Article Outlines Right Way to Downsize, Wins Award

It used to be called "lay offs." In recent years, it has come to be known as "downsizing." As companies face this reality, they may want to take their employees' needs into account, not just their own, suggests a recent study by a University of Cincinnati researcher.

An award-winning article by UC communication professor Gail Fairhurst concludes that employers who do not take into account the needs of the workers they plan to lay off, as well as their own goals, will pay a price. Her study, recounted in the May 2002 issue of Management Communication Quarterly, received the "Article of the Year" Award from the National Communication Association's Organizational Communication Division on Nov. 23 in New Orleans. Fairhurst followed a series of three downsizings at a firm and how that firm communicated with its employees for her case study. What she found is that it took three tries before the firm got "downsizing" right.

It works best for the company if it's a win-win situation for both the company and the employees who are being terminated," Fairhurst says. The most effective downsizing programs incorporate three crucial - and contradictory -  approaches:

• Top-down initiatives that thoroughly involve subordinates, giving them honest information. "It's management who says we're downsizing. But they need to involve the employees in some of the operational decisions."
• Short-term and across the board, but also long-term and selective. "If you just make it short-term and across the board, you're not thinking about whether you have the skill mix that is needed."
• Focused on both the needs of employees who lose their jobs but also on those who remain. "Survivors can also pay a heavy price in a downsizing.

In her case study, the company went through three downsizings during the 1990s. Below are summaries for each, showing that the third was the most effective.

First: Pack Your Box
The company's first downsizing used what she terms a  "Pack Your Box" involuntary separation approach. More than 200 employees came to work one morning and one by one were asked to the supervisor's office. There they received a box and were told to pack their belongs. They were also told of their immediate termination and about severance. Fairhurst said this approach resulted in a variety of lawsuits contesting the layoffs. Age discrimination and unfair practices were cited. Some survivors - those who stayed on - became whistleblowers. "There was so much external pressure applied to the firm that the president lost his job. It was a catastrophic downsizing that benefited no one."

Second: Involuntary voluntary
In the second downsizing, the firm used an "involuntary voluntary" approach that also backfired. "An incentive program to leave the firm was offered, but the firm ordered employees to volunteer for this program." They needed 400 people to "volunteer," but more than 700 applied, including some of the most qualified people they would like to have stay.  It ended up boomeranging and hundreds who volunteered to leave were told you can't go, you need to stay. The people who ended up staying were disgruntled because they were psychologically geared up to leave.

Third: The velvet boot
In the third downsizing attempt, the company finally got it right, says Fairhurst. They used a "velvet boot" strategy. It was a very employee-centered downsizing strategy that addressed the needs of management and the employees' needs simultaneously. By doing that, they were able to respond to contradictary demands in the workplace. They talked to employees two years in advance of the job elimination and provided a variety of clear paths to alternative employment or education and benefits provided well before termination. "Also the people that they let through the door were only in job classifications that needed to go. But if you were among those leaving, you got assistance long before you left, so that you could start new education or retrain for another job. They told people that 'you need to prepare yourself to leave, and we're going to help you. Downsizing will occur, so get ready now. They tried to satisfy both employees and management needs. It was a win-win situation," she said.

More and more Blue Chip companies are coming to the realization that this approach is the most effective, she says.

This is the second time Fairhurst has won the Best Article award from the NCA Organizational Communication Division. She also won in 1994 and received the Best Book Award in 1997.