Downsizing Hurts Productivity: A Case Study to Learn From

Although many companies lay off employees to cut costs and increase productivity, the result is often the opposite. In most cases, downsizing hurts productivity. A case study that was done on the fire department in Hampton, New Hampshire provides some insight into why this is true.

As part of the study, fire safety personnel were surveyed about their experiences with layoffs. Here are some of the results:

• The number of respondents who were very satisfied with their jobs was 72% before the layoffs and 11% after.

• The number who said they were not very satisfied was 3% before and 44% after.

• 47% of the employees who remained after the layoffs considered looking for work at another organization.

• Prior to the layoffs, 97% would have recommended their workplace to others. This dropped to 39% after the layoffs.

• 72% believed that downsizing had hurt productivity.

• 81% said that the layoffs had caused a drop in employee morale.

Of course, a single case study doesn’t prove that downsizing hurts productivity, but this is not an isolated occurrence. In 1996, the American Management Association conducted a study on companies that had downsized. They discovered that only about one-third of them had increased their productivity after downsizing.

Another study also found that downsizing hurts productivity. Some of the factors cited as reasons for the loss of productivity included the voluntary resignation of survivors, failure of those left behind to keep up the increased workload, resistance to change, and inexperience on the part of new employees who were hired to replace those who resigned.

If you are forced to cut labor costs, you should expect that there will be negative repercussions in the form of reduced productivity and morale, lowered employee trust in management, and valued employees who were not laid off leaving to work elsewhere. Although you can’t completely avoid these issues, there are ways you can reduce their impact.

7 Ways to Avoid a Loss of Productivity after Downsizing

1. Avoid layoffs if possible.

   Make sure your employees know that layoffs are a last resort that you will only consider when there are no other options.

2. Ask for cost-saving ideas from your employees.

   They may be able to help you come up with a way to cut costs without cutting their jobs.

3. Tell the whole truth.

   Be truthful with your employees, and don’t withhold information. Let them know what is going on.

4. Treat them as you’d like to be treated.

   Think about how you would feel if you were the one whose job was being cut. Try to treat your employees the way you would want to be treated.

5. Keep it positive.

   There are still good things going on at work. Help your employees focus on their successes.

6. Think ahead.

   Planning long-term projects demonstrates to your employees that you believe the future of the company is secure. Get them excited about being a part of that future.

7. Share the load.

   Your employees are going to be overloaded with work due to a shortage of staff and resources. Offer to help when possible and work with them to determine priorities so that they are focusing on the tasks that are most important.

Maintaining employee morale in the face of layoffs is not an easy task, but it is something every manager should strive for. By keeping employees motivated and productive during downsizing, you can increase your company’s chances of making a full recovery to its former strength.