RESOURCES

Revitalization after Downsizing:
A Briefing for Leaders
by Carolyn Turknett, Organizational Consultant


"In many cases, people burn out over the long run, the best people may leave, and those who remain often are dispirited," says Eric Flamholtz, a professor of management at the University of California, Los Angeles. "This is kind of a closet issue right now; no one wants to talk about it."

-Job Cutting Medicine Fails to Remedy Productivity Ills at Many Companies," The Wall Street Journal, June 7, 1994.


During times of change, too many organizations spend too much time paying attention to the wrong things. When the change involves downsizing, as many moves toward high-performance cultures do, too much effort is spent on the mechanics of the layoff and too little is spent on the group that will make or break the organization in the future - the layoff survivors.

Downsizing survivors usually feel like disaster survivors, and often are burned-out, depressed, lethargic, and cautious - not the high energy folks you need to build the organization of the future.

Some leaders take the approach that remaining employees simply have to get on with the new program or get out of the way. At some point, that's true. Some won't be able to navigate the new road and will have to be replaced. If you pay no special att ention to survivors, though, you won't simply have a few wrecks on the highway to clear up. You'll have a 500 car pile-up, and that can destroy the productive culture you're trying to build.

Productivity increases after downsizing have been disappointing: 75% of companies expected them and only 22% achieved them. There's increasing evidence that one of the reasons for this is the failure to revitalize the core employees who remain.

These are your core performers, and they have to say good-bye to the old organization that is lost forever, accept the new contract, and learn a new relationship to the corporation. The old contract promised job security for loyalty; the new contract promises challenging work and competitive pay for performance in exchange for maximum energy and task commitment. Understanding and buy-in will be automatic, and organizations that fail to understand this will fail to master the new competitive reality.

Although there's not yet a large body of research on layoff survivors, the data that is in indicates that downsizings often leave a workforce that is demoralized, angry, and depressed. More important for the long-term viability of the organization is that the survivors are also generally cautious, unwilling to make decisions or take risks, and lacking in energy and commitment. A study by the American Management Association found that 40 percent of organizations reported that productivity had sagged after do wnsizing, and 18 percent reported that quality had suffered. Morale was hit even worse: 58 percent said that morale had worsened, and 37 percent reported that employees were more difficult to keep. As the economy improves, retention will become an even b igger issue.

David Noer, who has done one of the most in-depth studies of layoff survivors (Noer, 1993) found these symptoms among survivors at all levels of the organization:
  • Fear and insecurity
  • Frustration and anger
  • Sadness and depression
  • Sense of unfairness
  • Reduced risk-taking
  • Lowered productivity
In all organizations there was a tendency to blame that was extremely divisive. Top managers blamed the union or the economy. Functional areas blamed other functional areas, and everyone blamed top management. Many layoff survivors view the top managemen t of the corporation the way survivors of the Holocaust viewed Hitler and Eichmann - they may feel glad that they escaped, but they don't feel good about the people they see as responsible.

Research from The Hay Group (Fisher, 1991) indicates that white collar employees not only feel angry, they also increasingly see their leadership as incompetent. On top of this, top corporate leaders often have a poor ability to take the pulse of the organization - they see morale as good when objective assessment sho ws it sinking. Sometimes they simply expect negative morale and ignore it.

Noer found that symptoms were worst in organizations that were highly bureaucratic and hierarchical before the downsizing or restructuring. In these organizations, the implied contract that has been broken ("If I am a loyal employee - if I keep my head dow n, don't make waves, and do my work - I'll have a guaranteed job here and I'll be able to move up in the organization. This organization is a family, and I'll be taken care of.") is much more entrenched than it is in newer, more flexible corporations. Ma ny older, more bureaucratic corporations continue to identify members by grades or levels after they have explicitly tried to flatten the organization. The terminology is just one part of an entrenched culture that implies continuity, upward mobility, and special status for those who have "made it."

Even more discouraging, perhaps, is Noer's follow-up study finding that many of the symptoms are still present after five years. In companies he studied employees still had not learned to deal with permanent job insecurity, and were particularly angry with top executives. They were more resigned and had a deepening sense of loss of control, as though they were passive players waiting for things to happen.

Joel Brockner has found evidence that the relationship between layoffs and productivity is not simple (Brockner, 1992). He postulates an "inverted U" relationship between insecurity and job performance: productivity may actually go up with mild job insec urity, but declines when insecurity becomes extreme. Brockner has also found that the way a layoff is handled affects the way survivors respond: if survivors see the layoff as fair and well-handled, its negative effect on productivity and morale will be lessened.

Employees see a layoff as fair if:
  • They see it as justified
  • They see it as congruent with corporate culture
  • The organization is given ample advance notice
  • Rationale is explained well by management
  • The burden is shared by all levels
  • The process for determining who should go is fair
  • Those who leave are given services to soften the blow
  • Employees are involved in the process.
Two other critical points emerge from Brockner's research. First, bureaucratic, paternalistic cultures will have a harder time adjusting, since the layoff will be seen as congruent with the culture. Employees will have an extremely difficult time seeing it as fair and necessary. Second, Brockner found that highly committed employees were more discouraged and angered by layoffs that they considered unfair than were less committed employees.

That means that paternalistic organizations, who have employees who are highly vested in the organization, will have to work harder to make sure that layoffs are thoroughly explained and well handled. They wi ll also have to work harder to revitalize survivors and to replace the old contract and the old culture.

Another research finding makes the revitalization more difficult: middle managers, who typically provide the link between upper management and the rank and file, are hardest hit by layoffs and most psychologically affected. (Fischer, 1991)

Their commitmen t to the organization plummets, they feel disenfranchised, and they often display hostility toward the organization with each other and with their subordinates. Without powerful effort from senior leadership they will not be willing or able to sell the new culture.

What researchers have found in organizations fits with what we know about human psychology. Security is a basic human need, far more basic than achievement or self-actualization. When security needs are threatened, people behave in self-protective wa ys to decrease anxiety and increase their feeling of security. They keep their heads down, refuse to take risk, guard their turf, and cater to those in power.

This defensive, passive behavior is not what most organizations are looking for as they attempt to build agile, high-performance organizations. The cross-functional teamwork and high commitment that leaders desire is often replaced by a highly politicized environment where employees are frightened and looking out only for themselves.Worse, we find that leaders are often unaware of the culture that exists, and don't take measures to counteract it.

The reactions of survivors after downsizing parallel the reactions of those who have experienced any major change or loss:
  • first denial ("Surely there won't really be another layoff" "I can't believe this is happening"),
  • then anxiety and anger ("How could the guys at the top do this?" "Why didn't they manage better?" Why are they paid so much?" "Why are they still not doing things right?" "Why are they still not listening to us?"),
  • through depression ("Things are just getting worse here." "There's no poin t in getting too charged up about this job."),
  • and, finally, acceptance. (Noer, 1993, pg. 131; Boronson and Burgess, 1992)
It's critical that organizations recognize these stages and help employees reach the acceptance stage quickly. Many organizations are struggling with key players stuck in anger or depression, making organizational revitalization impossible.

Some anxiety may be healthy, even necessary to replace the culture of entitlement with a culture of responsibility and performance. "Unremitting fear and uncertainty [though] generate free-floating anxiety that produces paralyzed, self-absorbed, and risk -averse employees." (Lee, 1992) Leaders who don't recognize this are living very dangerously.

Consequences for the Corporation


The aftermath of downsizings, left alone to fester, causes problems in all settings. Increased turfguarding, infighting, and politicization create an undercurrent of conflict. Discretionary effort, that effort between what it takes to maintain a job and t he maximum a person can give, decreases.

Middle managers, disillusioned and alienated, either don't talk to their people or let their negativity show. Most managers talk with their people less just when they need to communicate more. The cultural shift to high performance never comes - the organization gets bogged down in anger and isolation. Worse, people become more cautious rather than less, and even senior leaders become more risk averse.

As we have seen, the consequences for paternalistic, "old-paradigm" organizations will be more extreme and more dangerous. As Noer states, "In some old-paradigm organizations, with a history of paternalism, there is a permanent loss of motivation and comm itment." (Noer, 1993, pg.48)

These organizations may find:
  • That because the culture took care of people and tacitly offered a lifetime job, no one sees a layoff as fair no matter how well it's handled. This dramatically increases survivor problems. Anger may be intense, even dangerous, among both layoff victims a nd survivors, and increases without intervention.
  • That attempts to address survivors issues are sabotaged by old cultural assumptions. For example, the best remedy for minimizing the negative effects of layoffs (and for developing a creative, high-performance culture) is free and open communication. In most paternalistic cultures, however, there is an unchallenged, almost unconscious belief that communication is dangerous. Information is closely held and open debate is avoided.
  • That employees feel hostility toward the company, not the competition. For many of these organizations, there is no cultural history of true competitiveness. It must be instilled, yet intra-organizational hostility subverts efforts to build a new culture.
On a positive note, the downsizing itself may have the positive effect of making it clear that the culture is no longer paternalistic and care-taking. This result will be not be achieved, however, without some active intervention with survivors to help the m cope with the changed reality. Without a positive view of the new culture - without real help in understanding the new high energy, competitive, aggressive workplace - organizations get stuck in anger, depression, and lethargy.

Recommendations:


Four major elements form the basis for revitalizing survivors and building a new, high-performance culture. They are (1) information, (2) attention, (3)a clear vision of the future, and (4) group programs to help employees deal with grief and sadness and to help employees manage the change to a new culture. The specific recommendations below flesh out these ideas.

Before the Downsizing

  • Overcommunicate- about plans, about the competitive environment, about the need for change
  • Prepare supervisors and managers for the layoffs
  • Enlist managers who will remain - let them know how important they are to success
  • Ask them for ideas in dealing with survivors - even their peers
  • Train them to handle communication with their people. Although they will need to dramatically increase communication , studies show that they often decrease communication before, during, and after downsizings because of discomfort and guilt. Help them see the advantage of being straight-forward and supportive. Model this behavior.

During the Downsizing

  • Do it quickly. Get it over with, and, if possible, don't go through repeated downsizings.
  • Do it fairly. There is often an inherent contradiction between these first two recommendations that creates more problems. Fair procedures (ratings, etc.) are often lengthy, dragging out the process and dragging the organization down. Also, procedures th at are seen as most fair (e.g., early retirement) may take away just the key players you need to keep.
  • Find ways to deal with rumors. Some organizations have used bulletin boards and E-mail to deal with rumors. Let people post any rumor they hear. Respond to it immediately.
  • Again, overcommunicate. Give full information throughout the process. Information gives a feeling of control, and control reduces anxiety and insecurity. Remember that there is an almost insatiable need for information, and that information unsupplied wi ll be invented. Further, the information invented is usually negative: management is seen as guilty until proven innocent.

After the Downsizing

General Recommendations

  • Assess the survivors - have a clear knowledge at all times of mood, morale, energy, commitment, etc. Such knowledge is essential for planning interventions that will generate the culture you want.
  • Work to increase security, not by promising a job, but by:
    • Providing information (see next bullet point)
    • Increasing involvement (see fourth bullet point)
    • Helping people become responsible for themselves, in charge of their own career.
  • Overcommunicate. Provide information about:
    • Vision and strategy for the company - keep it simple and very focused
    • What is being done for layoff victims
    • Business realities (do this daily)
    • Business results (do this daily)
  • Increase involvement and control - give survivors an active role in creating the new workplace
  • Ask constantly for ideas, both about dealing with the downsizing and about ways to run the business. Involve everyone possible in reeingineering efforts, and keep everyone apprised of what's being done.
  • Get ideas from everyone on ways to build the new culture. Make the transition exciting. Remember that paternalistic cultures will not find this easy.
  • Where feasible, practice open book management.
  • Decrease paternalism, entitlement thinking, and hierarchy
  • Get rid of hierarchical language, perks, and displays. Avoid "surface only" changes (e.g., using the word associates while keeping the executive dining room).
  • Look at everything with fresh eyes. For example, change the way benefits are discussed. Make them a tangible, clear portion of compensation.
  • Real resolution of survivor issues requires culture change. Make the desired culture clear and exciting. To do this:
  • Focus on a few changes and use clear measures to give the workforce feedback about how they're doing.
  • Eliminate low value work (a daunting task for a bureaucracy - you'll face plenty of unconscious resistance, even personal resistance).
  • Tell success stories in conversation, in public forums, and in internal publications.
  • Cross-pollinate: bring in executives and other managers from other divisions or from totally different industries.

Recommendations for Group Programs

Group programs should build each individual's ability to manage change, through:
  • Saying good-bye to the past - mourning it and letting it go Understanding and accepting the future.
The "Good-bye" portion of the program may include such interventions as:

  • Open, frank discussion of feelings about the layoff - sadness, anger, fear, etc. - Feelings that are discussed are less powerful and less destructive.
  • A ritual good-bye, possibly using a funeral or a wake for the old comrades and the old organization as a vehicle. Remember that a funeral is a ritual for the survivors to help people accept a loss and go on - it is not for the victim. Few people would consider a funeral after a death a waste of time - most recognize that it helps us accept change and go on.
  • Discuss the old organization, perhaps in the context of the ritual. Ask questions: Was the old organization perfect? What was good? What will be missed? What will not be missed? What do we need to discard? Write out the old system ideas and activitie s and bury them.

After the mourning, when negative feelings have been discharged, introduce coping ideas. Ideas that will aid in coping and that will help people develop responsibility for themselves and their own career are:

  • The idea of self management: We are responsible for our own feelings.
  • The concept of resilience - people who respond well to change have measurable characteristics that can be developed.
  • The idea that each of us chooses how we respond to change. We can see ourselves as victims (feeling constantly angry and vulnerable), survivors (feeling passive and anxious), or as navigators (actively setting our own course). Victims see themselves as casualties even though still employed - someone else alw ays causes their problems and management is always the bad guy. Survivors lay low and don't take risks. Their energy is low, and it takes all they have to get through the day. Navigators are "change hardy" - they make their own meaning, and see themselv es as capable, responsible and in charge of their own lives.
  • Give everyone a vision of the new organization. In individual and group settings, have leaders speak to as many people in the organization as possible. When speaking, leaders should first show understanding and genuine concern for the loss of the old org anization and for the fact that many people are gone. Let leaders share their vision of the new organization.

Specific Advice for Leaders

  • Recognize that you absolutely won't get more effort from your people and won't get a high performance culture without dealing with survivor issues. You must separate what you think should happen from what will happen. Many leaders act as though wishing m ade it so. "Get on board or get out of the way -the train's leaving the station" sounds great, but it doesn't work, at least not at first.
  • Recognize that you can't get loyalty with orders or overcontrol. You must ENLIST the workforce - RE-RECRUIT.
  • Recognize that people feel betrayed - you (and they do blame you) violated the unspoken contract.
  • Lead from the heart. Imagine that you are going to a funeral, and you are the most senior person in the family. You wouldn't start a funeral service with discussion of actuarial tables - it's no more appropriate to start discussions of downsizing s with business environment statistics.
  • Remember that a bottom-line-only focus will get you in a world of trouble. People make the bottom-line results possible!
  • Say to your remaining workforce, "You're here because we want you - we feel that you can compete in the new world."
  • Move ahead, challenge, move fast, take risks - <+!>model<-!> the behavior you want. Even senior leaders often become cautious and defensive in times of change.
  • Institute a program for getting ongoing feedback about your own behavior. Particularly if you have been in a paternalistic, bureaucratic organization, you will have behavior that you don't recognize that gets in the way of the very culture you're trying to build.
  • Get ongoing feedback from the workplace. Monitor attitudes. Remember that you are likely to be unaware of the mood of the workplace, and will consequently be ineffective in communication. Speak to small groups before giving presentations to large groups, and get feedback about your message.
  • Recognize that you unconsciously reinforce the old contract and old behaviors:
    • You are likely to control information - to think about the "spin."
    • You may still act as though you expect loyalty - still reinforce the old entitlement for loyalty contract unconsciously. If you don't want to hear feedback, if you shoot the messenger, if you feel anger when employees criticize the company, you're playin g on the old field, and are reinforcing unproductive behavior.
    • You may continue to speak in terms of levels or grades, and continue to enjoy too many perks at the top of the hierarchy.
  • Make communication of strategy paramount. Studies show that in most organizations (two-thirds), people say they don't know the direction of the organization. In communicating strategy:
    • Keep it simple.
    • Keep it positive and exciting.
    • Let people react to it and help refine it.
  • Constantly support, reinforce, and re-recruit your middle managers - they:
    • Are likely to be angry.
    • Are likely to retreat from guilt.
    • Are the key to your survival - they will revitalize the rest of the workforce.

 

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