After more than two decades of research into corporate downsizing, there remains a fundamental question: “How can managers and employees rethink their organizations even as they confront the need to downsize?” More specifically, how can organizations support learning, innovation and creativity while at the same time finding effective ways to improve costs, quality and productivity? Some might argue that these goals are at odds with one another — that you can’t build a better and a leaner organization. We disagree. In our 1998 Sloan Management Review article, “Preserving Employee Morale During Downsizing,” we maintained that strong organizations need to develop resilience so they could take advantage of new opportunities that arise during periods of economic retrenchment.1 Our subsequent research, consulting and management coaching has reaffirmed our view that downsizing isn’t just about “doing more with less.” It is also about creating flexibility, innovation and better communication that lead to increased trust and empowerment between managers and employees. (See “About the Research.”)

In our original article, we presented four widely accepted goals of downsizing: reducing total costs; increasing labor productivity; improving quality; and enhancing the efficiency with which capital is employed.2 As we recommended... To read the complete article, login or sign-up using the form below.