On Wednesday morning, while walking to the company mailroom, I passed our director of human resources in the hallway. Without making eye contact, he walked by me and continued down the hallway toward Engineering. I knew something was terribly wrong. My heart sank as I quickly changed course and headed back to my office. I picked up the phone and called everyone who might have information about what was happening, but nobody knew. "It came without warning, like a nameless storm, and claimed many unsuspecting casualties along the way," said one employee.
By 10 A.M., almost 20% of our work force was escorted from the
building. In one fell swoop, we lost a significant number of software developers, testers, technical support engineers, trainers, and administrative personnel. Our company had downsized, without warning and without mercy. The number of casualties was staggering, but many of their identities were still unknown at the time.
The Stunned Survivors
Immediately following the massacre, our executive vice president called a company meeting. Everyone looked around the room, not only to see who was there, but also who wasn't.
Fifteen minutes of waiting seemed like an eternity, until the VP finally arrived. He was well prepared, and the beginning of his presentation was well received. He began with a synopsis of the state of the U.S. economy. "We're facing the start of a recession,” he said. Then, he continued his explanation with the condition of our U.S., Canadian, and international operations. Surprisingly, our company was profitable and, in fact, 2000 was a record sales year. At the conclusion of the VP's downsizing speech, he said, "...and everyone will receive a 7% EVA (Economic Value Added) bonus in February." We were stunned when we heard the financial figures and ashamed that our company was giving bonuses. Why would upper management make a decision to downsize the organization when we just had a record sales year?
The Paradox of Downsizing
Downsizing is a conscious decision made by management to reduce the size of its work force in an effort to immediately reduce operating expenses. The paradox of downsizing is that it can occur at any time, without warning. Companies may choose to downsize while in a strong financial position, or a weak one.
Traditional economic factors are no longer accurate indicators of a company's plans for its work force. Employees are carefully watching other companies as they downsize and are wondering if their company will be next. According to Melissa Wibom, a quality engineer, "News of other organizations downsizing is making people think twice before leaving here." Without traditional economic indicators, it's more difficult to predict which companies and positions are safe.
Short-term Psychological Effects
Although the question of "who will stay and who will go" adds enormous stress to departments and teams, that's just the beginning of the psychological psychological impact that downsizing inflicts on an organization. A new mood quickly manifests itself throughout a downsized organization. Perhaps most surprisingly, downsizing's biggest impact can be on those left behind in the office—the survivors. These are the people who weathered the storm to see what remains.
Few events cause as much stress, confusion, and uncertainty in an employee's life as a corporate downsizing. According to Eileen and Wayne Strider, consultants in the field of change management, "Survivors go through a predictable series of psychological stages after a corporate downsizing." Survivors usually feel guilty and angry about the loss of their co-workers. They may initially feel relieved that they're still employed, but later, they begin wondering if they may eventually become the next victims.
In the next stage, survivors feel overloaded and find it difficult to focus on their jobs. Feelings of anger, hurt, and resentment often prevail over their normal daily activities. A sense of trust has been broken between workers and the company. These feelings quickly become apparent through the survivors' choice of words and actions. Unfortunately, loyalty to the organization rapidly diminishes. "Ultimately," explains Eileen Strider, "something will suffer within the money-time-quality matrix," as the organization tries to recover.
Survivors experience emotional shock, which prevents them from adapting to the new direction. In extreme cases, survivors freeze like "deer in headlights," as the momentum of their daily routine is shattered. Not knowing what to do, many survivors will wait and see what happens. What are they waiting for? They're waiting for leadership—someone to tell them what to do next.
After a downsizing, managers should focus their efforts on finding ways to improve employee morale, identify inefficiencies within processes, weigh the risks, and monitor the results.
Improve Employee Morale
There are several useful techniques that management can use to help employees cope with the rapid changes brought about by downsizing. During these times of corporate chaos, employees have an insatiable thirst for information. If rumors aren't dispelled with facts, things can get messy.
One of the most important things that management should do immediately after a downsizing is provide survivors with clear information at frequent intervals. Department meetings, employee newsletters, and email messages are all effective methods of disseminating accurate information throughout the downsized organization.
Good managers will also have compassion for the employees' need to cope with shock and fear. Managers should meet that need with a combined sense of optimism, direction, and mission that will help workers through the painful transition. Eileen Strider suggests that "managers renegotiate project due dates and try to buy time for their staff to allow them to adjust to organizational changes." It's unrealistic to expect survivors to absorb the entire workload without compromising schedules.
Identify Inefficiencies within Processes
Although some companies conduct functional reviews in an effort to reengineer processes before opting to downsize, Wayne Strider explains that, in most organizations, "process reengineering either occurs after the fact as a reaction to downsizing, or not at all." Strider believes identifying inefficiencies within processes is one of the most important, and often overlooked, opportunities for improvement before, during, and after a corporate downsizing.
This activity works best when decisions to eliminate or modify processes are made with cooperation from a cross section of departments. The employee representation on these teams helps ensure wide-scale buy-in.
Weigh the Risks
According to Johanna Rothman, an author and consultant in the field of product development, good managers will ask themselves, “What are the priorities of my organization?” in order to determine what really needs to get done. To help answer this question' management should do a formal risk assessment of new product development versus maintenance releases of old software. It's important for managers to realize that the risks associated with new product development will significantly increase after downsizing an organization. Managers should weigh these risks accordingly, before trying to implement their plans.
Monitor the Results
Most companies include monitoring systems in their downsizing plans, either in the form of preexisting reviews or reviews designed specifically to assess their progress in achieving downsizing goals. Some companies produce reports that can be used as guides for future downsizing activities. Managers should review their human along with their budgets. Major projects should be reassessed and schedules should be adjusted based on the organization's downsizing strategy.
So What Can You Do?
There are several things you can do to help yourself and your organization recover from the effects of downsizing.
The success or failure of a downsized organization depends on the work force remaining after the storm. Before deciding to change jobs, survivors should carefully analyze their company's situation. Downsizing may be an indicator of poor economic performance, or it may be just what the company needed in order to turn itself around. Employees who "weather the storm" may discover new opportunities for career advancement hidden among the ruins.