Companies often aim to achieve high financial and productivity goals through downsizing. However, studies suggest otherwise. The results of a study analyzing the relative financial conditions of an organization due to downsizing depict that companies often lose customers, and cash inflow, due to a lack of resources and flawed or slow outcomes. Another study indicated the recorded negative impact of downsizing on employee motivation.
The decreased employee motivation further impacts the company’s finances negatively. Here’s how and why it happens:
Job Insecurity
The impact of downsizing is vastly different from the termination of employees for other reasons. This is because the employees who lose their jobs in downsizing don’t give any reason to the company to fire them. Instead, they are terminated simply because the company believes it benefits them.
Downsizing conveys to the remaining employees that loyalty and hard work cannot guarantee job security. Therefore, these employees stop putting effort into their work.
Uncertainty
Downsizing also raises serious concerns about the company’s future among the remaining employees. It also makes employees realize they cannot find information about the company’s financial situation. This leads to uncertainty about receiving their pay and benefits.
They start seeing the company as a sinking ship, even if it isn’t. The uncertainty about the company’s financial situation can dramatically impact employee motivation. It can make them find another job so they can quit as soon as possible.
Expectations
It doesn’t take long for employees remaining after downsizing to realize that they will be expected to take up the workload of the employees who were fired. Since companies tend to increase the workload of the remaining employees without any promotion or increment due to their difficult financial position, it negatively impacts employee motivation.
Adjustment Period
Downsizing often occurs in an urgency. Since the terminated employees aren’t given advanced notice, the work and responsibilities transfer doesn’t occur. This becomes an obstacle as the remaining employees are expected to simply take up and continue the work from where it was stopped. The lack of understanding from the company for the need for an adjustment period for the remaining employees further decreases employee motivation.
The terminated employees may also tend to leave things in more complicated ways to cause difficulty for the company and make their termination more noticeable. However, the lack of cooperation from the terminated employees impacts the remaining employees more than the company.
Loss of Work Friendships
Work friendships are an essential part of every positive workplace culture. But downsizing causes many remaining employees to lose work friendships, making the workplace culture negative, uncertain, and boring for them. The remaining employees also tend to empathize with their work friends who get fired and harbor negative feelings and opinions about the company. These feelings and opinions also result in decreased employee motivation and poor work output.
While downsizing may seem like the only option for companies in certain instances, it is best to explore the potential unwanted consequences of this action in advance. This can allow a company to analyze the pros and cons of downsizing more efficiently and make the right decision.
