Cutting productivity: the real downside to downsizing
- By DONNA NEBENZAHL, The Gazette (Montreal), Canada
Look to your staffing, experts warn. If a company decides to cut costs by downsizing, there is likely to be more fallout than they thought possible.
Because there's a direct correlation between lower productivity and turnover - and nothing causes turnover more than downsizing.
A study published in April in the Academy of Management Journal looked at two years' worth of data compiled from companies vying for a spot in Fortune magazine's annual Best Companies to Work For. It shows that downsizing is so demoralizing for the remaining staff that many feel motivated to leave the job and find work elsewhere.
And it doesn't take much to start the exodus. A 0.5-per-cent reduction of the workforce, for example, resulted in a staggering 13-per-cent increase in turnover. The shock of layoffs, say the researchers, triggers a significant number of employees to get out.
'The downsizing-turnover relationship suggests a sad irony in that employees are laid off by companies that may subsequently find themselves understaffed,' write the study's authors, Charlie O. Trevor and Anthony J. Nyberg of the University of Wisconsin - Madison.