Discussion Replies: Training, Development, and Separations

DB2: Training, Development, and Separations – Impact of Downsizing

           In our dynamic and rapidly changing global business environment, organizational downsizing is an unfortunate side effect that can negatively impact employee productivity and morale (Noe et al., 2021). Often referred to as “rightsizing”, the process of letting employees go, is never easy and should be taken with the utmost consideration, as it not only impacts those workers that have been laid off from their job, but also substantially affects the workers that remain at the company, the layoff survivors. Socioeconomic shocks such as layoffs and downsizing have been linked to increased work-related stress and mental health concerns, job insecurity, lower job satisfaction, and a weakened commitment to the organization (Elser et at., 2019).

           A study by the American Management Association revealed that only one-third of the organizations that conducted downsizing actually increased profits as a result (Noe et al., 2021). How then should managers and human resources departments handle the inevitable downsizing of the workforce while minimizing the collateral damage? After all, it is also the reputation on the company that is at stake. Present and future prospective employees need to be reassured that the leaders of the organization are fair-minded, acting in good faith, and are genuinely concerned with being accountable to stakeholders. The process for rightsizing should begin prior to passing out pink slips. Managers must analyze the big picture and how the overall supply chain will be affected by reducing employees. Will the reduced number of workers be capable of producing the same output? If the decision is made to let go of “unessential” employees, this should be done by analyzing productivity data of individual workers through downsizing models to determine the cost and benefit of each employee (Pandey, 2018). Typically, the most recent hires are the first to get let go as the company has not invested as much in education and training for the newer employees as those who might have been with the company for a number of years. Temporary layoffs, or furloughs, may be a better option to put the company in a position to recall skilled employees when the economy and financial conditions improve.

           Managers and human resources professionals must be committed to engaging with the surviving employees through open communication in order to maintain a sense of commitment and trust (Noe et al., 2021). Transparency and communication of financial standing with employees is essential so that they understand the reasoning for the reduction in staff. In the event of an economic downturn, company leaderships could also receive pay cuts to show that they are equally invested in the growth process. Such a gesture would go a long way to show support and reinforce common goals.

           Responsible downsizing that incorporates strategies, best practices, and actions in which HR, management, and employees are involved in the process, can provide solutions to curb the negative impact of lay-offs (McLachlan, 2022). “Finally, all of you, be like-minded, be sympathetic, love one another, be compassionate and humble” (New International Version, 2011, 1 Peter 3:8). Layoffs might be necessary to keep a company above water during difficult times. However, it’s important to look at the human factors involved in the situation and be accountable to all stakeholders for long-term success.

 

References

Elser, H., Ben-Michael, E., Rehkopf, D., Modrek, S., Eisen, E. A., & Cullen, M. R. (2019). Layoffs and the mental health and safety of remaining workers: A difference-in-differences analysis of the US aluminium industry. Journal of Epidemiology and Community Health (1979), 73(12), 1094-1100.  https://doi.org/10.1136/jech-2018-211774 Links to an external site.

McLachlan, C. J. (2022). Developing a framework for responsible downsizing through best fit: The importance of regulatory, procedural, communication and employment responsibilities. International Journal of Human Resource Management, 33(1), 16-44.  https://doi.org/10.1080/09585192.2021.1958248 Links to an external site.

New International Version. (2011). Biblegateway.com, Biblica Inc. https://www.biblegateway.com/passage/?search=1+Peter+3%3A8&version=NIV

Noe, R. A., Hollenbeck, J. R., Gerhart, B., Wright, P. M. (2021). Human Resource Management: Gaining a Competitive Advantage (12th ed.). New York, NY: McGraw Hill, ISBN: 978-1-260-26257-5

Pandey, J. (2018). Managing employee surplus: The cats, rats, camels and elephants of strategic downsizing matrix. Strategic HR Review, 17(4), 220-223.  https://doi.org/10.1108/SHR-08-2018-133