Executive Interviews, Elaine Eisenman on Managing Downturn without Downsizing

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Executive Interviews: Interview with Elaine Eisenman on Managing Downturn without Downsizing
June 2009 - By Dr. Nagendra V Chowdary

Elaine Eisenman
Dr Elaine Eisenman is Dean at Babson Executive Education.

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    First and foremost, constant and consistent communication and the reasons for the layoffs are essential. In difficult times people know when their company is suffering and when it is doing well. The role of the leader is to make clear what is happening, why it is happening, and when it will happen. It is also the leader’s goal to show confidence that this action is necessary for the long-term health of the company, and that there is every belief that the company will survive into the future. Ideally, it is a one-time event, rather than a purge that occurs slowly over time.While no leader can ever promise that it will not happen again, the ideal is to have a major downsize and then to begin to rebuild. If the layoff was handled in a way that the terminated employees were treated with the utmost respect, there was generous severance and outplacement benefits, and they were allowed to leave with their dignity, the survivors may feel sad, and a bit guilty for surviving, but will retain their positive feelings about the company and their continued contribution. Their commitment to the company is actually increased further if they believe that the decisions about who would go and who would remain were based on a clear model of critical skills and knowledge and performance necessary for the ongoing success of the company.

    I once consulted to a large global company where they needed to downsize each function and division by a significant number of positions – approaching 50%. I worked with themon amodel that beganwith a job evaluation inventory of all the positions in the company. Once that was accomplished we evaluated each position and altered it to meet the critical skills necessary to support a new and aggressive strategy. This resulted in a significant reduction in the number of positions, as many were combined into new roles. Ultimately each position was changed by a minimum of 54%. To accomplish this, we communicated with the entire company about what was about to occur and we provided a time frame for the roll-out of this initiative. To minimize the expected disruption, we decided to proceed in a progressive fashion, focusing on one function/division at a time. We then notified everyone in the division that their job had been eliminated, sharing the list and descriptions of new jobs now available. Everyone had the opportunity to apply for a maximum of three jobs, or could choose to apply for none, and receive a severance package. If, however, they applied for a new job and did not receive it, they would also receive a severance package; if they did receive an offer, they could not turn it down and still receive a severance package. We took a top-down approach so each level was selected, beginning at the most senior levels of leadership, and they were then responsible for selecting the level below.

    Despite the significant number of jobs cut, that year the company received its highest scores on job satisfaction in recent memory. It was especially noteworthy that the highest rated score was for meritocracy; i.e.,“I feel thatwhat I knowismore important in getting ahead than who I know.” Many employees said that for the first time ever they believed that skill trumped political maneuvering in determining success.

    The belief that decisions are based on performance and strategic need rather than politically based is the core of a successful downsizing that results in motivated rather than depressed and angry survivors. The remaining employees must understand that the decisions were based on critical skills and performance factors and not on who is best protected by a senior leader. When all three factors— honest and open communication, retained dignity andmeritocracy—are ensured, the remaining workforce will happily commit to working towards building corporate success. It is not what occurs that determines this, but rather how it occurs that counts.

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