Cheap approach to redundancies costs employers dearly

by 17 Mar 2009

The current round of downsizing by employers is not achieving desired results, with employee morale, motivation and productivity diving after most retrenchment programs, according to research from Drake International.

It found that 40 per cent of remaining staff became less motivated after their employer downsized and 41 per cent said their respect for their employer had declined.

It also revealed that 46 per cent of remaining employees were less likely to recommend their employer to a colleague seeking a job.

The research found that employers are doing themselves long-term damage by not managing downsizing effectively, according to Drake strategic manager, David Edwards.

"Only one year ago employers were investing heavily to attract new staff to deal with critical skills shortages," he said.

"Today the same employers are not only losing critical skills, which will be hard to replace once the upturn occurs, but they are also damaging their hard won reputations as employers of choice," he said.

Downsizing should be an opportunity to improve productivity and reduce waste, and not just a cost-cutting exercise, Edwards said.

"Organisational restructure should be about working smarter by changing processes and redesigning job roles, however, the survey reveals that most employers expected to achieve downsizing benefits by asking staff to work harder," he said.

The survey, which took in more than 6300 employees and managers who have experienced downsizing in their organisations, found that although many employers were changing processes and job roles, productivity increased in only 21 per cent of cases.

The main cause of the failure to get results was the lack of investment in retraining, according to Edwards, with only 14 per cent of employees receiving training after restructuring.

Many employers undertook downsizing without appropriate planning, resulting in chronic under-performance after a restructuring, he said.

Within the first six months after downsizing, 45 per cent of employers re-employed permanent or temporary staff in roles that had previously been eliminated in the downsizing.

Key survey findings

Employees are critical of the effectiveness and fairness of downsizing by their employers:

• 37 per cent say it was managed effectively

• 40 per cent say the communications were effective

• 24 per cent of employers asked their employees for their involvement in ideas to manage the downsizing

• 34 per cent say that the process was managed fairly

In general, employers did not manage the remaining staff well:

• 19 per cent were offered counselling after the downsizing

• 40 per cent became less motivated

• 56 per cent of employers established and communicated a new plan to re-focus employees on future goals, but 41 per cent said their respect for their employer declined after the downsizing

How did employers go about improving productivity?

• 54 per cent of employers changed some processes

• 81 per cent of employers changed roles or position descriptions

• 74 per cent of employers changed the organisation structure

• 72 per cent of employers expected staff to work harder (do more)

• After these changes, only 14 per cent of employees said they got training after the downsizing

• Productivity increased in only 21 per cent of cases

Did employers plan effectively?

• In the first six months after the downsizing 45 per cent of companies re-employed permanent or temporary staff in roles that had been eliminated as part of the downsizing

How did employers treat the staff who were made redundant?

• 29 per cent were offered independent counselling

• 32 per cent were provided with career transitioning services

• 15 per cent were offered the opportunity to respond to an exit survey or interview

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