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Downsizing While Maintaining Morale

Today we are still facing a struggling economy and seeing companies continuing to reduce their work forces. Too often this is done by cutting in general, i.e., mandating a 10 percent reduction in all departments or closing entire departments without considering other viable alternatives.

Since it may be necessary for you to downsize your company, whether in response to economic conditions or in response to structuring your company to be leaner and faster, here are some thoughts and guidelines that may prove helpful.

First, make the appropriate decisions. What is the targeted payroll cost reduction? Which personnel or departments will be eliminated or reduced? In what order and in what time frame will the downsizing begin, continue and end?

Consider how you will determine those to be released. Here are some criteria:


•Merit ratings.


•Veteran preference.

•Future needs.

•Early retirement buyouts.

Cost-saving options even after downsizing is complete could include eliminating part-time staff, reducing hours, offering short-term leaves, reassignment or transfer, leaves of absence and forced vacations.

Rationale. Develop a clear, logical statement of the situation and why downsizing is necessary. Tie this into positive aspects of organizational survival and effectiveness

Inform everyone about the following:
•What is going to occur and why.

•The timetable: When it will start, and when it will end.

•How it will happen.

•Options offered and available to affected employees to include possible re-hire in the future.

•Benefits to the organization, such as effectiveness, survival to reach the future.

Implement. Follow the timetable as published, then provide follow-up, contact and feedback. Think it out thoroughly and go through the process once—and only once. Let the remaining staff know when the downsizing process is over, and reassure those remaining employees when the downsizing is over.

Provide support. Your company can provide out-training and outplacement services, and help employees learn how to locate other positions. Keep the remaining employees at full employment if at all possible. Note: Doing these things can contribute to better labor relations and strengthen your company’s public image.

Openness. Management must develop the capacity to encourage, and be receptive and open to, input from employees. Information must be shared openly throughout the organization.

Congruity. Employees must have confidence in the information received. All levels of management must deliver the same message. Be consistent.

Delegation. Management must trust their subordinates to use their judgment in implementing their responsibilities in the downsizing.

Feedback and finality. Management must be willing to make decisions with input from subordinates, and yet must stand by decisions once they are made.

Shared values. There must be a common understanding of the organization’s vision, mission and goals and the need for the organization to survive so that the majority of employees survive as well.

Failure to properly approach and deal with downsizing can result in the following:

•Suspicion of management’s motives and actions.

•Skepticism of management’s plans and programs.

•Increased territoriality on the part of employees, departments or units.

•Institutionalized resistance to any change, even if it is beneficial.

•Development of “we/they,” “us/them” attitudes.

L. Douglas Mault is president of Executive Advisory Institute, Portland, Ore. The website is; he can be reached at (888) 428.3331.

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