Downsizing is the planned elimination of jobs in an organization. Because downsizing typically involves shrinking the organization’s workforce, it’s an important issue in HRM. When an organization has too many employees—which may happen when it’s faced with an economic crisis, declining market share, overly aggressive growth, or when it’s been poorly managed—one option for improving profits is to eliminate excess workers. Over the last few years, many well-known companies have gone through several rounds of downsizing—AmEx, Boeing, McDonald’s, Volkswagen, IBM, AT&T, Walmart, Ford Motor Co., PepsiCo, JCPenney, Amazon, and Comcast, among others. How can managers best manage a downsized workforce?

After downsizing, disruptions in the workplace and in employees’ personal lives are to be expected. Stress, frustration, anxiety, and anger are typical reactions. And it may surprise you to learn that both victims and survivors experience those feelings.49 Many organizations have helped layoff victims by offering a variety of job-help services, psychological counseling, support groups, severance pay, extended health insurance benefits, and detailed communications. Although some individuals react negatively to being laid off (the worst cases involve individuals returning to their former organization and committing a violent act), offers of assistance reveal that an organization does care about its former employees. While those being laid off get to start over with a clean slate and a clear conscience, survivors don’t. Unfortunately, the “survivors” who retain their jobs and have the task of keeping the organization going or even of revitalizing it seldom receive attention. One negative consequence appears to be what is being called layoff-survivor sickness, a set of attitudes, perceptions, and behaviors of employees who survive involuntary staff reductions.50 Symptoms include job insecurity, perceptions of unfairness, guilt, depression, stress from increased workload, fear of change, loss of loyalty and commitment, reduced effort, and an unwillingness to do anything beyond the required minimum.

To show concern for job survivors, managers may want to provide opportunities for employees to talk to counselors about their guilt, anger, and anxiety.51 Group discussions can be a way for the survivors to vent their feelings. Some organizations have used downsizing as the spark to implement increased employee participation programs such as empowerment and self-managed work teams. In short, to keep morale and productivity high, managers should make every attempt to ensure that those individuals still working in the organization know that they’re valuable and much-needed resources. Exhibit 9–10 summarizes some ways that managers can reduce the trauma associated with downsizing.