"Managing a Downsizing Process"
Human Resource Management
Winter 2004, pp. 425-438
This article identifies five "gaps" between knowledge and practice in employee downsizing efforts. Research shows that:
- Targeted cuts are the most profitable way to downsize, but practitioners often believe that attrition is more profitable
- Across the board cuts in workforce do not necessarily improve financial performance, but practitioners expect it to do so, without taking into consideration additional factors
- Involving employees in the process can be very beneficial, but practitioners often do not do this
- Breaching the psychological contract has serious consequences, but practitioners often act as if it does not
- It is important for employees to feel they have been treated fairly, but practitioners often act as if it does not matter
The authors also summarize what factors are likely to enhance the effectiveness of downsizing actions:
- Carefully consider the rationale behind employment downsizing
- Consider the virtues of stability
- Before making any final decisions about downsizing, executives should make their concerns known to employees and seek their input
- Top management should lead by example, and use downsizing as a last resort
- If employment downsizing is unavoidable, be sure that employees perceive the process of selecting excess positions as fair and make decisions in a consistent manner
- Communicate regularly and in a variety of ways in order to keep everyone abreast of new developments and information
- Give survivors a reason to stay and prospective new hires a reason to join
- Train employees and their managers in the new ways of operating
- Examine carefully all management systems in light of the change of strategy or environment facing the firm
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