Downsizing the Company Without Downsizing Morale


Our coauthor and good friend Professor Gretchen Spreitzer of the University of Michigan’s Ross School of Business was recently interviewed about our article, elaborating on our key findings, and you can listen to the interview here.

Our article on how to improve organizational flexibility, innovation, and internal communication to improve trust during downsizing was just published by MIT Sloan Management Review.  Here is an excerpt:

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.

In the last decade, we have continued to follow the organizations we profiled in our original article and have started studying additional organizations that have undergone significant change, including downsizing. We have conducted scores of additional interviews with top executives, surveyed hundreds of employees and collected performance data. We have also coached managers whose organizations have initiated downsizings as part of their global outsourcing efforts. Through these efforts we have identified three additional success factors that are important to successful downsizing: (1) Organizations must become more flexible; (2) they must become more innovative and creative; and (3) they must improve their communications with stakeholders who are increasingly skeptical of downsizing efforts. The emphasis on flexibility, innovation and communications will require even greater levels of trust and empowerment.

You can go here to register and download a copy of the full article.  Much more information about the research findings and strategies for downsizing effectively can be found in our book, Trust is Everything.


How to Lay Off People Properly Amidst the Unrelenting Downsizings

Even though we believe that layoffs should be used as a last resort, and have the published research to support it, there do come times when it’s necessary to lay off employees.  That’s why it was good to see Simon Constable in the Wall Street Journal recently recommend several ways in which to do it properly that fit with our findings and recommendations we made a decade ago in the MIT Sloan Management Review.  This includes our counterintuitive but important recommendation not to fire people on a Friday:

Don’t fire people on a Friday.

Don’t fire people late in the day.

Don’t make any layoff announcement until everyone affected has been informed.

Do offer to provide a good reference.

Fire people before Thanksgiving or after New Years, but not between.

Don’t piece-meal your chopping.

Don’t fire anyone by email.

We have an article in this spring’s issue of MIT Sloan Management Review that reflects upon and updates our article we published a decade ago:  “How do Downsize Your Company without Downsizing Morale.”  For  additional ideas and case studies on how to downsize or lay off people properly, be sure to read our book, Trust is Everything.

If you’d like a copy of our previous MIT Sloan Management Review article, Preserving Employee Morale During Downsizing, please contact us.


Below is a listing of downsizings that I have been keeping track of over the past several months, using data published by the Wall Street Journal and New York Times.  The list does not include the 2,000 job cuts that GM announced today as well.  It is by no means an exhaustive list, but it gives an idea of the horrific toll that downsizing is having in the U.S. and abroad:

Company Downsizing Percent Date
Citigroup 50,000 14% 11/17/08
Bank of America(Merrill Lynch) 35,000 11% 12/11/08
Caterpillar 20,000 18 1/27/09
AT&T 12,000 4% 12/4/08
DHL (U.S. staff) 9,500 73% 11/10/08
Dell 8,900 10% 10/22/08
Circuit City 8,000 20% 11/10/08
Sony (electronics division) 8,000 5% 12/9/08
Sprint Nextel 8,000 N/A 1/27/09
Merck 7,200 12% 10/22/08
Home Depot 7,000 N/A 1/27/09
NG Groep NV 7,000 N/A 1/27/09
DuPont 6,500 4% 12/4/08
UBS 6,100 26% 10/3/08
Sun Microsystems 6,000 18% 11/14/08
Credit Suisse 5,300 10% 12/4/08
Chrysler 5,000 25% 10/24/08
Dow Chemical 5,000 11% 12/8/08
J.P. Morgan Chase (Washington Mutual) 4,000 21% 12/1/08
National City 4,000 14% 10/21/08
U.S. Steel 3,500 13% 12/2/08
Texas Instruments 3,400 12 1/27/09
Goldman Sachs 3,260 10% 10/23/08
Fidelity Investments 3,000 7% 11/14/08
Motorola 3,000 4.50% 10/30/08
Xerox 3,000 5% 10/23/08
Micron Technology 2,850 15% 10/9/08
Textron 2,200 5.20% 12/23/08
Applied Materials 1,800 12% 11/12/08
State Street 1,800 6% 12/3/08
Yahoo 1,500 10% 10/21/08
Nortel Networks 1,300 5% 11/10/08
Unisys 1,300 4.30% 12/22/08
eBay 1,000 10% 10/6/08
Mattel 1,000 3% 11/6/08
Viacom 850 7% 12/4/08
Adobe Systems 600 8% 12/3/08
Carlyle Group 100 10% 12/3/08