The Concerns About Downsizing

Published Date: 02 Nov 2017

1.0 Introduction

This assignment provides a thorough analysis of the effects and causes of downsizing in a company. When an organisation reduces its number of staff, it can be unsettling both for those who lose their jobs and those that remain in post. Indeed, the effect can compromise the intended aims and outcomes of the exercise. Potential consequences include detrimental effects on innovation, loss of skills, and negative emotional impact on the remaining staff. The fears that employees face when the company decides to downsize will also be examined to what extent it affect the employee’s performance and company culture. Aside from that, the effectiveness of using relevant models, approaches and techniques such as the general planned change model and force field analysis will be tested as to tackle the issue of downsizing and returning work to normal. Moreover, the few options of downsizing will be scrutinized in order to ensure the aftermath is positive and less of the negative side. In the end, there will be an assessment to examine the relationship between powers, conflict, change, and ways of managing downsizing.

Company Background

This is a company which is facing a great deal of problem in terms of financially and employability. The research and development department has not been performing up to standard and hence the company decided to downsize the department instead of investing more money in it. This decision by the company has caused many problems amongst employees as they felt that they are of no use anymore no matter how much effort they put in. Employees are afraid that they will lose their job should they fail to perform up to the expectations of the company. Thus, some of the engineers decided to take new jobs outside the company due to fear of job security and this matter had caused the entire production line to slow down. Not only that, the flow of work has been disrupted as the research and development department plays a crucial role in determining the direction of the company in the future.

Employee’s fear for downsizing

Fear for downsizing

Crabtree (2010) said that employees' fears of layoffs and downsizing, which can induce anxiety even in the best of times, have been aggravated by the stormy economic climate of the past two and a half years. Those fears can be exacerbated when employees work in an environment characterized by low trust, poor communication, or lack of clarity about expectations. When layoffs or downsizing occur, engagement levels may drop as employees mourn the loss of friends and wonder if they might be next. To test that assumption, Gallup interviewed more than 6,900 adults who were employed full time or part time in July 2008, then interviewed the same respondents again in March 2009 as part of its research into the State of the American Workforce: 2008-2010. Overall, employee engagement levels among this group changed little between the two surveys.

In July 2008, 31% were engaged and 17% were actively disengaged. Eight months later, the numbers were similar: 30% were engaged and 18% were actively disengaged. In the March 2009 interview, Gallup asked respondents whether their organization had experienced layoffs or had downsized. About half (46%) said their organizations had gone through layoffs or downsizing since they were interviewed eight months earlier. The analysis compared changes in engagement scores among these employees with changes among the remaining respondents -- those whose organizations had not experienced layoffs or downsizing.

In both 2008 and 2009, respondents who worked in organizations that experienced layoffs or downsizing were less likely to be engaged in their jobs than those who worked in organizations where no layoffs or downsizing occurred. That would seem obvious; it's likely that the work environments in downsizing companies were more stressful. But this finding may also reflect that organizations with more engaged employees tend to perform better financially than their competitors, so they were less likely to lay people off in the eight months between surveys.

However, the purpose of the analysis was to compare the changes in engagement levels among workers whose organizations had been through layoffs and those whose organizations had not. Here there was less difference: The ratio of engaged to actively disengaged workers worsened marginally between 2008 and 2009 among workers whose organizations had laid people off as well as among those whose organizations had not.

Increase of workload in company

There is no doubt that the workload of the survivors of retrenchment will increase abruptly because a part of the workforce in the company has been curtailed due to downsizing. The demand for immediate action and rapid turnarounds contributes to the escalating work pressure. Undoubtedly, there will surely be an increase in expectations concerning speed of execution. The expanding global workplace also contributes to increased pressure due to the ever increasing demands, advancement of technology, and globalization. On rare occasions, employees would still say that their workloads in their organizations are reasonable; perhaps they have gotten rid of the unnecessary work, which contributes to heavy workload and overwork. Evidently, problems like inadequate staffing to meet ever increasing work demands are the biggest factor driving excessive workload; not only that, problems such as conflicting priorities between employees and their authorities, poor communication skills, and bad coordination among different functional structures in the company also contribute to increasing workload in a company.

4.0 Effectiveness of various solutions to tackle downsizing

4.1 Command-and-Control Mentality

In workplaces where layoffs or downsizing has occurred, managers shouldn't allow turmoil in the external economic environment to distract them from their employees' needs. Focusing on these workplace dynamics may help put employees' minds at ease in the wake of downsizing:

Manage human resource challenges with employees' talents clearly in mind. 

After a round of layoffs, managers may transfer work and responsibilities to their remaining employees without considering whether that additional work plays to those employees' talents and strengths. Doing so may compound the anxiety that the layoffs generate. Worse, employees may get "locked in" to roles that they aren't particularly suited for, reducing their long-term engagement and the overall efficiency of their workplaces.

Communicate the organization's mission and strategy clearly and often. 

Reassuring workers about the organization's commitment to its long-term goals and principles can help them focus on stability rather than the changes taking place around them.

The stress that accompanies layoffs can cause managers to adopt a command-and-control mentality -- a mindset that sets aside the needs and opinions of employees to focus on short-term productivity. This tendency may be particularly strong among middle managers, who may be asked to accomplish more with fewer people and who may simultaneously be worried about keeping their own jobs.

It's important to avoid such a reaction for two reasons. First, by heightening stress and negativity among team members, managers in "survival mode" may risk lowering rather than increasing productivity. Second, input from all employees is particularly important in lean times as organizations seek creative solutions to the challenges they face.

4.2 Job-sharing

Job-sharing is a way for two people to both fill one job. Each person has a permanent part-time post. They split the hours, pay, holidays and benefits between them according to how many hours they each work.

There are three main types of job-share:

Shared responsibility - there is no division of duties. The job-share partners are interchangeable. This works well for jobs where the work flows continuously. It demands a high level of communication and co-ordination - and that the partners are well matched.

Divided responsibility - works well when work can be split into different client groups or different projects. Each partner has their own case-load or project, which they focus on during working hours. If the partners do not know each other well, this can be a suitable way to arrange the sharing of job.

Unrelated responsibility - the partners perform completely separate tasks, while working in the same department. It acts rather like two part-time jobs running in tandem and fits situations where the partners have different skills.

4.3 Force Field Analysis

Force Field Analysis is a useful technique for looking at all the forces for and against a decision. In effect, it is a specialized method of weighing pros and cons. By carrying out the analysis you can plan to strengthen the forces supporting a decision, and reduce the impact of opposition to it. In this case, we use Force Field Analysis to analyze the situation of downsizing in a company; of which, will receive forces for and against it.

Driving Forces

Driving forces are those forces affecting a situation that are pushing in a particular direction; they tend to initiate a change and keep it going. In terms of improving productivity in a work group, pressure from a supervisor, incentive earnings, and competition may be examples of driving forces.

Restraining Forces

Restraining forces are forces acting to restrain or decrease the driving forces. Apathy, hostility, and poor maintenance of equipment may be examples of restraining forces against increased production. Equilibrium is reached when the sum of the driving forces equals the sum of the restraining forces. In this case of downsizing, equilibrium represents the present level of productivity, as shown in the diagram.

Equilibrium

This equilibrium, or present level of productivity, can be raised or lowered by changes in the relationship between the driving and the restraining forces. For illustration, consider the dilemma of the new manager who takes over a work group in which productivity is high but whose predecessor drained the human resources. The former manager had upset the equilibrium by increasing the driving forces (that is, being autocratic and keeping continual pressure on subordinates) and thus achieving increases in output in the short run.

By doing this, however, new restraining forces developed, such as increased hostility and antagonism, and at the time of the former manager's departure the restraining forces were beginning to increase and the results manifested themselves in turnover, absenteeism, and other restraining forces, which lowered productivity shortly after the new manager arrived. Now a new equilibrium at a significantly lower productivity is faced by the new manager to reduce the restraining forces. The manager may do this by taking time away from the usual production operation and engaging in problem solving and training and development. In the short run, output will tend to be lowered still further.

However, if commitment to objectives and technical know-how of the group are increased in the long run, they may become new driving forces, and that, along with the elimination of the hostility and the apathy that were restraining forces, will now tend to move the balance to a higher level of output. Managers are often in a position in which they must consider not only output but also intervening variables and not only short-term but also long-term goals. It can be seen that force field analysis provides framework that is useful in diagnosing these interrelationships.

4.4 Other actions employed

In order to save the company from continue plunging, the company should take action to address workload issues or eliminate low-value work to ease the burden of the employees. The most common actions would include: work prioritization to focus on a few critical needs, process improvement and re-engineering projects to shorten cycle times and increase efficiency, and outsourcing of non-priority and low-value work.

Organizations that recognize the impact of workload pressure are responding with resources to build employee resilience and help manage stress. The company should encourage the use of flexible work hours and enable teams to self-manage their workloads. Moreover, the company should also actively promote their EAPs, health and wellness programs and fitness centres. This way, employees who are under heavy workload can release their stress by using the facilities provided by the company; thus this will refresh the employees and motivate them to work even harder. Another key action has to be leadership communication to the employees, especially on the financial state of the organization, and support to make use of available programs to aid those employees who have tight financial capabilities or living in a single parent family.

5.0 Occurrence of large-scale downsizing

5.1 Downsizing and its impact on organizational performance.

A model that relates downsizing to performance outcomes from a stakeholder perspective is presented in the figure below. In brief, the model describes how the organization’s actions affect the evaluations of various stakeholders to the organization, which in turn result in reactions from stakeholders, and the conversion of these reactions into the organizational outcomes of profitability and survival.

The case on downsizing can be grouped based on existing theoretical perspectives into research on employees, former employees, the social community, and stockholders and partners. Reactions from these stakeholders in turn will affect human capital availability, productivity, legal/political actions, and financial/operational resources in the organization.

5.2 Powers, conflict, change, and how to manage downsizing.

First of all, the company must start motivating the survivors of redundancy. They have to ensure the immediate sense of relief experienced by employees not selected for redundancy can often be superseded by other, more negative, feelings. 

Some people may feel a sense of guilt at having survived the tragedy – the so-called ‘survivor syndrome’. Others may feel angry that they have been left to deal with an increased workload due to their colleagues’ departure and may even be envious of their former colleagues’ severance payments. Many may be fearful that they may be next to go if the cutbacks continue.

With all these feelings permeating the background, the manager must still find ways to motivate and re-invigorate their team to meet the needs of the organisation. There are many stages of change which can be experienced by employees, but every member of staff is different and some cope better than others. The stages include:

Denial – ‘this isn’t going to affect me’

Resistance – ‘if they think they’re going to make me do extra work they can think again’

Self-doubt – ‘I’m not sure I’m going to cope with the new situation’

Acceptance – ‘I’d better learn to adapt; if you can’t beat them, join them’

Exploration – ‘what do I need to do to deal with the changes?’

Understanding – ‘now I can see some Benefits for me’

Integration – ‘actually, this is better than I thought it would be’

Aside from that, most of the forward thinking organisations are not only empathetic and mindful of how to handle redundancies, but also put in place training and support for those who have to deliver the bad news, while also keeping in mind the employees that remain.

By not taking into account the survivors, companies run the risk of staff feeling helpless, bewildered and often angry about what has happened; not to mention overworked if they have taken on extra duties. If left unmanaged, these feelings can affect performance. 

Managers can put in place a number of steps in order to minimise the damage caused by restructuring that involves redundancies. Firstly, keep close to your people. Involve your team as early as possible when changes are imminent. It’s amazing how quickly the rumour mill gets into gear with negative, often inaccurate information. The earlier you get your team involved the more in control you will be of the information they receive and the better you will be able to engage their energies in a positive way.

Secondly, communication is the key. During any change process people need to be kept informed as much as possible. Communication puts you, as manager, in the driving seat and keeps you in touch with what’s happening. Allow your team to talk about how they feel about the changes. Let them get some of their negative feelings ‘off their chests’ in a controlled environment. This can be especially important after any redundancies have occurred so that you can address any important issues that may be of concern to your staff. 

        

Thirdly, manage the after-effects of downsizing. If the changes have involved redundancies then you will need to consider the after effects of this on those team members remaining in the business. Some may be angry that they have lost their colleagues, others may be resentful about being left with even more work to do. Consider training options. Adapting to change is a learned behaviour and people can be helped to develop this skill through training in managing personal change. Often people’s inherent resistance to change is driven by a fundamental sense of insecurity driven by their perception of loss of control.

Fourthly, employees can be helped to learn how to regain this sense of control through a variety of techniques that can enable them to better manage their perceptions of the situation they find themselves in. Remember to use all available resources. Simple steps such as employee assistance programmes, training and staff development plans will help reinforce the importance of an employee’s role to the business and make them feel a more integral part of the company.

Finally, when the economy is hopefully recovering, it will be those organisations that have paid attention to the psychological needs of their remaining employees and have taken steps to ensure they have loyal, engaged and motivated employees who will have the advantage. Thus, planning for that advantage now is a smart management move for this company.

Conclusion:

To sum up the whole analysis, when a company decides to downsize itself or any of its department, it will definitely affect the organization as a whole and also the employees; thus, creating fears among employees. Those fears can be exacerbated when employees work in an environment characterized by low trust, poor communication, or lack of clarity about expectations. When layoffs or downsizing occur, engagement levels may drop as employees mourn the loss of friends and wonder if they might be next. Followed by that, there is no doubt that the workload of the survivors of retrenchment will increase abruptly because a part of the workforce in the company has been curtailed due to downsizing. The demand for immediate action and rapid turnarounds contributes to the escalating work pressure. This calls for a remedy to the situation and the authorities of the company should manage human resource challenges with employees’ talents clearly in mind, also they should communicate the organization’s mission and strategy clearly and often remind the employees about it. Another solution is job-sharing. Job-sharing is a way for two people to both fill one job. Each person has a permanent part-time post. They split the hours, pay, holidays and benefits between them according to how many hours they each work. Also, Force Field Analysis was used to examine the pros and cons of the downsizing of a department in the organization. Thus, the company has to find a way to manage its workforce properly after downsizing. In the long run, it will be those organisations that have paid attention to the psychological needs of their remaining employees and have taken steps to ensure they have loyal, engaged and motivated employees who will have the advantage. Hence, it is crucial for organizations to make decisions such as downsizing and how they manage it well, which includes how to lay off workers the ethical way and how to motivate the survivors of retrenchment in the company.

References:

Crabtree, S. 2010. Exacerbating the Fear of Layoffs. Gallup Management Journal.

[ONLINE] Available at: http://gmj.gallup.com/content/144044/exacerbating-fear-layoffs.aspx#1. [Accessed 13 March 13].