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Introduction
Downsizing is a characteristic of modern life of organizations that involves the reduction of the organization’s financial, human, physical and information assets (Cooper, Pandey and Quick, 51). In most cases, organizations employ downsizing as a strategy for transformation that is intended to introduce changes in the organizational designs, work process and corporate cultures and values. The process of downsizing is often referred to as organizational restructuring. Among the stakeholders that are affected by downsizing are the employees, especially when the organization resorts to employee downsizing that results in the reduction of the number of organizational workforce. The process involves the elimination of certain job positions, employee layoffs and to generally reduce the human assets of an employer.
Companies usually resort to downsizing as the last option when it is necessary to take measures to introduce organizational change. Whenever customer demands begin to decline, most companies will resort to layoffs in order to reduce the number of their workforce and consequently reduce the operational costs. Downsizing also occurs as a result of outsourcing measures and the introduction of labor efficient machines in order to enhance the company productivity, improve global competitiveness. While downsizing can provide a lot of benefits to the company, the process can leave a very painful experience among its employees that may result in the negative consequences that may affect employee loyalty, satisfaction, trust, and their performance in general. This paper will present the impact of downsizing to employee performance and trust, while underpinning important solutions that can prevent the detrimental effect of downsizing to the employees and the organization in general.
Discussion
Downsizing is often viewed as a normal part of the organizational change process and it can undoubtedly affect every member of the organization. Most literatures study the effects of downsizing based on three levels, namely the macro, organizational and micro level. The most dramatic impact of downsizing is on the micro level, which involves the individual employees of the organization. While the one who are most directly affected by downsizing are those who were laid off from employment, the process also leaves a chilling and negative effect to the employees who stay, or whose services are retained by the organization. According to Djordjevic and Djukic (57), the surviving employees experience different kinds of problems, such as low motivation, job insecurity, mistrust, reduced loyalty, psychological stress, reduced turnover, absenteeism, lack of job commitment and lack of productivity, as among many others. As a consequence, this indirect effect of downsizing to the surviving employees can also have a dynamic impact on the organizational productivity. Organizations may also lose talented and highly competent employees who might choose to leave the organization because of the feeling of mistrust and lack of job security.
Downsizing has a major personal impact among the employees. In a survey made by Searle and Skinner (315) among the HR managers and employees, it was conclusive that downsizing has left many employees doubting their loyalty to the organization. Some expressed the feeling of isolation with the fear of the possibility of losing their job anytime. Some psychologically distance themselves from their employer, with the feeling of mistrust that they might be the next in line of being laid off. HR managers also experience emotional conflicts about communicating to employees whom they have known for a long time about the news of downsizing. The impact of downsizing can be so expanse that it can provide an environment of fear, uncertainty, mistrust and insecurity within the workplace. Downsizing can also result in the breach of psychological contract of trust that are common in the workplace setting, resulting in poor work ethics among the employees (Liou, 509).
In many cases, the problem with the growing insecurity and mistrust among employee to its organization where they belong after downsizing is the lack of information. Sears (8) indicated that the most common root of the problem is due to communication gap between the employees and the employer. Rumors may spread within the organization, leaving employees speculating about the reasons why some of the employees were laid off. This leaves a very stressful environment that could affect the surviving employees’ ability to feel secure about their employment and the development of lack of trust and consequently a decline in their motivation and commitment to their work performance. Without having communicated the main cause of downsizing to the employees will leave a threatening work environment for the employees, making them feel insecure and unproductive. The impact of communication gap about downsizing also involves the escalating feeling of mistrust among the surviving employees with the fear that there will be more job losses in the future. Moreover, in a study of Ndlovu and Parumasur (16), about 67% of the employees who were interviewed revealed losing their trust to their employer because they did not receive an adequate information regarding the downsizing before and after the organizational restructuring. 37.6% among these surviving employees are not confident that they can achieve their career and personal goals within the company after the downsizing.
The impact of downsizing to employee trust can also affect their morale, leaving them the feeling of dissatisfaction, lack of motivation and the intention of leaving the organization. As a result, the negative effects of downsizing can extend to affect employee performance. The psychological breach of trust among the employees can influence their attitude towards work and this can lead them to develop practices that diminish their productivity and performance. These are usually characterized by absenteeism, lack of commitment, and poor employee turnover. Employees who feel dissatisfied with their job are also likely to show disturbed behaviors in the performance of their duties, usually resorting to anger, laziness, resentment, poor cooperation and the lack of teamwork spirit. Searle and Skinner (316) also noted that the greatest personal impact of downsizing involves the role challenge, followed by the feeling of uncertainty and stress. The effect of reducing the number of employees in the workplace can have a tremendous impact on the workloads of the surviving employees, which is responsible for a stressful workplace environment that generally affect employee performance.
Downsizing will certainly leave a significant impact to the surviving employees that can have a dramatic impact on employee trust, work engagement and performance. It is crucial for every organization to understand that poor employee performance and mistrust can hurt the overall organizational productivity. While organizational change seems to be inevitable, there are strategies that can help organizations introduce the transition of downsizing smoothly and to mitigate the impact of the process to the employees. According to Niehaus and Price (113), implementing a strong communication program at the outset is critical in the smooth process of downsizing within an organization. This is a method of showing a higher level of concern and ethical values from the employers and it an effective means of mitigating tension and stressful condition within the workplace. It is very common for employees spreading rumors and make biased assumptions about a situation. In order to prevent causing strained relationships and stress among the employees about the threat of downsizing, it is crucial to keep them informed in order to better understand the cause of downsizing. The employment of a cross-functional team to implement and disseminate the information about downsizing is recommended to ensure that the interests of all organizational members are represented. It is important to communicate to the employees the rationale of the downsizing measure in order to help them understand the situation that can help reduce the employees’ resistance to change.
Whenever the downsizing involves laying off a greater number of employees, the implementation of the downsizing measure must involve the labor management relations. Large workforce reduction can have a devastating impact between the labor organization and the employer, but this can be avoided by involving in the decision making process the labor organization representatives in helping the members of the workforce understand the need for downsizing within the organization. This is a strategic plan that organizations can endeavor in order to avoid the mistrust and resentment of the surviving employees to the management. It also helps for the senior managers being present during the announcement of the downsizing to the employees. Their presence is essential in order to show their personal concern to the well-being of their employees and be able to provide accurate answers to issues that will remove the feeling of doubts, uncertainties and mistrust of the employees (Mishra, Spreitzer and Mishra, 12). An open communication will improve the employee’s trust to the management because of the transparency that the organizational leaders are willing to provide to all the members of the workforce.
The active participation of the human resource department of an organization can also help in the smooth implementation of downsizing. Among the important participations that the department can provide in assisting the affected employees is using various resources such as determining the available options that will reduce the involuntary separation of the employees, such as retirement, and job placement assistance. They can also help in reducing the impact of the downsizing to the workload of the surviving employees by sending them to trainings in order to further enhance their skills and competence and by reviewing the employee’s job description to determine the suitability of the job assigned to an employee with consideration of his training and educational background. The human resource also has a critical role in making microlevel choices in determining who among the employees to let go (Schmitt, 862). It is easier to maintain the trust of the employees to see poorly performing workers to be laid off instead of seeing the more competent ones to go. The fairness and good will that the organization can show when implementing downsizing can help retain employee trust and will encourage more competence and productive performance among the workforce. Downsizing can leave a stressful workplace environment, but this can be mitigated through the presence of the top executive managers who should be present when announcing the plan for downsizing to show passionate concern to the distressed employees and to retain the psychological contract of trust among the retained employees.
Conclusion
The impact of downsizing to the employees is often magnified by the fact that the organization implementing the same lacks the strategy that can help mitigate the distressing condition that it can have to the surviving employees. Organizational management should understand that downsizing can have a dramatic effect to the employee performance that can have a devastating effect on the overall productivity of the organization. The lack of trust among the employees and their poor performance at the workplace are often the consequence of the lack of communication process between them and the management. The implementation of a well planned downsizing measure can mitigate the negative effects of the process of organizational structure. Communication is the primary element that can prevent mistrust and uncertainties among the surviving employees. The active participation of the management’s top ranking executive will also encourage a more passionate concern of the organization to its people. The role of the human resource management is to ensure the fairness of the implementation of the downsizing measure and that the primary cause of such measure is fully communicated to all members of the workforce. It is also crucial to provide assistance to the employees to embrace the change more competently and with less resistance on their part. These strategies can help reduce the psychological, emotional and behavioral stress among the employees as a result of downsizing and at the same time will enhance employee trust and improved level of work performance and productivity.
Works cited
Cooper, C., Pandey, L.A., and Quick, J.C. Downsizing: Is less still more? Cambridge: Cambridge University Press. 2012. Print.
Djordjevic, B. and Djukic, S. The impact of downsizing on the corporate reputation. Economic and Organizations.2009. 5(1): 51-62.
Liou, K. Handbook of pubic management practice and reform. New York: Marcel Decker, Inc. 2001. Print.
Mishra, K., Spreitzer, G. and Mishra, A. Mitigating the damage to trust and empowerment during downsizing. California: CEO Publication. 1997.
Ndlovu, N. and Parumasur, S.B. The perceived impact of downsizing and organizational transformation on survivors. SA Journal of Industrial Psychology. 2005. 31(2):14-21.
Niehaus, R.J. and Price, K.F. Botton line results from strategic human resource planning. New York: Springer Science. 1991. Print.
Schmitt, N. The Oxford handbook of personnel assessment and selection. Oxford: Oxford University Press. 2012. Print.
Searle, R. and Skinner, D. Trust and human resource management. Massachussetts: Edward Elgar Publishing. 2011. Print.
Sears, E. The impact of downsizing on the long term employees’ self concept. Ann Harboe, MI: ProQuest. 2008. Print.
