The 2008 global economic crisis, the impounding recession, the Euro-zone debt crisis, the slowing growth of the Chinese economy and other economic bad news have been causing sleepless nights to regulators, authorities, managers, employees, households etc. Although there has been slight improvements in economic performances in other parts of the world, the majority parts are still in the doldrums.
Under these dire economic conditions, most businesses see cost cutting, in particular, downsizing as a way of securing growth and achieving operating efficiencies despite past research showing that downsizing does not guarantee any performance returns. Evidence can be seen from global financial institutions and companies that have laid off thousands and hundreds of thousands of employees since the global financial crisis started. Some are still letting go of their employees and others planning to do so.
When it comes to laying off staff, downsizing initiatives should be aligned with talent management strategy. It is important to note that some employees have become so loyal and committed to your organisation and one mistake on the part of management in handling the laying off process, can result in employee broken trust, reduced employee commitment and morale and an increase in voluntary turnover.
The following considerations should help you when dealing with downsizing issues :
• What do you need to survive now? Is the reason for downsizing in response to changes in the market environment? If for example, the demand for your product or service has declined, find out why prior to laying off employees. It could be that certain features such as quality, packaging, delivery or price need to be changed to increase the demand again.
• What do you need to do well in the future? It could be that you’re now considering taking advantage of technological innovations for greater efficiency purposes at the cost of manual labour.
• How do you view your employees? Do you view them as a cost to be reduced or as an asset to be retained and developed?
• You need to communicate openly and clearly with your employees. Don’t allow grapevine to communicate the news for you regarding the downsizing process. Make sure your employees are aware of the extent and timing of the downsizing and give them a stage to air their concerns and views. There should be two-way communication between you and your employees.
• In most cases, employers downsize that department or function which is under performing. Instead of laying off employees, you could temporarily shut down that department and transfer some of the workers involved to other departments or branch locations. You could also offer voluntary retirement and sabbatical leave opportunities, thereby helping you retain a skilled and talented workforce.
• Past research has shown that, whenever there is downsizing, the effect on the remaining employees can be demoralising leading to a drop in productivity. As a manager, you should be able to demonstrate to them why the change is necessary and also affirm their survival. You should consider taking extra measures to motivate people during and after the downsizing.
• The recent global financial crisis has resulted in many organisations laying off employees. However, some of the surviving employees were complaining of work overload as they had to perform their own work and that of the laid off employees. Others are still complaining to date. To avoid similar complaints in the future, managers should ensure that employees are trained to multi-task. This can be achieved through job rotation and job enlargement as this enables employees to build skills and gain valuable work experience.
As there is no one size fits all when it comes to downsizing, managers need to ensure that they are successful not only at cutting costs, but also in maintaining a committed and motivated workforce during and after downsizing. Human capital is a valuable resource to the organisation and very critical to the attainment of organisational goals and objectives. Building and retaining key talent is key to obtaining and maintaining a leading competitive advantage.