Calculating the Human Costs of Downsizing

by Linda Matias

Downsizing is never an easy decision. There is an inherent conflict between protecting the company’s interests and that of employees. This balancing act can be a real dilemma for an organization as it tries to insure its long-term survival, and its desire to protect the welfare of its employees.

Downsizing is never an easy decision. There is an inherent conflict between protecting the company’s interests and that of employees. This balancing act can be a real dilemma for an organization as it tries to insure its long-term survival, and its desire to protect the welfare of its employees.

Handled improperly, a company downsizing can damage the public standing of both the organization and its management. People have long memories, and after a difficult time an organization needs the support of the remaining employees in order to rebuild.

Consider the costs once remaining employees begin to question their company’s published ethical standards and values. At best, they will do their job responsibly, not putting much effort to the re-growth of the organization as they just go through the motions of their job. At worst, absenteeism increases, morale decreases, and resentment steadily begins to grow, all of which inevitably disrupts the functions of the organization. The cost is immeasurable.

Minimizing human costs
To lessen the negative impact of a downsizing, the remaining employees must be assured that the decision to reduce the workforce was made only as a last resort, after lengthy discussions and a concerted effort to reduce costs in other areas.



Employees will closely monitor the way downsized employees are treated. They want to be assured that their former colleagues and friends that were let go are being cared for. To avoid the guilt that most remaining employees feel, management should stress that departing employees are being provided with the best severance package that current circumstances allow for.

After a layoff, the remaining employees will experience an array of emotions including confusion, anger and fear. If these emotions are not addressed, valued employees may feel their jobs are at risk and begin to look for work elsewhere. The danger is particularly grave when this attitude begins to affect company loyalists, the employees who are the glue of the organization. When they begin to worry others will also.

During challenging times, rumors spread throughout an organization like cancer. Because of this, management should openly inform remaining employees about the plan to revitalize the organization, and address whispering campaigns head on. Allowing rumors to linger without clarification feeds into the belief that the organization’s future is uncertain.

Employees will look towards the leadership for reassurance and encouragement so it is important to be visible, and address employee concerns. With open, honest communication the possibility exists to develop a rich relationship with those who remain.


Linda Matias is President of Long Island Outplacement (LIO). She specializes in working with organizations facing transitional challenges due to downsizing, restructuring, or layoffs. Visit the LIO website at www.lioutplacement.com. Linda can be reached directly by phone at 631.382.2425 or via email at lmatias@lioutplacement.com.

 
Free small business newsletter
 
Get great business ideas and advice like this sent to you in email twice a week.
 
Subscribe to the free Business Know-How newsletter. 
 
Enter your primary email address below

 

Follow Us and Share