Explain the impact of downsizing on employees remaining with the organization.

DownsizingOne outcome of downsizing must be to preserve the organizations intellectual capital. Used sparingly and with planning, downsizing can be an organizational lifesaver, but when layoffs are used repeatedly without a thoughtful strategy, downsizing can destroy an organizations effectiveness.
Read the article “Downsizing With Dignity: You Can Downsize With Care—for People and the Business” by Alan Downs. http://humanresources.about.com/od/layoffsdownsizing/a/downsizing.htm (see 2nd page)
This article presents an Executive Summary regarding how to treat people during a downsizing, including both the people who leave and the people who remain. Throughout the article the author mentions different considerations during the downsizing process and the impact on the remaining employees. Utilizing the information presented in this module, summarize an effective downsizing, citing your research on employment law, readings, and your experience.
In your article analysis:
a. Briefly summarize the article (1-3 paragraphs).
b. Identify considerations for the downsizing process.
c. Explain the impact of downsizing on employees remaining with the organization.
d. Outline the requirements for an effective downsizing, based on readings, research, and your experience.
The article analysis must follow these formatting guidelines: double spacing, 12-point Times New Roman font, one-inch margins, and APA citations. Page length requirements: 3-5 pages, not including cover page and references.
Downsizing With Dignity
You Can Downsize With Care – for People and the Business
By Alan Downs in Business: The Ultimate Resource**
Updated April 29, 2015.
Executive Summary
• Downsizing or doing layoffs is a toxic solution. Used sparingly and with planning downsizing can be an organizational lifesaver, but when layoffs are used repeatedly without a thoughtful strategy, downsizing can destroy an organizations effectiveness. How you treat people really matters – to the people who leave and the people who remain.
• One outcome of downsizing must be to preserve the organizations intellectual capital.
• How downsized employees are treated directly affects the morale and retention of valued, high-performing employees who are not downsized.
• Downsizing should never be used as a communication to financial centers or investors of the new managements tough-minded, no-nonsense style of management – the cost of downsizing far outweighs any benefits thus gained.
Make no mistake: downsizing is extremely difficult. It taxes all of a management teams resources, including both business acumen and humanity.
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No one looks forward to downsizing. Perhaps this is why so many otherwise first-rate executives downsize so poorly.
They ignore all the signs pointing to a layoff until its too late to plan adequately; then action must be taken immediately to reduce the financial drain of excess staff.
The extremely difficult decisions of who must be laid off, how much notice they will be given, the amount of severance pay, and how far the company will go to help the laid-off employee find another job are given less than adequate attention. These are critical decisions that have as much to do with the future of the organization as they do with the future of the laid-off employees.
So what happens? These decisions are handed to the legal department, whose primary objective is to reduce the risk of litigation, not to protect the morale and intellectual capital of the organization. Consequently downsizing is often executed with a brisk, compassionless efficiency that leaves laid-off employees angry and surviving employees feeling helpless and demotivated.
Helplessness is the enemy of high achievement. It produces a work environment of withdrawal, risk-averse decisions, severely impaired morale, and excessive blaming. All of these put a stranglehold upon an organization that now desperately needs to excel.
Avoiding the Pitfalls of Downsizing
Ineffective methods of downsizing abound. Downsizing malpractices such as those that follow are common; they are also inefficient and very dangerous.
Allowing Legal Concerns to Design the Layoff
Most corporate attorneys will advise laying off employees on a last-hired, first-fired basis across all departments. The method for downsizing that is most clearly defensible in a court of law, for example, is to lay off 10% of employees across all departments on a seniority-only basis. This way no employee can claim that he or she was dismissed for discriminatory reasons.
Furthermore, attorneys advise against saying anything more than whats absolutely necessary to either the departing employees or the survivors. This caution is designed to protect the company from making any implied or explicit promises that arent then kept.
By strictly scripting what is said about the layoffs, the company is protecting itself from verbal slips by managers who are themselves stressed at having to release valued employees.
This approach may succeed from a legal perspective, but not necessarily from the larger and more important concern of organizational health. First, laying off employees by a flat percentage across different departments is irrational. How can it be that accounting can cope with the same proportion of fewer employees as human resources?
Could it be that one department can be externalized and the other left intact? The decision of how many employees to lay off from each department should be based on an analysis of business needs, not an arbitrary statistic.
The concept of laying off employees strictly on the basis of seniority is also irrational. The choice of employees for a layoff should be based on a redistribution of the work, not the date the individual employee was hired. Sometimes an employee of 18 months has a skill far more valuable than one with 18 years seniority.
Give as Little Notice as Possible
Out of fear and guilt many executives choose to give employees as little forewarning as possible about an upcoming layoff or downsizing. Managers fear that if employees know their fate ahead of time, they might become demoralized and unproductive — they may even sabotage the business. However, there is no documented evidence that advance notice of a layoff increases the incidence of employee sabotage.
The lack of advance notice about downsizing, however, does dramatically increase mistrust of management among surviving workers. Trust is based on mutual respect. When employees discover what has been brewing without their knowledge or input (and they will when the first person is let go), they see a blatant disrespect for their integrity, destroying trust.
By not giving employees information that could be enormously helpful to them in planning their own lives, management initiates a cycle of mistrust and helplessness that can be very destructive and require years to correct.
Afterward Act as if Nothing Happened
Many managers believe that after a layoff, the less said about it the better. With luck, everyone will just forget and move on. Why keep the past alive? The reality is, surviving employees will talk about whats happened whether the management team does or doesnt.
The more the company tries to suppress these discussions and act as if nothing has happened, the more subversive the discussion becomes. Remaining employees will act as a consequence of what has happened regardless of whether the management does.
Recovery from a layoff is greatly hastened if managers and employees are allowed to speak their minds freely about whats happened. In fact, it can be a great opportunity for the team of surviving employees to pull together and renew ties.
When management refuses to acknowledge what has really taken place, it appears emphatically heartless, feeding the employees sense of helplessness. If management wont talk about it even after the fact, what else is it hiding?
“To downsize effectively you have to have empathy with the people who are losing their jobs. ” (Percy Barnevik)
Downsizing Effectively
When faced with an organization that isnt functioning at optimal efficiency and thinking that a layoff is needed, there are a few key principles to keep in mind. Observing these principles wont completely eliminate the dangers of downsizing, but they will help to avoid the common pitfalls of a poorly planned layoff.
Is the Problem Too Many People or Too Little Profit?
The critical first question to ask before any layoff is: Is the need for this layoff driven by having too many employees or too little profit? If its too little profit, this is the first warning sign that your company isnt ready for a layoff.
Using a layoff solely as a cost cutting measure is utterly foolish: throwing away valuable talent and organizational learning by dumping employees only makes a bad situation worse. When your business lacks revenue, annihilating intellectual capital and thus reducing the efficiency of remaining resources as well as the potential for future growth is not the solution.
If the answer is too many employees, then youve begun the process of a well-thought-out strategy for change. To legitimately determine if you have too many employees, look at the organizations business plan, not its head count. What product and services will you be offering? Which of these products and services is likely to be profitable?
What talent will you need to run the new organization? These questions will help you plan for the post-layoff future. These issues will enable a quick turnaround from the inevitably negative effects of downsizing to positive growth in value and efficiency.