Business Exposed134
However, they had also expected the reverse to be true; that rms
in industries in which people were less central to companies’
competitive advantage (rms in industries with low R&D, rms
with high capital intensity) and rms in low-growth industries
would be able to get away with downsizing programs, and
increase their protability as a result. Yet, they proved to be
wrong. Even in such businesses, downsizing didn’t help a single
bit, and usually lowered performance. In fact, they couldn’t nd
a single business in which downsizing proved benecial for rms.
To conclude, the average company did not benet from a
downsizing effort, no matter what situation and industry they
were in. Of course, rms in trouble need to do something.
However, simply reducing your headcount won’t do the trick.
Who can downsize without detriment?
Why do downsizing programs not usually work? Well, for
starters, as you can imagine, it is not a great motivator for
the survivors. Academic studies conrm that organizational
commitment usually decreases after a downsizing program and,
for example, voluntary turnover rates surge. Hence, downsizing
is not something to be taken lightly, and should be avoided if at
all possible. But sometimes, of course, a company’s situation may
have become so dire that it may not be avoidable. What then?
Who might be able to get away with it?
Professors Charlie Trevor and Anthony Nyberg from the University
of Wisconsin-Madison decided to examine this question,
surveying several hundreds of companies in the US on their
downsizing efforts, voluntary turnover rates, and HR practices.
As expected, they too found that for most companies, voluntary
turnover rates increased signicantly after a downsizing program.
Many of the survivors, earmarked to guide the company through
its process of recovery, decided to call it a day after all and
continue their employment somewhere else – an unexpected
aftershock for many slimmed-down companies; they became
quite a bit leaner than intended!
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