Chapter 14:
Don’t be complacent with something that
Managing Change
Change takes on many forms and occurs in
many reasons. Downsizing, reorganization, or
introduction of teams are some of the reasons.
Sacred Crow Hunts
- According to Kriegel and Brandt (1996),
the sacred crow hunt is perhaps the
primary step towards organizational
changes.
In a sacred cow hunt, an organization looks at all
of its practices and policies and asks questions
like these:
✓ Why are we doing it?
✓ Does it add value, quality,
service, or productivity?
✓ What if it didn’t exist?
✓ Is it already being done by
someone else?
✓ How and when did we start doing
this?
✓ Can it be done better by another
person, department,
company?
- According to Kriegel and Brandt,
common types of sacred cows include
the paper cow, the meeting cow, and the
speed cow.
1. Paper Cow - Paper cows are
unnecessary paperwork—usually forms
and reports that cost organizations
money to prepare, distribute, and read.
To determine if something is a paper
cow, consider the extent to which the
paperwork increases efficiency,
productivity, or quality.
2. Meeting Cow
3. The Speed Cow - Unnecessary
deadlines are another source for
potential change. Requiring work to be
done “by tomorrow” is sometimes
necessary. However, unnecessary
deadlines cause employees to work at a
faster than optimal pace, resulting in
decreased quality, increased stress, and
increased health problems.
Kriegel and Brandt (1996) suggest that in
addition to sacred cow hunts, effective change
can be encouraged by using these strategies:
1. Think like a beginner: Ask stupid
questions, constantly ask “why” things
are being done a certain way, and don’t
assume that anything makes sense.
2.
is working well. Keep looking for ways to
improve, new markets to enter, new
products to introduce.
3. Don’t play by everyone else’s rules;
make your own.
Ex. Domino’s Pizza is a great example of
this type of thinking. Although all the
other pizza chains competed for ways to
increase the number of customers
entering their restaurants, Domino’s
decided to change the rules and bring the
restaurant to the people rather than
bringing the people to the restaurant.
4. Rather than penalizing mistakes, reward
employees for making the attempt to
change or to try something new.
Employee Acceptance of Change
Though change can be beneficial to
organizations, employees are often initially
reluctant to change. This reluctance is
understandable, as employees are comfortable
doing things the old way. They may fear that
change will result in less favorable working
conditions and economic outcomes than they
or are used to. Employees may also fear that their
skills may not be valued in the future and they
might worry about whether they can adapt to the
new changes.
Stages:
1. Denial - During this initial stage,
employees deny that any changes will
actually take place, try to convince
themselves that the old way is working,
and create reasons why the proposed
changes will never work
2. Defense - When employees begin to
believe that change will actually occur,
they become defensive and try to justify
their positions and ways of doing things.
The idea here is that if an organization is
changing the way in which employees
perform, there is an inherent criticism that
the employees must have previously
been doing things wrong.
3. Discarding - At some point, employees
begin to realize not only that the
organization is going to change but that
the employees are going to have to
change as well. That is, change is
inevitable, and it is in the best interest of
the employee to discard the old ways and
start to accept the change as the new
reality.
4. Adaptation - At this stage, employees
test the new system, learn how it
1
 functions, and begin to make
adjustments in the way they perform.
Employees spend tremendous energy at
this stage and can often become
frustrated and angry.
5. Internalization - In this final stage,
employees have become immersed in
the new culture and comfortable with the
new system and have accepted their new
coworkers and work environment
Important Factors
1. The Type of Change - Organization
change expert Warner Burke (2014)
distinguishes two types of change:
evolutionary and revolutionary. The vast
majority of change is evolutionary, that is
the continual process of upgrading or
improving processes. Burke defines
revolutionary change as a “real jolt to the
system” that drastically changes the way
things are done. Clearly, revolutionary
change is more difficult than is
evolutionary change.
2. The Reason behind the Change -
Employee acceptance of change is often
a function of the reason behind the
change. Employees are least likely to
accept change if they don’t understand or
were not told the reasons behind the
change.
3. The Person making the Change -
workers are more positive about change
when the source of change is within the
work group rather than an external
source (Griffin, Rafferty, & Mason, 2004).
Changes proposed by leaders who are
well liked and respected and who have a
history of success are more likely to be
accepted than changes proposed by
leaders whose motives are suspect
(Dirks, 2000; Lam & Schaubroeck, 2000).
4. The Person being Changed - As one
would imagine, there is considerable
variability in the way in which people
instigate or react to change. Change
agents are people who enjoy change and
often make changes just for the sake of
it. A change agent’s motto might best be
expressed as “If it ain’t broke, break it.”
Though many people like to call
themselves change agents, it may not be
such a compliment. That is, reasoned
change is good, but change for the sake
of change is disruptive.
✓ Change Analysts - Change analyst
A person who is not afraid of change
but makes changes only when there
is a compelling reason to do so.
✓ Receptive changer - A person who
is willing to change.
✓ Reluctant changer - A person who
will initially resist change but will
eventually go along with it.
✓ Change resister - A person who
hates change and will do anything to
keep change from occurring
Implementing Change
Burke (2014) stated that another important
factor in employee acceptance of change is the
way the change is implemented. That is, how
and when will details be communicated? How
long will the implementation take? Does the
organization have the right personnel for the
change? What types of training needs does the
organization have? When organizations are
planning change, they intend the change
process to be linear in that they begin with Phase
1, move to Phase 2, and so forth until the change
is complete. Typically, there is an initial timeline
for each phase. As you read the following “steps”
to implementing change, it is important to
understand that the change process seldom
(perhaps never) goes as planned and that
setbacks will occur, resulting in the need to make
revisions to the change process.
1. Create an atmosphere for change -
One of the first steps in organizational
change is to create the proper
atmosphere (Denton, 1996). This
process begins by creating
dissatisfaction with the current system.
Employees should be surveyed to
determine how satisfied they are with the
current system. If things go as normal,
the results of the survey will indicate that
many employees are unhappy with the
way things are currently done and have
suggestions for improvement. By sharing
these results with employees, an
organization can protect itself from
employees reacting to change by
remembering the “good old days.”
Instead, they will focus on the “bad old
days” and be more willing to change.
2. Communicating Details - Employees
are most responsive to change when
they are kept well informed (Wanberg &
Banas, 2000). Unless there is a need for
secrecy (e.g., a merger), employees
should be aware of and involved in all
aspects of the change, from initial
planning to final implementation. If
employees are kept in the dark until the
very end, they usually suspect that
something bad is happening. It seems to
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 be human nature to think the worst when
we don’t know something.
3. Time Frame - Most successful
organizational changes occur in a timely
fashion. The longer it takes to change,
the greater the opportunity for things to
go wrong and the greater the chance that
employees will become disillusioned.
Many consultants advise that
organizations should not remain in a
“change mode” for longer than two years.
4. Training Needs - After an organization
has made a major change, it is often
necessary to train employees. For
example, if an organization changes to a
new computer system, all employees will
need to be trained in the use of the new
system. Likewise, if an organization is
changing to a self-directed team
environment, employees will need to be
trained in such areas as goal setting,
teamwork, presentation skills, and quality
analysis.
Organizational Culture
- comprises the shared values, beliefs,
and traditions that exist among
individuals in organizations (Anderson,
2015). It is this culture that establishes
workplace norms of appropriate behavior
(what’s wrong or right) and defines roles
and expectations that employees and
management have of each other
(Nwachukwu & Vitell, 1997; Sackman,
1991). Most cultures have a subculture.
- In organizations, each department or
office can be a subculture with norms of
behaviors that may be different from
those of the overall organization. How
each department reacts to change is a
result of that subculture. Most major
changes, such as changing management
philosophies, will require a cultural and a
subcultural change to support the
implementation of new ideas throughout
the entire organization
- organizational culture has traditionally
been ignored during restructuring and
other changes. This is either because
there is a general belief that culture can’t
be changed or because many
organizations do not know how to change
their cultures. In fact, in a survey of 500
corporations, 70% stated that they did
not have the knowledge to address
cultural issues (Sherriton & Stern, 1997).
Without such knowledge, changes in the
way the company operates, and thus, the
way its employees behave, will not be
long lasting. Consequently, it is important
that an organization knows how to
include culture in its change process.
Changing Culture
- Making organizational changes doesn’t
necessarily mean that everything about
the existing culture must change.
According to one manager, “The change
process includes holding on to the
successful elements of the present
culture and adding new elements that are
important” (Laabs, 1996, p. 56).
Consequently, the first step in changing
culture is assessing the desired culture
and comparing it with the existing one to
determine what needs to change. Two
additional steps are creating
dissatisfaction with the current culture to
create support for the new one and
maintaining the new culture.
Assessing the New Culture
Assessment of the new culture involves a great
deal of discussion and analysis and should
include the following steps (Sherriton & Stern,
1997).
1. Needs Assessment - Because parts of
the existing culture may actually support
certain organizational changes, the
current culture must be analyzed and
compared with the desired culture to
determine what might need to change.
For example, if an organization wants to
move from a traditional hierarchical
management philosophy to a more
empowering one where employees share
more decision-making responsibilities,
there will have to be a change in systems,
procedures, and policies to fully support
the new culture.
2. Determining Executive Directions -
Management must then analyze the
needs assessment to determine the
decisions or actions that will reinforce the
culture and to assess the feasibility of
certain changes. Using the previous
example, if most of the supervisors and
managers in an organization are
unwilling to share their decisionmaking
authority, a true “empowering” culture
cannot be maintained. Consequently,
that may be a change that will not be
reinforced by the culture. In fact,
according to research, it takes the
wholehearted support of top
management to implement an
empowering philosophy (Schuster et al.,
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 1997). Addressing possible obstacles to
culture change during the transformation
process can usually minimize unintended
consequences.
3. Implementation Consideration - This
area addresses how the new culture will
be implemented.
- Will committees or ad hoc groups be set
up to carry out changes or will
management execute the changes?
- If the organization’s desired culture
includes encouragement of more input by
employees, they should be allowed to
participate in implementing the
empowering organization in order to
support the new culture
4. Training - Culture change means a
change of philosophy, and that ultimately
means different role expectations. As
with any new skill, all organizational
members must be trained in a new
philosophy for the new culture to thrive
and be long lasting. This has often been
the biggest barrier in organizations that
have declared that their members are
now empowered to share in decisions
5. Evaluation of New Culture - As with any
changes, an evaluation mechanism must
be established to review the new culture.
Issues such as whether the change
actually has occurred or whether old
norms and procedures still exist should
be addressed. If change has not
occurred, additional strategies must be
identified to establish and support the
new culture.
Creating Dissatisfaction with Existing
Culture
Just as creating dissatisfaction with the status
quo in general is necessary to promote change,
for employees to accept a new culture, the
existing culture and status quo must be “upset.”
This might mean communicating to employees
the future impact of continuing to “do business
as usual.”
Examples:
➢ Many organizations share data that show
technological trends and the financial
performance of the company. If
employees see this information as
negatively affecting either them or the
organization as a whole, this can create
the necessary displeasure with the status
quo and be the catalyst for developing a
new business strategy.
➢ Another way to create dissatisfaction is to
distribute attitude surveys that ask
people how satisfied they are with the
organization’s goal and to suggest ideas
for changes. The results of the survey are
distributed throughout the organization
so that people can see the dissatisfaction
level and will begin to buy into a new
culture and other organizational
changes.
- The key at this point is to seek input from
employees in the process. A successful
cultural transformation requires
commitment from all levels of the
organization. When employees have an
opportunity to be an actual part of the
change, they are more likely to be
committed to it. Once you have started
the process of transformation, it is
important that it be maintained.
Maintaining New Culture
- If the new culture is expected to last,
developing new reward systems and
selection methods should occur.
Rewarding current employees for
successfully participating and
cooperating with the new system is
imperative (Kotter & Cohen, 2002).
These rewards can include:
✓ Pay for performance in jobs that
have increased responsibilities
due to the new culture or other
changes. But they also go beyond
financial rewards, and can
include employee recognition and
meaningful work.
Selection of Employees
- Future employees should be selected on
the basis of how well they epitomize the
new culture. For example, if the new
culture is one of team decision making,
new employees should have not only the
ability but the willingness and personality
to perform in such an environment. As
current employees are replaced by new
ones, the new culture can become
“frozen” into the desired system selected
by the leadership (Lewin, 1951).
However, continuing to hire employees
who prefer a more structured
management philosophy and who work
better alone will eventually cause the
organization to revert to its old culture.
➢ Organizational socialization - the
process whereby new employees learn
the behaviors and attitudes they need to
4
 be successful in the organization. It also
helps any newcomer to the organization
define his role and what is expected of
him in his position (Morrison, 1993).
- Both informal and formal strategies can
help with this process. Informal strategies
of socialization include such things as
hearing the same stories repeated by
several different employees.
➢ There are also formal ways in which
organizations can influence the
socialization process. One way is
through establishing rituals. Rituals are
procedures in which employees
participate to become “one of the gangs.”
Activities such as annual awards,
banquets, or staff picnics are rituals that
reinforce the impression of a “caring”
organization. Another ritual is requiring
all new employees to go through a
probationary period before being
considered a permanent employee.
➢ Finally, symbols that represent certain
attitudes of the organization can be used.
Symbols are communication tools that
convey certain messages to employees.
For example, establishment of an on-site
wellness center conveys the
organization’s interest in health. In
addition, communication techniques
such as the use of mission and value
statements can help acculturate the new
person to his environment.
EMPOWERMENT
• authority or power given to someone to
do something.
• many organizations are “empowering”
employees to participate in and make
decisions. It can range from asking them
for their opinions to giving them complete
decision-making control.
Making the Decision to Empower
Factors in Making the Decision to Empower.
Employees need to be involved in decisions in
circumstances in which the quality of the
decision is important, the decision affects
employees, the supervisor doesn’t have the
knowledge to make the decision, or the
employees don’t trust the supervisor.
• Importance of decision quality. The
first factor to be considered in making a
decision is whether one decision will be
better than another
• Leader Knowledge of the Problem
Area. The second factor in decision
making involves the extent to which
leaders have sufficient information to
make the decision alone.
• Structure of the Problem. The third
factor of concern in decision making is
the extent to which a leader knows what
information is needed and how it can be
obtained and that is the problem’s
structure.
• Importance of Decision Acceptance.
The fourth decision-making factor
involves the degree to which it is
important that the decision be accepted
by others.
• Probability of Decision Acceptance.
The fifth decision-making factor is
subordinate acceptance.
• Subordinate Trust and Motivation. The
sixth factor in the decision-making
process is the extent to which
subordinates are motivated to achieve
the organizational goals and thus can be
trusted to make decisions that will help
the organization.
• Probability of Subordinate Conflict.
The final factor for our consideration in
the decision-making process involves the
amount of conflict that is likely among the
subordinates when various solutions to
the problem are considered.
Decision-Making Strategies Using the
Vroom–Yetton Model
• Autocratic I strategy. Leaders use
available information to make a decision
without consulting their subordinates.
• Autocratic II strategy. Leaders obtain
necessary information from their
subordinates and then make their own
decision.
• Consultative I strategy. Leaders share
the problem on an individual basis with
their subordinates and then make a
decision that may or may not be
consistent with the thinking of the group.
• Consultative II strategy. Leaders share
the problem with the group as a whole
and then make a decision that may or
may not be consistent with the thinking of
the group.
• Group I strategy. Leaders share the
problem with the group and let the group
reach a decision or solution.
Levels of Employee Input
• Following. Work is closely
checked/approved by others. Employee
is closely or constantly supervised.
• Ownership of own product. Employee
becomes responsible for own quality.
• Advisory. Employee makes
recommendations, suggests new ideas,
and provides input.
5
 • Shared/Participative/Team. Employee
has an equal vote in making decisions.
Employee reaches consensus with
others to make decisions.
• Absolute. Employee has sole
responsibility for making decisions and is
responsible for the outcomes of
decisions.
Empowerment Charts
• A chart made for each employee that
shows what level of input the employee
has for each task.
• Organizations never have just one level
of employee input and control that
applies to every employee. Instead,
levels will differ by employee as well as
by task.
Consequences of Empowerment
• The increased responsibility can result in
higher skill levels, which in turn can result
in higher pay, increased job security, and
increased potential to find other
employment. However, empowerment
can have its downside. With increased
responsibility comes increased stress.
With the power to make decisions comes
the risk of making bad ones and thus
being fired or denied a promotion. Thus,
it is not surprising that some employees
resist efforts to empower them or their
teams.
• One of the things that is true throughout
life is that people are different, and not
everything affects everyone the same
way.
Flexible Work Arrangements
By allowing flexible work arrangements,
employers see positive outcomes such as lower
absenteeism and turnover, and higher
productivity and job satisfaction, while
employees gain better work-life balance and
have lower commuting costs. There are four (4)
intervention strategies on flexible work
arrangements.
Strategy 1: Full Time Work, Flexible Hours
Also called flextime, this strategy originated in
West Germany as a way to alleviate traffic
problems and was brought to the West in the
1970s. It is used by 52% of U.S. organizations.
In the U.K., employees have the right to request
this if they have a young child or a minor with
disabilities.
The employees may choose the work hours that
make up their schedule in this setup. With it,
employees can attend to their personal tasks
such as going to the doctor or picking up their
children.
Three basic components make up flextime:
bandwidth, core hours, and flexible hours.
Bandwidth is the total number of potential hours
available for work daily. It is typically a few hours
longer than the minimum working hours. For
example, a company that requires employees to
work eight (8) hours a day may have a bandwidth
of 12 hours from 7:00 a.m. to 7:00 p.m.
Core hours are the periods that all employees
are required to be work in, usually when
organizations are busiest, such as 11:00 a.m. to
1:00 p.m. for restaurants.
Flexible hours are those that employees can
choose for themselves. In an example where the
bandwidth is 12 hours and the core hours are
from 11:00 a.m. to 1:00 p.m., the employees may
then schedule the remaining six (6) work hours
anytime from 7:00 a.m. to 11:00 a.m. and 1:00
p.m. to 7:00 p.m.
Another arrangement, called gliding time is one
where there are no core hours. Employees may
come and go as long as they meet the required
work hours every day of every week within the
bandwidth. This is the most flexible
arrangement, but can only work in organizations
that do not always require at least some
employees working, such as in retail.
Most flexible working schedules are categorized
as flexitour or modified flexitour. Both systems
allow flexible working hours, but must be
schedules in advance. The flexitour system
requires employees to submit their schedules on
a weekly, biweekly, or monthly basis, while the
modified flexitour system has the employees
schedule their work hours in advance, but may
change them on a daily basis with some advance
notice.
Flexible working schedules have been found to
result in less absences, overtime, and role
conflict, with higher job satisfaction and
productivity. It can also be associated with a
small, but statistically significant reduction in
work-to-family interference, but no reduction in
family-to-work interference.
Another option is FlexYear, offered by certain
tax firms. In it, employees must work on certain
times of the year and may take the rest of the
year off. It is also common for teachers, who take
the summers off.
6
Strategy 2: Compressed Workweeks
- The trend toward working more hours a
day but fewer days a week is called a
compressed workweek. It may involve
10 hours/day for four days, or 12
hours/day for three days. It was first used
in 1940, when oil companies used this for
their truck drivers, but gained popularity
after Riva Poor wrote about it in 1970.
- For employees, the benefits include:
more vacation days, time with family,
opportunities to moonlight (a.k.a.
“sideline”), and have reduced commuting
costs and times. Child care costs may
also be minimized.
- While it can be surmised that such an
arrangement will cause fatigue and more
errors at work, research shows the
reverse to be true. Employees have been
found to be moderately more fatigued,
but have improvements in work behavior
and attitudes. Other research has found
that employees who worked 12 hours
were healthier than those who worked 8
hours, with no difference in productivity
or turnover. However, an upper limit in
shift length may exist as 14 hours were
found to be too long for firefighters.
- To reduce the fatigue associated with
compressed workweeks, most
organizations provide paid breaks (20-40
minutes) during the workday. Some
organizations even have spaces to allow
employees to nap (napping rooms),
which may also increase performance.
- For organizations, other advantages may
be seen in reduced start-up and cleanup
times associated with jobs such as in
printing, where the machine and the
supplies must be prepared and cleaned
before and after each use. In
compressed workweeks, this means a
reduced number of total hours spent on
start-up and cleanup.
Strategy 3: Reducing Work Hours
- In reduced work hours, employees
work for fewer hours (or part-time). The
peak-time pay and job-sharing programs
are strategic uses of this.
- In industries such as banking and fast-
food, there are several hours of the day
when it is particularly busy and logistic
requirements may change. But instead of
hiring more regular employees to work
the entire day, it would make more sense
to have more people working only in the
peak hours. This program is called peak-
time pay. However, as there may be little
interest in working only a few hours a day
at the regular pay rate, peak-time
workers are paid at a higher hourly rate
than full-time workers. Overall, the
organization would be able to save
money compared to the cost of hiring
everyone full-time.
- A related concept is casual work, in
which employees work on an irregular or
as-needed basis. Examples include
theme park employees at peak seasons
and concert staff whenever there is a
concert. This is also used by
organizations like hospitals who may
contact their pool of casual workers to
look fill-in for absent employees. This
provides employees flexibility and
ensures that organizations always meet
staffing needs. Casual workers usually
receive a higher hourly rate.
- The job-sharing program deviates from
the typical part-time work model. In this,
two employees share one job title and
position by splitting the work hours. While
part-time work usually involves lower-
level jobs, job sharing is done in more
complex jobs. In the former, one
employee’s performance does not
usually affect the other’s, but in job
sharing, one employee’s poor-quality
work must be corrected by the other.
- Another difference is in the level of
commitment involved. This program
usually attracts highly-qualified
employees who may not be able to work
full-time, such as those with family
responsibilities. Couples who work in the
same field may also share their job, such
as in teaching, where the wife teaches
the morning classes and the husband
teaches in the afternoon to care for their
children.
Strategy 4: Working from Home
- The fourth strategy is achieved by
allowing employees to work from home
and set their own schedules. It’s a
concept that has been practiced since
long ago, when women would sew
garments and sell them to factories.
Unlike this model, where there is minimal
contact with a central office,
technological advancements allow for
other work to be done from home, too.
➢ Telecommuting (also known as
telework or mobile working) allows
employees to interact with a central office
using a computer, phone, or other off-site
7
 media. It is particularly useful in computer downsizing. One way is to freeze the
programming, data entry, and hiring of permanent employees and not
telemarketing. Telecommuters have fill the vacancies caused by retiring or
been found to have less work-family leaving employees. They may choose to
conflict, better relations with their hire temporary employees (temps) who
supervisor, and less role stress, in are not technically employees of the
addition to other benefits. With that, company and have no reason to expect
“telebusiness centers” have been a future with the company instead. Other
established, where employees from organizations use outsourcing to hire
different companies share office space outside vendors to provide services. This
close to their homes. proves to be more cost-efficient than
- Overall, employees can cut costs on having employees performing the said
childcare and commuting, while task.
employers can save up on office space - A third strategy is to encourage
and utilities. However, disadvantages employees to change careers and
include a difficulty to unionize among helping them learn the competencies
employees, the enforcement of safety needed to make the change. Money
and fair treatment standards by the spent on this training can be recovered
government, and a general difficulty in when employees voluntarily leave. Still,
supervising employees. It also becomes other organizations offer early retirement
difficult to separate work from home life. packages, which are made to be
financially worthwhile for the employee.
The ff. table summarizes the different flexible - Fifth, employees can be asked to take
work arrangements and their positive outcomes. pay cuts or defer salary increases. This
is particularly useful when the cause for
The
Flexible Work Positive Employee downsizing is an economic recession,
Arrangements Outcomes Wants which last less than a year. If the
Flexibility employees were laid off, it would take a
Lower long time to recover the previous
absenteeism
Flextime
Lower
production capacity when the economy
Compressed returns back to normal. Organizations
turnover
Workweeks
Reduced hours
Higher Management may offer company stock to make the pay
productivity is supportive cuts more appealing to the employees.
Part-time work result
Peak-time pay in
Higher job if The job itself
satisfaction allows for The final strategy involves adjusting work
Casual work schedules by restricting overtime,
Better work- flexibility
Job sharing
life balance implementing job sharing, encouraging
Work from
Lower work-at-home, payless holidays, and
home
commuting
costs shortened workweeks.
- On the employees’ end, they can monitor
their organization’s economic health and
Downsizing gauge their likelihood to be laid off,
should it happen.
- The size of the workforce often
decreases when organizations Selecting the Employees to be Laid Off
restructure. It may be because of
economic difficulties, loss of large If the above-mentioned strategies do not mitigate
contracts, pressure by stockholders for the necessity of a layoff, then the organization
quick profits, mergers, new technology, has to form a committee that is diverse in terms
employee empowerment programs of age, sex, and race (to reduce legal problems)
minimizing the need for managers, or to decide who will be laid off. Factors to be
other such factors. considered include seniority, performance,
salary level, and organizational need.
Reducing the Impact of Downsizing
The Announcement
Signs of Problems
Layoff announcements are best done in person.
- Organizations typically see warning signs The manner in which it is announce can affect
of a need to downsize, unless a the effectivity of future programs designed to
catastrophe occurs. During this time, help employees. During this time, it is important
their decisions may impact the size of the that concrete information is delivered, such as:

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the reason for layoffs, the possibility of
alternatives, when it will take place, who will be
laid off, and the assistance in the form of
finances, résumé-writing, and pension.
Otherwise, employees may resort to deriving
their own answers (rumors).
Outplacement Programs
Programs such as emotional counseling,
financial counseling, career assessment and
guidance, and job search training are created to
help layoff victims move on with their lives.
• Emotional Counseling
Employees typically go through four
(4) stages upon learning that they will be
laid off. In the denial stage, employees
deny that the layoff will actually occur.
Because of this, they may refuse to
partake in efforts to help them such as
with training. Then comes the anger
stage when they realize that it will
happen and they start becoming angry
towards the organization, supervisors,
and even coworkers. Employees need an
appropriate avenue to vent these
feelings, such as through support groups.
In the fear stage, employees begin to
worry about their bills and financial
responsibilities and finding new jobs. The
emotional counseling then changes from
a listening approach towards a more
empathic and soothing one. Last is the
acceptance stage, when employees
accept the outcome and are ready to take
steps to secure their future, which can be
through accepting offers of assistance.
• Financial Counseling
In between the fear and acceptance
stages, employees are under a lot of
stress worrying about how they will be
paying for their rent, mortgage, and
loans. Food, insurance, tuition, and
medical costs are also factored in. Most
banks and credit unions have financial
counselors for this specific case. The
counseling should include the issues of
the severance pay, unemployment
insurance, and special programs
available for the victims.
• Career Assessment and Guidance
Many victims will search for jobs
similar to their previous work, but they
may also need to consider other careers.
Psychologists working on this process
may administer a battery of tests to check
individual abilities, transferable skills,
career interests, and work values.
Financial needs, time constraints,
and geographic constraints need to be
considered in the discussion of potential
careers. Not all employees are able or
willing to go back school or relocate, but
those who can and will may have an
easier time finding a new job.
Retraining is often necessary to get a
new job, but issues such as funding,
family life, lack of training sites, and fear
can hinder victims from getting training.
Workshops on the job market, finding job
openings, writing résumés, answering
interviews, and deciding on job offers are
conducted to help them find new
employment.
Effects of Downsizing
Victims
Individuals who lose their jobs due to layoffs
(victims) report health consequences such as
increased headaches, sleeping problems,
cholesterol levels, physical illness, shortness of
breath, and other issues. On an emotional level,
they report high levels of stress, increased
substance abuse, marital problems, and feelings
such as that of depression, anger, and
dissatisfaction with life. They may feel
embarrassment and shame, refusing to share
their feelings. They may also avoid social
situations or entertainment that require money.
Beyer and colleagues (1993) offer the following
advice to victims: (1) immediately tell families, (2)
evaluate the reason, (3) deal with the emotions
and get help, if needed, (4) prepare for departure
by securing references, negotiating a severance
package, and maximizing outplacement
opportunities, (5) take a short break period, and
(6) plan a new course and have confidence in it.
Survivors
Research indicates that employees who retain
their jobs can suffer trauma and reduced
productivity depending on how they and the
victims were treated during the downsizing
process. They were found to become afraid of
taking risks, grow more apprehensive, stressed,
anxious, skeptical, and have greater role conflict
and ambiguity. They may lose confidence in
themselves and in management, have lower
morale and job satisfaction and feel a loss of
control.
However, if the survivors are allowed to
participate in decisions and make suggestions,
given some level of job security, are well-
supported, and if the victims were treated well,
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they can be more productive and feel more
secure. Organizations must make sure that the
procedure to determine layoffs was fair and
communicate this to everyone involved. The
organization must also talk positively about the
victims and communicate the company vision to
the survivors.

Local Community

Layoffs and plant closings also affect the local

community as tax and revenues are reduced,
retail stores lose business, greater loan defaults
in banks, and social and criminal problems
increase. But this also results in an increase in
the quality of the available workforce, which can
help employers and may attract a new industry.

The Organization

It is unclear that downsizing really produces the

intended increase in organizational
effectiveness. Cascio (2002) found no
improvement in financial success in those that
downsized between 1982 and 2000. Henkoff
(1990) found that half among 1,500
organizations reported lower productivity. The
Wyatt Company (1993) found that only: 46%
reduced expenses, 22% increased productivity,
and 9% improved quality. Fortune 100 firms had
lower performance in the two years after
downsizing, but had not significant difference in
the years that followed.

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