Professor Colin Lindsay of Strathclyde Business School looks at recent evidence on the impact of downsizing on employees, priorities for HR practice and implications for workplace innovation.
The UK Government’s furlough arrangements will end in their current form in the coming weeks, and despite additional support being promised by ministers, the latest employer survey data from our PrOPEL Hub colleagues at the CIPD suggest that one-third of employers are planning redundancies before the end of the calendar year.
The downsizing process is inherently difficult for employers, those employees exiting organisations and the ‘survivors’ left behind. Clearly, key issues for all employers should be that: all other options are explored before laying people off; legal and contractual obligations are respected; and the wellbeing of those affected is prioritised. Recent research by the CIPD has found evidence that employers are exploring various options to minimise redundancies, including recruitment freezes and the introduction of new working arrangements. But for many organisations, there will be no choice but reduce staffing levels.
At first sight, there is limited overlap with the issues that provide the focus for PrOPEL Hub researchers interested in supporting engagement and innovation. But we do know that downsizing situations can have severe negative impacts on the capacity of organisations and their employees to innovate and perform. The flip side is that we can arguably identify priorities for business leaders seeking to minimise the damage, and perhaps even suggest strategies to assist remaining employees to bounce back. First, there is compelling evidence that organisations need to be ready to respond to challenges of ‘survivors’ syndrome’. This means that employees retained following downsizing sometimes report feelings of fear, guilt, powerlessness and vulnerability – this has obvious implications for employee performance and wellbeing. So, what can organisations do to respond? Clearly, it’s important to ensure that feedback and support for wellbeing are in place. Johanna Stengård and colleagues at Stockholm University have studied plant closure programmes’ impacts on employee wellbeing, concluding that providing consistent and accurate information is also crucial.
“An organisation that manages to inform workers about closure early on, explains the details of the procedures well and communicates openly is more likely to induce perceptions of informational justice and to provide workers with control and predictability, which should reduce stress and strain reactions.”
At a most basic level, downsizing is likely to impact on survivors’ job quality and conditions in the workplace. New research by Katja Dlouhy and Anne Casper analyses large-scale employee survey data from Germany, and uses the Job Demands Resources model that informs much of the work of PrOPEL Hub partners. Dlouhy and Casper find that downsizing survivors experience more job demands in the form of increased workloads and feelings of job insecurity, with implications for wellbeing. They also argue that the perception among survivors that there will be fewer opportunities for progression and development can undermine employee engagement. There are no easy answers to these challenges, but two take-aways for managers would appear to be that: (1) it is important that employees are aware that there are still opportunities to build a career in downsized workplaces; and (2) we should (again) not underestimate the wellbeing impacts on both leavers and survivors.
Can we even think about strategies for workplace innovation in a downsizing context? Well, the potentially negative consequences for innovation performance need to be acknowledged: the impacts on wellbeing and engagement described above are unlikely to be good for innovation; feelings of insecurity might lead to risk aversion; and information networks (among employees and with external stakeholders) will be dislocated. Nevertheless, supporting ‘innovative work behaviours’ – even in such a challenging workplace context – might have benefits. As well as maintaining a focus on generating new solutions of benefit to business survival, recent research by Michelle Hammond and colleagues has suggested that engaging in innovative work behaviours may be associated with reduced risk of psychological burnout, but only in workplaces where there are strong voice mechanisms so that employees think that there are “few costs of speaking up”.
Downsizing in the midst of an economic and health crisis is by definition horrible. The first responsibility of business leaders is clearly to avoid redundancies where possible and treat both leavers and survivors with compassion. But supporting innovative work behaviours among those who remain, communicating clearly and with integrity, and facilitating employee voice might all be important, both for the wellbeing of employees and the capacity of businesses to innovate towards a new normal after COVID19.
