The Human Realities of Corporate Downsizing

Resolving the past and seizing opportunities for the future.

1998 Volume 1 Issue 1

Every corporate downsizing event has certain predictable outcomes such as feelings of betrayal, loss of trust, turf battles, and cynicism about the corporation’s future. This typically leads to a widespread lack of commitment throughout the organization. But downsizing can also bring significant opportunities for creating new energy and enthusiasm which often go unrecognized.

One such opportunity is for an organization to re-state its vision of the future. A second is to establish a revitalized culture which rewards individual and team initiative. A third is to create new alliances across departments and divisions. A fourth is to create a new personal work ethic, “I am responsible for my own future!” Each of these opportunities makes unique professional and personal demands on managers. These opportunities also require that an organization consider the human realities of downsizing for those who leave as well as those who stay behind.

The creation of a new corporate vision requires a sense of closure concerning the mistakes of the past. Management must identify these mistakes, take responsibility for them, and address them in a way which assures employees they will not happen again. This requires personal integrity as expressed through candor, honesty, and directness.

In downsizing, it is incumbent on a corporation to affirm, in practice, the importance of its employees. This can be expressed through considerate treatment of those who are leaving and through a renewed commitment to the professional growth of those who remain.

Plan for and be ready to implement a job search and career development clinic for displaced employees. Plan for generous separation packages. Be ready to deal with the legal and tax implications in a way which is helpful to those leaving the company. Position communication and coordination people with posted “help line” phone numbers. Plan for psychological counseling and support where needed. Fully inform staff and employees, as much as possible, of the planned events. Do not walk the halls Friday afternoon passing out pink slips.

It is important to remember that survivors of downsizing will be impacted at the emotional level. In 1996, Edison International was restructuring to position itself for deregulation and a well-planned early retirement program was instituted. Over a thousand long-term employees elected to accept the generous offer. Many remaining employees felt that with so many “old hands” going away, the history of the company and the “know how” to deal with emergencies was also leaving. On observing the departure of middle managers with reputations as tactical geniuses in dealing with power outages, one survivor commented to the writer, “Who will keep the lights on now?”

As a general rule, when the intense feelings of loss, sadness, anger, guilt, etc. can be acknowledged and somehow worked through, the degree of intensity rapidly diminishes. If, on the other hand, these feelings are denied or suppressed, they can remain buried for years until they are triggered, perhaps years later, by some resonating event. It is important to acknowledge the legitimacy of the feelings associated with grief. They are signs of a healthy human!

There are creative ways of working through grief. When the Pharmaseal Division of Baxter International was in the final days of a major restructuring, a severed employee brought his guitar and sat in the large lobby playing and singing to people as they arrived for work. He had composed songs about how he would miss the challenging work and the friendships he had formed.

It is not uncommon for departments to have farewell parties and celebrations which sometimes have the appearance of a “wake.” Sometimes departments hold one-day off-site meetings where people are encouraged to talk through their feelings about how the downsizing is affecting them. If such efforts are not undertaken, employees can grow cynical about the company and about their ability to influence or have some power in their own lives. This kind of powerlessness saps motivation and tends to spread like a virus among other employees unless some proper intervention is undertaken.

Executives who assume that employees will return to business as usual may be in for a rude awakening. Survivors of downsizing may experience emotional ups and downs which can bear heavily on self-esteem and whether or not the person has the energy or will to concentrate or work on anything. In many companies, surviving employees are troubled by three sets of remaining feelings:

  1. Grief and guilt-related feelings about those who lost their jobs.
  2. A combination of feelings about top management: “Was it the poor planning of the boss that made this necessary?” “Our trust has been betrayed, why should we work so hard for them?
  3. Fear of future recurring downsizing events.

Three kinds of events are necessary if one is to help survivors move forward and make their possible contributions to the company:

  1. The opportunity to acknowledge and work through feelings of grief and guilt.
  2. Evidence that the company truly values all employees.
  3. Evidence to support belief that the company will be successful enough in the future to provide stable employment.

If executives expect surviving employees to give their best, the company will need to provide substantial evidence of new beginnings. This can be as simple as a clearly articulated vision of where the company will be in five years and a significant investment in the re-training and upgrading of employee skills.

Training and upgrading the skills of employees can provide a very tangible message of corporate investment in the individual’s future. During the early stages of a project with Yamaha Corporation of America, I was asked by more than one disillusioned employee why they should trust upper management to not fire them. The answer was simple, “Look at the investment they are making in raising your skill level. Would they do that if they thought they might need to fire you?”

Edison International has developed an internal training program focused on what Edison executives believe are critical management skills for the year 2000. This program places a heavy emphasis on leadership, finance, marketing, and strategy. With the decision of the California Public Utilities Commission to deregulate the industry, Edison was forced to go through a significant downsizing. In spite of personal feelings of grief for the people who left the company, participants in the management development effort have reason to believe that they are already being given significant opportunities to prove themselves as leaders. Their enthusiasm is reported to have a positive, almost contagious, impact on others across the corporation.

Re-statement of Corporate Vision for the Future

While addressing the mistakes of the past and the needs of the present, management will enhance the probability of employee commitment by developing a new vision of the best that is possible for the organization. Managers must consciously articulate this vision, solicit input, and invite employees to greater participation and empowerment. Employees, as well as many outside the firm, will be vitally interested in knowing, and responding to, management’s preferred state of affairs in five years. Many re-structuring scenarios provide an excellent opportunity to let go of old policies, practices, and sacred cows which may have contributed to the need for downsizing. Then, be ready to implement the steps which will move the organization forward in the new direction.

Creating an appropriate vision for the future is simple, but not necessarily easy. In my experience, executives tend to be too conservative and cautionary and may not think big enough. In working with the visioning process at several major companies it became apparent that the limits of the executive’s vision may be determined by what he or she already knows to be possible. In other words, the visioning executive does not paint a big enough picture to take in opportunities just beyond his or her reach. As a consequence, the manager does not fully inspire employees to help bring that future possibility into being.

Trust is an essential element in corporate renewal. Employees must trust the ability and integrity of senior management. If employees do not trust the competence of managers and colleagues in doing what is necessary, they may be less than enthusiastic about supporting the renewal process. When vision and competence are conveyed in a compelling way at the top level of an organization, trust can be regained at every level. Without trust, there is no basis of hope for a positive future. Without hope, there is no basis for individuals to find personal meaning in their work, or for any employee to give the best of his or her energy and skill to the company.

Corporate change, be it downsizing, restructuring, or re-engineering guarantees ambiguity. Ambiguity, if one feels insecure, can look like chaos. Chaos, if one is already insecure, generates fear. Fear is paralyzing. One can quickly come to feel powerless in regard to ones future.

However, if one can rise above feelings of insecurity, and see them as temporary, ambiguity and chaos can become the parents of opportunity. Given the right skills and tools, trust in the leadership, and a proper vision of what is possible, every employee can gain the sense of power and responsibility needed to create his or her own future. Under the best of circumstances, there will be a subtle but real alignment between the ambitions of employees and those of the corporation. That is the ultimate source of energy and motivation.


Resources

Chibber, Lt. Gen. M.L., Sai Baba’s Mahavakya on Leadership; Leela Press; 1995.

Noer, D., Healing the Wounds: Overcoming the Trauma of Layoffs & Revitalizing Downsized Organizations; Jossey-Bass Publishers; 1995.

Gottlieb, M. & Conkling, L., Managing the Workplace Survivors: Organizational Downsizing and the Commitment Gap; Quorum Books; 1995.

Fritz, R., The Path of Least Resistance: Learning to Become the Creative Force in Your Own Life; Ballantine Books; 1989.

About the Author(s)

Wayne L. Strom, PhD, is a professor of behavioral science at Pepperdine's Graziadio School of Business and Management. As an active consultant to executives and organizations, Dr. Strom has worked with a long list of local and multinational corporations in Europe, Asia, and the United States, including ABC-TV, Baxter Healthcare, CB-Richard Ellis, Citicorp, Consolidated Capital, The Culver Studios, SmithKline, Southern California Edison, Toshiba America, the U.S. Department of Agriculture, and Yamaha. His current focus is on leadership processes for corporate renewal and the development of businesses as continuous improvement/learning organizations. He has served as associate dean, director of graduate programs, and chair of various academic committees. In 1986, he founded the Pepperdine Civic Leadership project, and in 1991, he was selected as a Harriet and Charles Luckman Distinguished Teaching Fellow in 1991. Currently he enlists executives in coaching employable but unemployed and homeless men and women for job searching skills.

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