Employee downsizing involves the orderly reduction in the number of employees through methods like retrenchment, temporary suspensions and early retirement aimed at boosting the organization’s profitability, competitiveness, efficiency and operations (Gandolfi, 2013). Employee downsizing is part of the whole process of organization downsizing which involves the restructuring of management, extensive layoffs and organization restructuring. Processes like resizing and reengineering are also considered under downsizing (Sayed, 2013). Downsizing also aims to cut down on costs incurred by employers through wages and other related expenses. Smooth downsizing is a systematic process involving research, management decision, informing the workers and carrying out the process. Even though employee downsizing has been in existence for decades, however, the global recessions of the 1990s and 2009 made downsizing a run-to choice for many companies. The recession had an effect of reduced purchasing power in the economy, resulting in reduced sales for businesses. Businesses had to cut down on costs to stay in the competition. This paper will explore the impact of employees downsizing on both departing and remaining employees from a human resource management perspective and recommend ways to make the resizing process smooth for both sets of employees.
Literature Review
Downsizing impacts both remaining employees and those that are departing. Organizations’ continued view of downsizing as an imperative method for rejuvenating and maintaining relevance in the market has created the need for research on how downsizing affects employees. Employment restructuring impacts workers levels of satisfaction in an organization (Ko & Yeh, 2013). The global trend of downsizing has led to change in workers attitudes about their jobs. They begin to view their jobs as less secure and this impacts on their morale at work. Further research indicates that employers are beginning to offer shorter employment terms (Ko & Yeh, 2013).
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Research on the effects of workforce downsizing has majorly dwelled on the impact of the organization’s processes and outcomes. However, the effect of the downsizing process to departing employees also plays a vital role in the performance of existing workers. If they view the process as fair, unbiased and justifiable, their performance is unlikely affected (Brenner et al., 2014). However, a quick and unexplained process negatively affects their performance and the output of the business. Victim’s perceptions of the process affect the period that they will take to deal with the impact of job loss and move on to another job or engage in another activity. Retaliatory actions to the layoff are also determined by perceptions of the downsizing process (McDevitt, Giapponi & Houston, 2013). Victims may view the process as unfair and biased, leading to legal action which may affect the firm’s image.
Personal Experience
Massive layoffs in companies accompanied the Great Recession of 2007 to 2012. Employers resulted in downsizing as a measure of cutting costs and maintaining relevance in a highly competitive market with reduced purchasing power for customers. Slow recovery from the recession meant that job loss was at an all-time high while anxiety and uncertainty among the survivors affected organizations’ performance (Hout, 2012). Among the victims of the layoffs, growing concern and despair resulted and stunted career growth. Most of their skills went unused during the period. However, their perception of the downsizing was that it was justified because it affected both multinationals and small companies. The prolonged recovery period from the recession led to a career change for many of the victims leading them to careers that they deemed to have more opportunities. Employees with least education were most affected since employers gave more preferences to college-educated workers (Hout, 2012). Among the survivors of the downsizing, levels of uncertainty over job security soared. Those who held comfortable positions no longer felt safe due to the situation. Restructuring meant that more responsibility and accountability was required among the surviving employees. Sluggish recovery further affected the situation causing fears of continued downsizing among the employees.
Impact of Downsizing on Remaining Employees
Downsizing presents both opportunities and undesirable effects to surviving employees. Since restructuring always accompanies the process, the new environment presents some challenges to employees. Comparatively, new avenues are made available for them to advance their careers and acquire new skills.
Job Security
Employee downsizing significantly reduces the organization's workforce. Consequently, surviving employees have the perception of diminishing opportunities within the organization (Jager, 2013). Eventually, their attitudes are affected because they are more worried about losing their jobs than their performance. Change in mentality translates to reduced performance. This trend is more common among junior employees who view themselves as less important to the organization. In the long run, the company’s performance is affected due to attitude change.
Work Overload
Downsizing significantly reduces the amount of workforce in a company. This process implies that less personnel will be available to complete the tasks available. Without proper planning and efficient restructuring, some workers may find themselves with a workload that is unbearable. With increased workload combined with anxiety over their position, the effects of work burnout become apparent (Jager, 2013).
Effect on Morale
The process of downsizing is mentally draining to employees’ right from the moment it’s announced until its completion. Failure by the management to effectively communicate to employees further impacts on the mental state of the employees. Survivors may perceive the process to be unfair and feel powerless to scrutinize it. Such perceptions affect their attitude over their job and the organization.
Opportunity
In spite of the negative effects of downsizing, opportunities emerge that survivors can grab and build their careers. A reduced workforce lowers competition for preferred positions within the organization. Laid-off workers leave essential positions vacant that the management may be interested in filling with more innovative people. Employees within the organization may use this opportunity to get into the position and farther their careers.
Impact on Victims
Similar to the effects of downsizing to survivors, effects on victims are both negative and positive. However, the negative impact on victims may be more severe if not handled carefully.
Anxiety and Despair
Job loss is never a comfortable situation for a person used to a steady paycheck. Right from the period the communication is made on imminent downsizing, the employee always feels anxious about their fate. Loss of employment has a tremendous mental impact on the victim and may lead to despair in their careers (MacDonald, 2017). Such an occurrence leads to loss of valuable skills that would still be beneficial elsewhere.
Career Setback
Loss of employment is an enormous setback for workers with intentions to grow their careers. Such setbacks are never easy to bounce back or pick up from where the career development had reached. Furthermore, career dreams may be shattered by employee downsizing.
Opportunity
MacDonald, a human resource professional, explains that employees who find themselves jobless after downsizing have the chance to venture into fields that they had never thought of before because of the comfort of the positions they held. Such new opportunities may be avenues to maximize their potential and utilize their skills and talents. According to her, downsizing may be a blessing in disguise for the victims.
Recommendations
Workforce downsizing is a trend that has picked up in recent years, and as competition continues to grow in the business environment, organizations are unlikely to abandon it in their quest to remain competitive and cut down on operating costs. In light of that, strategies and tactics employed by these organizations need to improve to cater for the effect of the process to employees.
Responsible downsizing calls on excellent leadership skills for the management. Employee-oriented leadership is of significance on the performance of the organization after downsizing (Tsai & C., 2014). Thus, management needs to follow the process of research, informed decision making and communication. Justified and unbiased downsizing is a crucial requirement for the whole process. The criteria for employee downsizing needs to clear and well stated. Legitimate reasons for carrying out the process impact on the trust of both surviving and victims of the process.
Another vital aspect of downsizing is communication. The management needs to inform employees of the impending layoff and give justified reasons for the decision. Such disclosure is necessary to reduce the psychological impact of downsizing and also to avoid employee backlash. Other considerations to smoothen the process are severance pay and counseling support (MacDonald, 2017). These two considerations ease the transition from one job to another.
Conclusion
More organizations are resulting in employee downsizing as part of their restructuring process to reduce operating costs and increase efficiency. The process impacts both negatively and positively on remaining and departing employees which in turn affects the firm's performance after the process. Considerations like job security, morale, and workload for remaining employees are part of the management responsibility during downsizing. The method also needs to be justifiable and unbiased. Employee-oriented strategies for downsizing make the process smooth and mitigate the negative impacts of downsizing on surviving and departing employees.
References
Brenner, M., Andreeva, E., Theorell, T., Goldberg, M., Westerlund, H., Leineweber, C., . . . Bonnaud, S. (2014). Organizational downsizing and depressive symptoms in the european recession: The experience of workers in France, Hungary, Sweden and the United Kingdom. PloS one, 9 (5).
Gandolfi, F. (2013). Workforce downsizing: Strategies, archetypes, approaches and tactics. Journal of Management Research, 13(2) , 67-76.
Hout, M. (2012). The labor force and the great recession. The Russell Sage Foundation and The Stanford Center on Poverty and Inequality . Retrieved on 2 February 2018, from https://inequality.stanford.edu/sites/default/files/LaborMarkets_fact_sheet.pdf.
Jager, W. (2013). Negative effects on downsizing survivors . Wageningen University. Retrieved on 2 February 2018, from http://edepot.wur.nl/281713.
Ko, J. J., & Yeh, Y. J. (2013). Worker satisfaction following employment restructuring: Effects of nonstandard workers and downsizing on job satisfaction in Taiwan. Social indicators research, 110(2) , 453-467.
MacDonald, L. (2017). The positive and negative effects of downsizing on departing employees. Hearst Newspapers, LLC . Retrieved 2 February 2018, from http://smallbusiness.chron.com/positive-negative-effects-downsizing-departing-employees-34813.html.
McDevitt, R., Giapponi, C., & Houston, D. M. (2013). Organizational downsizing during an economic crisis: Survivors' and victims' perspectives. Organization Management Journal, 10(4) , 227-239.
Sayed, Z. (2013). The Impact of Downsizing on the Remaining Employees in the Organization. (Unpublished Master Thesis). University of the Western Cape.
Tsai, P. & C., S. (2014). When responsible downsizing strategy meets employee-oriented leadership: Implications for downsizing performance. Journal Management & Organization 19(05) , 583-597.
