Downsizing: 7 Steps to Minimize the Damage

Drew Stevens, PhD.
Posted: 09/28/2010

Despite the official declared end of the Great Recession, turbulence in the economy continues to hamper profits and productivity. Stress is high as employees and executives must do more with less. As executives review balance sheets for year-end goals, anxiety heightens with possible thoughts of downsizing.

Much has stabilized in recent months, with organizations believing they have completed needed cost cuts. However, as the economy ebbs and flows, it is possible that downsizing activity will increase before year end. This is an emotional issue, to be sure, yet there are some best practices for minimizing the damage.

Communication - The largest issue surrounding the trauma and stress of downsizing is the lack of communication. While there is a need for privacy and analysis it is always best to inform employees first before rumors circulate. Executives can create a collaborative atmosphere with candor. Open communication diminishes some of the anxiety, perhaps even paving the way for voluntary departures and better relationships for future rehire possibilities.

Consider your talent pool - Many organizations tend to use a flat percentage when cutting staff. The new competitive landscape is completely knowledge based, and cutting staff diminishes needed "brain trust." Use a scalpel rather than an axe.

Consider Compliance - It is imperative to work with General Counsel to ensue that all state and federal laws are upheld. Downsizing is as much about ethics as it is about profits.

Senior Management must be involved
- People do not leave bad organizations, just bad managers. Ensure during this difficult time that all executives are meeting with teams, holding town hall meetings and explaining downsizing rationale.

Survivorship - When the muck and mire of downsizing is settled there remains a treasure trove of sensitive employees. It is best to pay careful attention to the morale and productivity of the survivors. Continually explain the rationale for the program while also providing an array of services to assist them. Some examples include mentorship or counseling to assist them with alleviating any guilt. In addition, holding recognition meetings and ensuring front line managers offer continual praise when necessary are useful tools that help foster collaborative work teams.

Never underestimate over-communication - With a world that devours information and requires more connectivity then ever, over-communication must never be an issue. Use all resources necessary such as direct meetings, voice mail, email, videos or even internal Facebook or instant messenger accounts. No one has ever complained about receiving too much correspondence from corporate.

Measure the success - Strategic organizations accomplish more because they constantly review the data to ensure measurements of success. Involve the team and provide candid assessments on strengths, vulnerabilities and value to the organization. Archive the content for future use. Remember, strategies fail in implementation when they sit in a credenza.

Downsizing is a short-term solution to help reach higher margins and reduce cost. However, such dramatic steps also diminish morale, productivity and -- most importantly -- intellectual capital. The greater the communication and involvement of senior management, the more rapid the return to "normalcy."

Drew Stevens, PhD.
Posted: 09/28/2010

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