In this article we look at what happens to the culture of an organisation after a significant downsizing.

At the moment, many employers are feeling the pinch through the current financial crisis. To cope with this, cost cutting measures have been introduced by many. Most experienced managers see downsizing of staff as a necessary way to safe point an organisation through a market downturn.

A good downsizing will chip away staff in non-performing sectors and strengthens the performing areas. However, if handled badly, a reduction in staff non-performing sectors can quickly spread to your viable staff – creating a deadly spiralling downfall of a company as their key revenue raisers depart.

Point of case, in the dot.com crash an-ex-director of a major employer of IT staff in Melbourne confided in me that he had laid off 20 staff by inviting them into a boardroom and then announcing to them that today was their last day and their severance cheques are at the door. No forewarning. Immediately everyone in the business was shell shocked. Most spent the rest of their working week walking around in a daze talking with anyone that would listen about how badly it was handled and how now they feared for their jobs.

Now the company at that stage had a good cash flow of committed clients. The decision of whom they chose to slash was to do with a new product line that did not have the legs in that current market – but the remaining staff did not know that beforehand. Over the course of the next month, key mid -performers drifted away from the company. Once a key manager left, the tide opened. Incomplete teams lead to massive drops in production, leading to more cost cutting as more managers were chopped away and teams merged.

All this disruption results in the company’s profit disappearing and less than eighteen months later a company that had been in business for over 21 years and employed some 350 staff ceased to exist and its assets and clients sold off for well below market rates.

One of the key assets of an organisation is the strength of its staff culture.

A company’s culture dictates the level of your staff’s commitment to getting their company moving forward though good production. A good culture keeps staff motivated and weeds out non-performing staff. A bad culture leads to staff turnover and missed growth opportunities. In business things are done by people – without good people machines fail, plans don’t start and growth opportunities are missed.

A good manager knows what to expect and builds strategies around handling the emotions that come into play with remaining staff. Some of the most common cultural shifts after a significant downsizing that we have witnessed from the last 17 years are;

A Culture of Denial.

This occurs when a basic belief of security becomes suddenly compromised. The next logical step is into employee anger, which occurred in the 1990’s triggering union militancy, strikes, and sabotage. Once the anger has subsided, depression sets in. During major downsizing, suicide levels increase. Unprecedented levels of family violence and break-ups occur. Commonly we find that even though the employer may have given three months warning that cuts were looming in the specific sectors, staff in those sectors have not told their spouses – until it is way to late to plan.

A Culture of Fear

Continuing waves of downsizing lead to widespread fear that job security is not existent. With career comes a sense of identity for most, this becomes challenged as there becomes a belief that it doesn’t make any difference how hard you work, how long you’ve been around, or how loyal you’ve been: You’re an expendable commodity.

A Culture of Cynicism

Stock-option-based compensation ensures that senior management’s interests are aligned with those of shareholders. Workers, especially those struggling with flat or diminished personal earnings, are not motivated to follow the leadership of greedy managers whose first priority is their own pockets.

A Culture of Self-Interest

As employees realize that the company cannot sustain their own interests, they start to become more self-reliant and look after their own interests. This can mean a large drop off in company loyalty.

A Culture of Distrust

Employees become distrustful of management and/or others as the next wave of job cuts loom. Many employees become less open to share their thoughts or disagreements with management, as they fear that they may be misinterpreted. This results in fewer ideas on how the company should move forward being contributed.

Interestingly, marriage counsellors recognize that these cultures are present within the months leading up to a divorce. As in all relationship building, open and straight communication is the key. Many organisations have successfully worked through these cultural changes by focusing on two criteria:

Eliminating fear and doubt in the work place and working within a consistent set of values and ethics.

Although many may say is a management / HR driven revival, the success of revival depends on the buy in of the strong personalities in the team. Without them driving the water cooler gossip in your direction, you are faced with an uphill battle.

I’m Daryl Keeley and I hope I have given you some valuable tips on what to expect and forearm you should you need to go through a downsizing in your company.