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What They Don't Teach You in Business School

Lessons for Downsizing During COVID-19

March 28, 2020

In a time where we are living and working in a world of COVID-19 and fear is high — very high. Leaders at all levels are struggling with what to do and how to do it. Business schools do not focus on how to gracefully lay off people or deal with shutdowns. This post will share effective ways to make tough decisions.

A college friend told me recently he agreed to “retire early” instead of being laid off. He said the organization was “killing his soul.”

The Power of Culture

The most devastating consequence of downsizing (often called layoffs) is how it destroys the culture. Peter Drucker believed in the power of culture and was famous for saying “culture eats strategy for breakfast.” Culture is the “invisible tapestry” that weaves people together. When layoffs occur, the threads are broken both for the victims and survivors. And Edward Deming, the continuous improvement guru, said leaders need to “drive out fear.” When people are fearful, they become risk-averse and their behaviors are in direct opposition to what is now needed — innovation, creativity and productivity.

Downsizing Versus Restructuring

Since employee satisfaction is a pre-requisite for customer satisfaction, research indicates many companies that downsize actually continue to lose money. Most people and companies don’t do it right because these skills are often not taught in business schools. According to Wayne Cascio, author of Responsible Restructuring, “Downsizing has attained the (dubious) status as one of the most high-profile, significant, and pervasive management issues of our time. Over the past three decades, downsizing has occurred in virtually all industries and sectors of the economy, and it has affected businesses, governments and individuals around the world.” Cascio concluded, “You can’t shrink your way into prosperity.”

Based on his research, Cascio found that companies separate themselves quickly into one of two camps. The larger of the two he called “the downsizers.” They try to find the smallest number of employees that they need in order to operate. They view employees as costs to be cut. He referred to the second group as “the responsible re-structurers.” This group views employees as assets to be developed. There is a dramatic difference in how the groups view people and how they manage their business.

Alternatives to Downsizing

Cascio advocates alternatives to downsizing, but says it is based on whether senior leaders believe the downturn is temporary or permanent. If permanent, then workers need to be retrained if retained. He suggests creating a business decline contingency plan that identifies stages of decline, symptoms and actions to be taken. He encourages involving employees in defining the actions to be taken, however, this means sharing information, being transparent, and having a high level of trust within the organization.

Unfortunately, this strategy is rarely used.

I contacted David Noer, another one of the leading authorities on downsizing and layoffs and author of the book Healing the Wounds: Overcoming the Trauma of Layoffs and Revitalizing Downsized Organizations. Noer emphasized how it is much “harder to lead on the way down than on the way up” because of the lack of skills and training. He stressed how leaders need to be brave, to act with courage, and to remember that courage is a skill that needs to be practiced.

  • Face the fears, anxieties and uncertainties. Resist succumbing to anger, blame, and cynicism.
  • Help others. Lead with compassion and empathy. Be present for others.
  • Be visible. Don’t hide. The natural tendency is to hide.

Reigniting the Power of Culture

If leaders choose to downsize, in order to heal the wounds of downsizing, both for victims and survivors, leaders need to weave the culture back together because of the culture influences how people feel, think, and act. Noer offers this advice to leaders when dealing with fear, anxiety, and mistrust:

  • You can’t analyze people out of their pain. Connect with them at the heart, not the head.
  • In the midst of a loss of position and identity, they are not interested in strategic analysis. People need high touch and low tech.
  • Let go of the win-lose mentality of competition and focus on working collaboratively with employees to make improvements.

Warren Bennis is often cited as saying most organizations going through downsizing are overcontrolled and underled. Most of us did not learn the leadership skills needed in these uncertain times and the times are only becoming more uncertain. Now is the time to learn them and there are resources available to help. Noer concluded:

“Leaders must drop their hierarchical, analytical defenses, and become vulnerable to the power of human emotions. When it comes to restructuring, I generally tell people to avoid the four no’s. No secrets, no surprises, no hype and no empty promises. If you can stick to that, people will generally get in step with the program.”

If you didn’t learn these skills in business school, it is not too late to learn them now. There are resources such as those mentioned in this blog post to inform decision making before decisions are made that affect lives and organizations in negative ways.

This post originally appeared on leadingwithwisdom.net.

You can count on The Partnership to continue to share accurate and fact-based updates as well. See more on COVID-19 here.

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