Creative Class

In this economy, many organizations engage in downsizing as a cost-cutting measure or a means of increasing productivity. Apparently, such programs have mediocre rates of achieving the goals set by the downsizing.

In a Watson Wyatt survey (according to an article by Bob Nelson, Ph.D and author of the intriguingly entitled book, Managing for Dummies):

• Only 46 percent of companies who downsized met their expense reduction goals.
• Only 33 percent met profit objectives.
• Only 21 percent enhanced shareholder return-on-investment by doing so.

Nelson’s article goes on to say that because downsizing isn’t typically effective at meeting corporate needs, one round of layoffs tends to beget more. (This would suggest that if your employer has recently done a round of layoffs, you should probably dust off the resume and start updating.)

Downsizing tends not to help companies improve or return to profitability because they don’t take into account the perspective of (top) employees, according to Nelson. Here are a few traps employers can fall into:

• Believing survivors will be thrilled just to have jobs, and will forgive anything else.
• Believing that if anyone subsequently quits, it will be the weak and poor performers.
• Assuming that employees take what management is saying at face value.

Having been at a company that collapsed during the dot-com crash, and another that downsized following the 1991 recession, I recall management making all of these incorrect assumptions, and more.

As corrective advice, Nelson stresses the need to communicate excessively with employees during any downsizing and involve them directly in decisions. He also points out that lots of praise and recognition is free and goes a long way.

As the creative economy flattens hierarchies in day-to-day activities, any situation that creates an “us” versus “them” mentality would be especially toxic to productivity and longevity. Conversely, getting everyone involved might present some alternative solutions.

Is your organization looking for alternatives to downsizing? Or falling into the traps described by Nelson?

This entry was posted on Monday, May 11th, 2009 at 8:56 am and is filed under By The Numbers, Creative Class. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.