2001 Volume 4 Issue 2

Downsizing with Dignity

Downsizing with Dignity

Management principles gleaned during a plant closure

In downsizing, managers are urged to create a learning environment by working with their employees.

The plant manager’s voice cracked as he read the announcement that the company’s Southern California production facility, in which he worked, would close its doors. I looked around the makeshift stage set in the shipping warehouse. The union president – jaw set and intense. Twenty-five-year veterans of the plant – slumped in disbelief. And young managers – feeling the sting and knowing they would bear the brunt of employee anger and anguish.

I was a member of a management team that had labored nine months in a cone of silence trying to decide what fate to recommend to corporate decision-makers. Our manufacturing plant had been around for over 50 years. During the Depression, it had served as a beacon of light, giving hope to the surrounding community. Now, this star was fading.

I flashed back to key moments in our nine-month deliberation process. Corporate decisions were being made that slowly would remove a growing variety of products from our plant. However, since these decisions were made by independent groups of managers at corporate headquarters, no one looked at them from the perspective of the whole plant. Our plant manager, however, urged us to pull our heads out of the sand and look at the implications five years down the road.

We collectively had to face the facts. Did we want to die a slow death with no control, or could we somehow shape our destiny? At first we rallied with hope. We had a group of MBA students propose creative alternatives. We formed teams to come up with feasibility studies on new products and other alternatives. But the cold, hard truth was that life, as we knew it, was ending.

So we were faced with the question of how to bring it to an end. We could slowly hang on, enduring wave after wave of layoffs, expanding the empty sections of the plant. Could some be saved if we did that? Maybe. Would corporate come along some day and say, “Forget it, you’re too small and the overhead too large.” Probably.

Another way to end was for us to recommend plant closure, with some conditions. Conditions that included plenty of warning for people, having a sizable retraining and placement budget, and making sure that all managers would have a position elsewhere in the system. Hourly workers would have the opportunity to transfer to other locations within the company, unheard of before. These conditions came from days of meetings where we examined our deep beliefs and values. We wondered out loud what conditions would have us – all of us – leave our employment with dignity and confidence. People needed to recognize what they had achieved while working there and be able to communicate to potential employers. For example, we knew that people had working knowledge of team building, quality management and communication skills that were of value to any business.

In a key meeting with the top manager in our division, we considered our options and finally decided to recommend closure. I remember clearly how this high level manager said that he wanted to be able to look his young son in the eyes and explain our decision with honesty and integrity. He became one of us that day, and led us in thoughtful and heartfelt discussions.

We spent many hours examining our principles during the shutdown. Two of these principles became embedded in my being. The first principle was to “do with” our employees – rather than to “do for” or “do to” them. The company was historically paternalistic and, coupled with our guilt over the hardships facing employees, we tended to “do for” everyone. Doing for people constituted a pattern of continued dependency on management for solutions rather than helping people learn how to act and think independently. There is the parable of teaching people to fish rather than giving them a fish when they are hungry. This is similar to what we meant – working with people to have them write their own resume vs. doing a resume for them, as an example.

The authors of a recent article in the Journal of Applied Behavioral Sciences suggested that the do for management style may lead to employees becoming dependent and demanding. This is like a divorced parent who gets the children every other weekend and brings lots of presents and spends money on doing fun things out of guilt. We found, however, that doing for our employees prevented us from dealing with them as partners in resolving our problems.

Doing to comes from a manager’s desire for control. Such a person may seek to exert power simply because he or she is the manager. This type of manager might tell employees, “Hey, if you had done more, this wouldn’t have happened. You’ll just have to learn to live with it.” The result is generally resentful employees. There were times that there were temptations to foist the blame on others, but those were rare for us.

The third option is doing with people. This orientation derives its energy from a position of responsibility and learning. A person might say, “Hey, this is a bad situation, but what can we learn about ourselves from it? How can we use this to make our lives better? What would help?” This management style is most likely to result in responsible and skilled people who can be depended upon during tough times. It also invites more partnership in learning. People can be used to generate ideas for action, such as creating seminars on owning one’s own business or helping create a “yearbook” – both of which were done. Employees needed a supportive management to do this, one that offered the freedom to decide what to do along with the resources and guidance to make it happen.

All three of these philosophies have implications for action. The doing for orientation will have programs galore for people, designed by consultants who excel in downsizing and outplacement. People are practically forced into enrolling in programs. Managers will act as parents, checking up on who went where and fixing schedules so people can be freed up. The doing to group will have programs as required by law (or corporate policy). The delivery of these programs will be matter of fact, and an adversarial environment may develop that results in injuries and lawsuits. There will generally be little help for people who are displaced.

But organizations with managers who are doing with their employees will initiate discussions in which employees can verbalize what’s most important to them. These organizations are likely to design programs that genuinely meet employee needs. Priorities will be established and people will coordinate their schedules with colleagues so that the work gets done as personal needs are met.

The second principle we embraced during the plant closure was to make the plant a “learning organization.” As the end played out, people learned a tremendous amount about themselves. Managers learned how to manage people as human beings since we had few control mechanisms. This meant listening to what people were feeling and helping them take the steps that enhanced self-efficacy, not just increase their skills or behave in a way that management wanted them to behave. We also had a great sense of equalization. A plant shutdown put everyone out of a job. Managers talked openly about leaving the company and other employees talked about their transfer options. Eventually, one-third of the employees at the plant were transferred to other locations while the rest were retrained, retired, went back to school, opened their own businesses, or were employed elsewhere.

An imminent plant closure accelerates the pace of change for managers. We were faced with planning what needed to happen in this strange new world while continuing to manage daily activities and deal with our own emotions. It was extremely difficult to maintain perspective and composure. We worried about plant production, conducted support groups for those wanting to start small businesses, and pondered how to deal with the teenager at home who was resisting any move out of the city. While managers are used to dealing with multiple issues, none prepares them to endure such an emotional roller coaster ride while trying to look in control.

We had success with open discussions and career planning. Many people decided that this was a good time to leave the organization, to take severance pay or benefits, or do things they had always wanted to do. In the best scenarios, an organization will co-create ways for people to enhance their skills and leave feeling valued and respected. This has a very positive emotional effect on employees who may be remaining in the organization.

Depending on how exiting employees are treated, those who stay may feel suckered, betrayed, or guilty. If those leaving get such a good deal, people might feel that they are suckers for staying. If those leaving get a bad deal, those staying will feel guilty. If people leaving (or staying) are lied to about things such as how they will be treated, or the terms of their severance, they will feel betrayed. Survivor’s guilt is common when some departments are cut while others stay intact.

Unions are typically big losers in a plant closure. Sometimes there is deception or misunderstanding. For example, a union may be promised that a plant will remain open in exchange for certain concessions – but these concessions may not be enough for the plant to survive. There are often environmental factors beyond the control of just changing work rules or increasing productivity. Union members and representatives often can feel angry and betrayed. The other common scenario is that a plant closure is announced before a union is informed. The question of when to tell union officials such news is a delicate one. It is usually best if they are told shortly ahead of the general populace. For example, a union meeting with the highest management personnel prior to a plant wide meeting would be appropriate. You can ask that they do not disclose the information (Rumors will probably be so heavy that it doesn’t matter.) It generally enhances future bargaining relationships to give a union the courtesy of prior information (although not too far in advance or you set the union members up for conflict.)

Treating a union as a partner often works well, especially if you have a philosophy and a history of partnership. At my plant site, there were several wins for all parties around a “Rule of 75” that allowed people to retire at a combined years of service and age (For example a 55 year-old with 20 years of service.) It is absolutely essential to start realizing that seemingly small things can be important. For example, the rule of 75 enabled employees to say, “I retired from the company,” rather than, “I was laid off.”

Managers provided employees with recommendations, and some employees received “stay pay” to remain through closure. Giving employees the first chance to purchase plant equipment was another appreciated gesture. The union at the plant was heavily involved in forming advisory teams, setting transfer procedures, and selecting outplacement counselors. They were helpful in spotting those who were emotionally unstable and helping them. A few employees judged to be emotional security risks were placed on disability.

There used to be an unwritten contract in America between top managers and workers that, if you made a good effort to do your job, you could count on having that job as long as the firm stayed in business. But this contract virtually disappeared in the 1990’s and there have been unintended consequences. Loyalty and morale suffered and employees became reluctant to volunteer labor saving innovations that could lead to layoffs. And many organizations learned that the benefits of downsizing were, at best, short-term.

But the challenge of downsizing with dignity continues to puzzle managers and employees in today’s fast-paced world. Being involved in a plant closure was one of the most emotional experiences I have ever been through as a manager. It was a profound growth experience for both employees and managers. It was a time when the principle of “doing with” was validated by trusting and productive relationships between managers, the union, and employees. And the value of sharing both professional information and personal insight maintained a strong sense of community as we literally tore down the walls of our organization. During this time, I felt that I could live by my principles. There was no other road map than the one I had within.

Please see related articles from past issues of the GBR…

The Death of the Sales Force

The Human Realities of Corporate Downsizing

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Author of the article
Ann Feyerherm, PhD
Ann Feyerherm, PhD, is Director of the Masters of Science in Organization Development (MSOD) program and chair of the organization theory and Mmnagement discipline. Previously, Dr. Feyerherm spent 11 years as a manager of organization development at Procter & Gamble. As a consultant she worked with top-level companies on projects ranging from team function to leadership development and managing change. Dr. Feyerherm’s research focuses on government, business, environmental community collaboration and increasing human capacity through strength-based approaches. She is currently serving a five-year leadership position within the Organization Development and Change Division of the Academy of Management.
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