Motivating Downsizing Survivors in Small Businesses

Studies on the effects of downsizing have generally revealed mixed results depending on several variables including the nature and extent of downsizing, degree of planning undertaken, extent of Human Resource involvement, and effectiveness of the organization's communica- tion climate (Burke & Cooper, 2000; Atwook et al., 1995; Huber & Glick, 1993). According to one study published at the peak of the downsizing phenomenon, nearly 68 percent of downsizing efforts were not successful in terms of meeting goals (Clark & Koonce, 1995). Not only were management-related goals not fully achieved, but survivors of downsizing were left with emotional and other problems that could affect their future with the organization. While some studies have concluded downsizing negatively affected the company in terms of its financial status, skilled workforce, and public perception (AICPA, 2001; Cascio, Young, & Morris, 1997; Cascio, 1993), other studies have found that downsizing had negative effects on the morale, loyalty, and overall attitudes of survivors (Luthans & Sommer, 1999; Martin, 1998). Scholars and entrepreneurs generally agree that for downsizing to be effective, it must be properly executed, which means it must not focus exclusively on the interest of management to the extent the interests of workers are marginalized. In short, downsizing needs to be well planned and executed.A study by Martin (1998) has confirmed a widely-held belief - firms that engage in layoffs based on poor or no planning are more likely to suffer negative effects. At the very least, management needs to reassure the survivors that the perception of the survivors that management only sees workers as mere tools is inaccurate (Frazee, 1996; Obilade, 1998; George & Jones, 2008). One problem that arises from downsizing is instability resulting from uncertainty. This could be a huge problem in a volatile business environment where firms may have to resort to unplanned downsizing to stay competitive. Martin (2001) reports that a survey conducted in June 1999 found that 66 percent of the firms surveyed (N= 1992) reported a scarcity of skilled workers in 1999; whereas only 6 percent reported a scarcity of skilled workers a year earlier. This highlights the fact that firms faced stiff competition in their attempt to recruit technologically competent workers who could help them to compete in a technologically- driven work environment that had "blown to bits" the old ways of doing business. (Evans & Wurster, 2000). Many firms felt they had no option but to restructure in order to recruit skilled workers.The problem of scarcity seemed to have peaked by 2000 when 76 percent of the firms reported that skilled workers were scarce. By 2001, 47 percent still reported a scarcity of skilled workers. Also, the American Institute of Certified Public Accountants note that 58 percent of the 1 63 1 businesses surveyed by AMA between 2000 and 2001 reported job cuts, and this represented the highest level of job loss in AMA's fifteen-year survey history. The instability evidenced in these surveys can be attributed in large part to downsizing.What this suggests is that downsizing needs to be conceived and implemented as a part of the overall human resource management (HRM) strategy of the organization designed to improve the ability of the company to compete more effectively. Workers should be persuaded that they too have a stake in the competitiveness of the organization. To achieve this goal, it is important for the company to create a strategic role for HRM, especially if downsizing is a credible part of the company's competing strategy.Although managers may be aware of the important role of HRM in decisions on downsizing, not all businesses are well- equipped to pursue all the activities associated with HRM. Furthermore, small businesses in particular might be so focused on survival that they could engage in downsizing principally to reduce costs. …