When downsizing is unavoidable, smart managers look for opportunities to improve flexibility, innovation and internal communication to improve trust between managers and employees.
In their 1998 Sloan Management Review article “Preserving Employee Morale During Downsizing,” the
authors maintained that strong organizations need to develop resilience so they could take advantage
of new opportunities that arise during periods of economic retrenchment. They detailed four stages of downsizing programs: deciding to downsize, planning the program, making the announcement and
implementing the program. In this sequel, the authors argue that downsizing programs aren’t just
about “doing more with less.” They also provide opportunities to build a sense of trust and empowerment
between managers and employees, which can provide significant benefits going forward.
In addition to examining the impacts downsizing has on surviving employees and how survivors can
influence whether a program is successful, the article explores three new areas that the authors have come to recognize as important to the success of downsizing efforts: (1) how organizations must become more flexible, (2) how they must become more innovative and creative, and (3) how they must improve their communications with stakeholders who are increasingly skeptical of downsizing efforts.