Downsizing: A CSR-oriented Toolkit

Aarti Ramaswami, Professor of Management and Director of the ESSEC Global MBA programme, draws on Parts 1 and 2 of her research article into the why downsizing is viewed as justified or unethical to provide an at-a-glance toolkit for leaders, managers, and the HR function. 

  1. Ensure that the CSR dimension is considered in your downsizing strategy: It is crucial for management to show their internal and external stakeholders that the decision to downsize is justified. Moreover, it is necessary to be seen as ethical for it to be also seen as socially responsible.
  2. Use clearly specified lay-off selection criteria: Level of work performance, employee commitment and employee skills sets. Organisations that do not are seen by employees as socially irresponsible and the selection process is seen as biased and unfair.
  3. Use proper procedures and involve employees (and/or their representatives): Failing to do this leaves the decision-makers open to claims of being unethical. Give clear dates and timelines.
  4. Set up supervisory support and coaching: Losing one’s job is a shock and a stress-producer, with many additional repercussions for the employee on both professional and personal levels. Take this into account and help both victims and survivors through the process. Provide both with an action plan for the future.
  5. Provide the possibility for employees to express themselves: This will help foster trust and reduce the psychological pressures the workforce will have to bear. Let emotions be expressed. Learn from employees.
  6. Name the responsible cause of the downsizing decision: Be it difficult times or fierce competition, both victims and survivors will consider downsizing as socially responsible and inevitable in order to save the firm. Be clear, transparent and provide hard facts to justify this.
  7. Postpone, scrap or modify the downsizing decision if necessary: Downsizing due to management failures or incompetence will been by internal and external stakeholders as unjustified. Leadership is meant to inspire and take just decisions. Research has shown that downsizing to increase share price is short-term in impact and only effective in periods of non-recession.
  8. Take into account universal ethics: Research points to employees in the USA, France, India and Estonia being equally sensitive to fairness in the selection criteria for lay-offs, the equity of procedures, and the opportunity for employees to communicate.
  9. Take into account culture: Survivors – those keeping their jobs – in low power distance cultures (USA and Estonia) seem to react more negatively to downsizing than those in high power distance cultures (France and India) when downsizing is due to poor management.
  10. Prepare a checklist: Is the decision justified? Have I/the company measured the potential impact on employees and the wider community? Have I/the company taken into account universal ethics and the cultural dimension of the workforce? Has a clear process been set up? Have clear, and fair, selection criteria been established? Has a mechanism for employees to express themselves been set up? Have supervisory support and coaching mechanisms been included in the process?

Food for thought, matter for discussion:

  • To what extent does the CSR dimension influence your organisation’s strategic decisions?
  • In the context of downsizing, who would be impacted internally and externally?
  • What nationalities and cultures are employed in your organisation? What universal ethics or values make them tick?
  • What cultural norms, behaviours and values among your workforce have an impact on their way of working and how they view management and the organisation?
  • Are there existing mechanisms or bodies set up for communicating to employees and external stakeholders (the press, the community, shareholders, local authorities, etc.)? Is there a clear procedure for communication with them?
  • Have you yourself experienced, or been victim to, a downsizing decision? What emotional and psychological impact did this experience have on you? How could you have been better prepared? What support system could be set up in your company to help employees through a possible downsizing process?

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