The reality is striking – layoffs are becoming the norm for major American companies as business growth slows and labor costs rise. But for every bleak headline, there’s a beacon of hope. Some organizations have transformed downsizing from disaster to success, with soaring employee engagement, sky-high customer satisfaction and record-breaking profits.
This article reveals the keys to successful reorganization, providing you with science-based insights on how to thrive amidst the upheaval.
The real effects of downsizing
Corporate restructuring and downsizing are tricky to get right. Over the last 27 years, the failure rate is around 70 percent. Companies that cut 10 percent or more jobs tend to suffer a fall in stock prices, decline in productivity and near collapse in customer satisfaction. At best, 25 percent of firms that downsize hit their original financial and strategic objectives.
Also, in today’s highly interconnected workplace, employee departures have a ripple effect across the organization. When a person departs an organization, depending on the team’s size, it increases the probability of their colleagues quitting by 7 to 25 percent.
Avoid the common restructuring pitfalls
Although most companies are different, their reorganization failures tend to follow a similar pattern. Leaders hyperfocus on the negative, peripheral issues rather than exploring the opportunities for successful change and transformation.
They zero-in on cynics and the people who jump ship for their own security. They obsess over the company, the “what and the how” of downsizing without a clear focus or plan. They fixate on informing employees of the minutiae of reorganizing, losing sight of their individual contributions. Worst and perhaps the easiest tendency is to approach reorganizations as something that is “done to employees” rather than a process that involves everyone.
By contrast, leaders of successful reorganizations focus on the employees who remain, “the stayers,” and ensure they continue to feel influential and heard within the company. Instead of the “what and how,” they shift the focus to the “where and why,” particularly when communicating with others. The best leaders listen to their employees’ feelings about organizational change and help them find valuable opportunities amid the obstacles they face.
Firms looking to downsize also need to find the influencers and “change catalysts” within their teams. Beyond helping achieve wider employee buy-in via social influence, successful reorganizations have change catalysts who provide senior leaders with feedback, lead transformation initiatives themselves, and partner with managers on changes being made in their domains.
Navigating the storm of reorganization
The changes that come with large-scale restructuring can be disorienting and leave employees, managers and leaders feeling uncertain about their future. But despite the difficulties, it is possible to emerge from a reorganization stronger and more resilient.
To succeed, employers need to establish a process which shifts the culture of their organization and provides their workforce the clarity and support they need to excel. This process is not without its challenges, but with a clear and empathetic approach, companies can make the transition a positive experience for everyone.
With key actions for employees, managers and leaders, the journey through reorganization can be broken down into three phases: the announcement, the reorganization itself and the new world.
- Announcement: The first phase is all about preparation and adjustment.
- Employees: This is a time to focus on understanding opportunities, shifting away from worry and embracing change.
- Managers: Be a truth monitor and actively seek out facts to help allay fears.
- Leaders: Create a compelling vision for the future that inspires and motivates employees.
- Reorganization: This phase is about appointments and transitions.
- Employees: Seize the opportunity to be proactive and make the most of new opportunities.
- Managers: Show tough love by giving honest appraisals and guidance to employees.
- Leaders: Be present and involved, providing support and encouragement throughout the process.
- New world: The final phase is about settling into the new normal.
- Employees: Build plans to help maintain momentum and success in the new world.
- Managers: Encourage a culture of continuous improvement and growth.
- Leaders: Inspire and lead by example, modeling the desired behaviors that will shape the future of the organization.
While the path to reorganization is never easy, it can be a journey to a stronger future for all involved. With the right mindset and approach, companies can create a culture of resilience and success.
