Downsizing Strategy

When business conditions deteriorate many firms turn to downsizing.  And in most of these circumstances layoffs become the central focus of a plan to reign in expenses.

Unfortunately, research has shown that downsizing strategies usually fail to restore the financial health of the organization.  The reason they fail is that layoffs are usually followed by a host of unintended consequences, consequences that can make matters worse not better.

They include a loss in the skill and knowledge base as employees are furloughed, deterioration in employee morale, interruptions in new product development, and  a drop in service levels.

 From the employee perspective, downsizing can raise havoc with stress levels.  While those laid-off certainly suffer, those left behind, called survivors, may find it impossible to escape from the increased pressures in the workplace.  They may succumb to a wide range of responses from a short-term reaction called “survivor syndrome,” to a more serious and protracted response called “Post Downsizing Stress Syndrome.”

Post Downsizing Syndrome, a term I coined during the 1990-1991 recession, is now recognized as a significant problem that organizations need to address.

Unfortunately, downsizing is here to stay.Apart from the
human toll, it has become an accepted way of dealing with an intensely competitive global environment.It is a tool that will be used even in more prosperous times when organizations find it necessary to transform their products, services, organizations, and workforce in respond to threats and opportunities of a rapidly changing and very competitive world economy.

Downsizing, then, has become a 21st century tool of survival.

The problem, however, is that organizations may use the tool too quickly, that they will over-respond to market tremors and that they will adopt a command-an-control style that overlooks the strategic role of human resources in the firm’s ability to survive.

Rather than respond impulsively, it may be in their long-term interest to take a hard look at their downsizing strategy and consider a host of alternatives that in combination can preserve the competitive position of the firm while at the same time achieving financial goals.

Building such a strategy is complex and it differs for each organization, but there are those who have done it. They have succeeded in weathering tough times, earning the respect of their workforce, and prospering when good times return.

This site focuses on downsizing issues. It accepts Downsizing as a 21st century tool but at the same time promotes a balanced approach:  tough on the problem but soft on the people. You will find tips for managers and employees, summaries of relevant research, lessons learned from both successful and balanced strategies as well as lessons from failures. Finally, the site includes tests you can take to measure workforce morale, determine how you are managing or responding to a downsizing situation, and even tests that will assess your vulnerability to a threatened layoff.

Thank You
Barry Shore, PhD

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