In an effort to increase productivity while cutting down costs,
more and more U.S. companies are shrinking their staffs. There's only one
problem with downsizing. It's not working, insists a team of researchers
at the University of Michigan.
Of 30 automakers studied over four years of downsizing, only five
or six experienced gains in productivity, report Kim Cameron, Ph.D., and
colleagues. In the others, corporate performance actually declined
following staff reductions.
Possibly, downsizing was so poorly managed that the intended cost
reductions have not occurred. But it also may be that downsizing creates
resentment and resistance among remaining employees--and that hinders
competitiveness.
Organizational shrinkage often leads to what Cameron's team calls
"the dirty dozen"--12 negative effects including decreased morale, trust,
communication, and innovation, as well as increased conflict,
scapegoating, and conservatism.
Cameron and Co. interviewed the heads of each organization five
times over the four years and compared their reports with perceptions of
corporate culture and the outcomes of downsizing gathered from more than
2,500 employee questionnaires. The end result? The way downsizing was
carried out proved more important to effectiveness than the actual size
of the work-force reduction.
"The most successful firms implemented both short-term and
long-term strategies as they downsized, and they used both
across-the-board and targeted techniques," reports Cameron. The
short-term, across-the-board shrinkage helps relate the seriousness of
the company's problem, while the long-term organizational restructuring
rebuilds employee security that changes are in motion to stop the
bleeding.
Cameron's team also recommends that the downsizing strategy be
designed by employees, not top managers, and that suppliers, customers,
and distributors be included in the reductions. And, perhaps most
important: "Pay special attention to those who lost their jobs. And those
who didn't."
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