the street with no warning, your other employees will wonder if that might happen to them. You can give too much warning, but you need to give people time to get their affairs in order."

4) Invest in making survivors' skills more marketable

"This is a credibility issue. Once you cross the line to downsizing, the only credible guarantee you can make to employees is to keep their skills marketable and fresh. If you say you're never going to downsize again, no one believes it."

5) Give notice to "downsized" employees personally ahead of public notification

"Treating people right has a positive effect on the 'survivors.' It's humiliating to be downsized. All of the survivors are watching. It arouses fear and indignation if you mistreat their co-workers."

6) Outplacement assistance

"This is a way of acknowledging that the company has obligations to its employees. Employers reap what they sow in terms of employee loyalty. Not treating people with decency is a way of telling the people who stay behind that they are disposable. If you do that, expect the best and most productive survivors to dust off their resumes and start looking for jobs elsewhere."

7) Severance pay

"There are not only ethical concerns -- you are causing a major disruption in people's lives — but the survivors are watching. The post downsizing turnover of the employees you intended to keep is a referendum on their confidence in management."

8) Involve middle and lower-level managers in the process

"You need input from middle management because if they participate there in more buy-in. Plus, they are the people who have to implement the downsizing plan."

9) During the course of downsizing, increase both the amount and the openness of communication with employees

"Otherwise, people fill in the gaps with their own suppositions. People will value misinformation over no information. Without some basis for hope, you can create learned helplessness in employees. How productive are you if you live your entire corporate life in a fox hole?"

FIVE THINGS TO AVOID IN DOWNSIZING

1) Have security escort terminated employees out of the firm

"Justified as a way of avoiding violent incidents, this actually increases the likelihood of problems later. No one has an Uzi in their desk drawer. But if you stage a perp walk right down the middle of the firm when the termination isn’t for cause, that can really tick people off. They go home upset and humiliated, that stews for a few days and now those former employees are more likely to consider violence as an option."

2) Percentage cuts of employees across the board

"That's just politically easy. It goes against the notion of fixing the problem. It means you don't know what the problem is. You had better make sure that shrinking the firm doesn't leave you with a failing system that's now also understaffed."

3) Multiple waves of downsizing over time

"This is a path to learned helplessness for employees. They can begin to take a fatalist view of their jobs. Plus, downsizing multiple times says that management got it wrong, that they don't know how to fix the problems."

4) Have employees re-apply for their redesigned jobs

"Why would you do that? It is a way for management to tell employees, 'There are no promises to anyone.' But your best employees will understand that there is no difference in applying to their present employer and applying to a new employer. Your good people will take off. They don't want to play those games."

5) Base downsizing on seniority

"The problem is, the skills you want to keep aren't necessarily correlated to seniority. If you have to cut employees, you need to cut based on differences in skills, abilities and productivity. If you use early retirement as a way to cut head count, for example, you could be paying your most valuable employees to leave."

Dr. Clint Chadwick, 256.824.6146
Clint.Chadwick@uah.edu

Phillip Gentry | Newswise Science News
Further information:
http://www.uah.edu

More articles from Business and Finance:

nachricht How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung

nachricht Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Shape matters when light meets atom

Mapping the interaction of a single atom with a single photon may inform design of quantum devices

Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...

Im Focus: Novel silicon etching technique crafts 3-D gradient refractive index micro-optics

A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.

Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...

Im Focus: Quantum Particles Form Droplets

In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.

“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...

Im Focus: MADMAX: Max Planck Institute for Physics takes up axion research

The Max Planck Institute for Physics (MPP) is opening up a new research field. A workshop from November 21 - 22, 2016 will mark the start of activities for an innovative axion experiment. Axions are still only purely hypothetical particles. Their detection could solve two fundamental problems in particle physics: What dark matter consists of and why it has not yet been possible to directly observe a CP violation for the strong interaction.

The “MADMAX” project is the MPP’s commitment to axion research. Axions are so far only a theoretical prediction and are difficult to detect: on the one hand,...

Im Focus: Molecules change shape when wet

Broadband rotational spectroscopy unravels structural reshaping of isolated molecules in the gas phase to accommodate water

In two recent publications in the Journal of Chemical Physics and in the Journal of Physical Chemistry Letters, researchers around Melanie Schnell from the Max...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ICTM Conference 2017: Production technology for turbomachine manufacturing of the future

16.11.2016 | Event News

Innovation Day Laser Technology – Laser Additive Manufacturing

01.11.2016 | Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

 
Latest News

IHP presents the fastest silicon-based transistor in the world

05.12.2016 | Power and Electrical Engineering

InLight study: insights into chemical processes using light

05.12.2016 | Materials Sciences

High-precision magnetic field sensing

05.12.2016 | Power and Electrical Engineering

VideoLinks
B2B-VideoLinks
More VideoLinks >>>