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Excerpt--Responsible Restructuring

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By Wayne F. Cascio

2002, 126 pages, Hardcover

ISBN: 9781576751299

SHRMStore Item #: 61.16502

Order from SHRMStore or call (800) 444-5006

10 Mistakes to Avoid When Restructuring

  1. Failing to be clear about long- and short-term goals. Always ask, "What do our customers expect from us, how can we best serve them, and how will restructuring affect our ability to meet those expectations and service requirements?"
  2. Using downsizing as a first resort, rather than as a last resort. In some cases, firms downsize because they see competitors doing it. This is a "cloning" response, in which executives in different firms follow one another's actions under conditions of uncertainty, but it fails to consider alternative approaches to reducing costs.
  3. Using nonselective downsizing. Across-the-board job cuts miss the mark. So also do cuts based on criteria such as last-in-first-out (because then firms lose all their bright young people), removal of everyone below a certain level in the hierarchy (because top-heavy firms become even top heavier), or the weeding out of all middle managers (because firms lose a wealth of experience and connections). Are all departments and all employees equally valuable to the firm? Probably not. With respect to employees, think about performance and replaceability. Employees who are top performers, who work well together, and who are difficult to replace are most valuable. This is the reservoir of talent that firms will depend on to innovate, to create new markets and new customers. Do everything you can to retain that talent.
  4. Failing to change the way work is done. Some firms assume that cutting perks is a cure-all for other problems and that they can keep making products or delivering services the same way as before downsizing's They fail even to consider changing from an old way to a new way of working. The same amount of work is loaded on the backs of fewer workers.
  5. Failing to involve workers in the restructuring process. It is a truism that employees are more likely to support what they helped create, yet many restructuring efforts fail to involve employees in any decisions about either the process or the desired outcomes. As a result, employees feel powerless and helpless, and massive uncertainty invades the organization. Conversely, when employees were asked to rate various factors that affect attracting, motivating, and retaining superior employees, one of the most important factors was "opportunities to participate in decisions."
  6. Failing to communicate openly and honestly. Don't allow employees to hear about cutbacks through the grapevine. We noted earlier that failure to provide regular, ongoing updates not only contributes to the atmosphere of uncertainty but also does nothing to dispel rumors. Open, honest communication is crucial if employees are to trust what management says, and trust is crucial to successful restructuring. People trust leaders who make themselves known and make their positions clear.
  7. Handling ineptly those who lose their jobs. Failure to treat departing employees with dignity and respect (e.g., having security guards escort them off company property), failure to provide training to supervisors in how to handle emotional factors, and failure to provide assistance to departing employees (financial, counseling, redeployment, training, outplacement) comprise another crucial mistake.
  8. Failing to manage survivors effectively. Employee morale is often the first casualty of downsizing, as survivors become narrow-minded, self-absorbed, and risk-averse. Many firms underestimate the emotional damage that survivors suffer by watching others lose their jobs. In fact, a great deal of research shows that survivors often suffer from heightened levels of stress, burnout, uncertainty about their own roles in the new organization, and an overall sense of betrayal. In unionized environments, downsizing may be related to increased grievances, higher absenteeism rates, workplace conflict, and poorer supervisor-union member relations. In fact, survivors are looking for signals such as the following: Were departing employees treated fairly, and with dignity and respect? Why should I stay? What new opportunities will be available to me ff I choose to do so? Is there a new business strategy to help us do a better job of competing in the marketplace?
  9. Ignoring the effects on other stakeholders. In addition to survivors and victims, it is important to think through the potential consequences of restructuring on customers, suppliers, shareholders, and the local community. A comprehensive program addresses and manages consequences to each of these groups.
  10. Failing to evaluate results and learn from mistakes. Restructuring is not a one-time event for most firms. Unless firms are brutally honest about the processes and outcomes of their restructuring efforts, they are doomed to repeat the same mistakes over and over again. Don't be afraid to ask employees and managers at all levels, "What did you like most and like least about our restructuring effort?" Don't be afraid to ask customers whether the firm is now meeting their needs more effectively, and for suggestions on how it might do so.

Now that we have seen what so many firms do wrong, let's examine how to do it right.

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