Downsizing with Dignity
Management principles gleaned during a plant closure |
Reprinted by permission from the Graziadio Business Report, Volume 4, Issue 2, 2001
http://gbr.pepperdine.edu/012/dignity.html
By Ann E. Feyerherm, PhD
In downsizing, managers are urged to create a learning
environment by working with their employees.
The plant manager's voice cracked as he read the
announcement that the company's Southern California
production facility, in which he worked, would close its doors.
I looked around the makeshift stage set in the shipping
warehouse. The union president - jaw set and intense.
Twenty-five-year veterans of the plant - slumped in disbelief.
And young managers - feeling the sting and knowing they
would bear the brunt of employee anger and anguish.
I was a member of a management team that had labored
nine months in a cone of silence trying to decide what fate to
recommend to corporate decision-makers. Our
manufacturing plant had been around for over 50 years.
During the Depression, it had served as a beacon of light,
giving hope to the surrounding community. Now, this star
was fading.
I flashed back to key moments in our nine-month
deliberation process. Corporate decisions were being made
that slowly would remove a growing variety of products from
our plant. However, since these decisions were made by
independent groups of managers at corporate headquarters,
no one looked at them from the perspective of the whole
plant. Our plant manager, however, urged us to pull our
heads out of the sand and look at the implications five years
down the road.
We collectively had to face the facts. Did we want to die a
slow death with no control, or could we somehow shape our
destiny? At first we rallied with hope. We had a group of
MBA students propose creative alternatives. We formed
teams to come up with feasibility studies on new products
and other alternatives. But the cold, hard truth was that life,
as we knew it, was ending.
So we were faced with the question of how to bring it to an
end. We could slowly hang on, enduring wave after wave of
layoffs, expanding the empty sections of the plant. Could
some be saved if we did that? Maybe. Would corporate
come along some day and say, "Forget it, you're too small
and the overhead too large." Probably.
Another way to end was for us to recommend plant closure,
with some conditions. Conditions that included plenty of
warning for people, having a sizable retraining and
placement budget, and making sure that all managers would
have a position elsewhere in the system. Hourly workers
would have the opportunity to transfer to other locations
within the company, unheard of before. These conditions
came from days of meetings where we examined our deep
beliefs and values. We wondered out loud what conditions would have us - all of us - leave our employment with dignity and confidence. People needed to
recognize what they had achieved while working there and be able to communicate to potential
employers. For example, we knew that people had working knowledge of team building, quality
management and communication skills that were of value to any business.
In a key meeting with the top manager in our division, we considered our options and finally decided to
recommend closure. I remember clearly how this high level manager said that he wanted to be able to
look his young son in the eyes and explain our decision with honesty and integrity. He became one of
us that day, and led us in thoughtful and heartfelt discussions.
We spent many hours examining our principles during the shutdown. Two of these principles became
embedded in my being. The first principle was to "do with" our employees - rather than to "do for" or
"do to" them. The company was historically paternalistic and, coupled with our guilt over the hardships
facing employees, we tended to "do for" everyone. Doing for people constituted a pattern of continued
dependency on management for solutions rather than helping people learn how to act and think
independently. There is the parable of teaching people to fish rather than giving them a fish when they
are hungry. This is similar to what we meant - working with people to have them write their own resume
vs. doing a resume for them, as an example.
The authors of a recent article in the Journal of Applied Behavioral Sciences suggested that the do for
management style may lead to employees becoming dependent and demanding. This is like a divorced
parent who gets the children every other weekend and brings lots of presents and spends money on
doing fun things out of guilt. We found, however, that doing for our employees prevented us from
dealing with them as partners in resolving our problems.
Doing to comes from a manager's desire for control. Such a person may seek to exert power simply
because he or she is the manager. This type of manager might tell employees, "Hey, if you had done
more, this wouldn't have happened. You'll just have to learn to live with it." The result is generally
resentful employees. There were times that there were temptations to foist the blame on others, but
those were rare for us.
The third option is doing with people. This orientation derives its energy from a position of responsibility
and learning. A person might say, "Hey, this is a bad situation, but what can we learn about ourselves
from it? How can we use this to make our lives better? What would help?" This management style is
most likely to result in responsible and skilled people who can be depended upon during tough times. It
also invites more partnership in learning. People can be used to generate ideas for action, such as
creating seminars on owning one's own business or helping create a "yearbook" - both of which were
done. Employees needed a supportive management to do this, one that offered the freedom to decide
what to do along with the resources and guidance to make it happen.
All three of these philosophies have implications for action. The doing for orientation will have
programs galore for people, designed by consultants who excel in downsizing and outplacement.
People are practically forced into enrolling in programs. Managers will act as parents, checking up on
who went where and fixing schedules so people can be freed up. The doing to group will have
programs as required by law (or corporate policy). The delivery of these programs will be matter of fact,
and an adversarial environment may develop that results in injuries and lawsuits. There will generally
be little help for people who are displaced.
But organizations with managers who are doing with their employees will initiate discussions in which
employees can verbalize what's most important to them. These organizations are likely to design
programs that genuinely meet employee needs. Priorities will be established and people will coordinate
their schedules with colleagues so that the work gets done as personal needs are met.
The second principle we embraced during the plant closure was to make the plant a "learning
organization." As the end played out, people learned a tremendous amount about themselves.
Managers learned how to manage people as human beings since we had few control mechanisms.
This meant listening to what people were feeling and helping them take the steps that enhanced selfefficacy,
not just increase their skills or behave in a way that management wanted them to behave. We
also had a great sense of equalization. A plant shutdown put everyone out of a job. Managers talked
openly about leaving the company and other employees talked about their transfer options. Eventually,
one-third of the employees at the plant were transferred to other locations while the rest were retrained,
retired, went back to school, opened their own businesses, or were employed elsewhere.
An imminent plant closure accelerates the pace of change for managers. We were faced with planning
what needed to happen in this strange new world while continuing to manage daily activities and deal
with our own emotions. It was extremely difficult to maintain perspective and composure. We worried
about plant production, conducted support groups for those wanting to start small businesses, and
pondered how to deal with the teenager at home who was resisting any move out of the city. While
managers are used to dealing with multiple issues, none prepares them to endure such an emotional
roller coaster ride while trying to look in control.
We had success with open discussions and career planning. Many people decided that this was a
good time to leave the organization, to take severance pay or benefits, or do things they had always
wanted to do. In the best scenarios, an organization will co-create ways for people to enhance their
skills and leave feeling valued and respected. This has a very positive emotional effect on employees
who may be remaining in the organization.
Depending on how exiting employees are treated, those who stay may feel suckered, betrayed, or
guilty. If those leaving get such a good deal, people might feel that they are suckers for staying. If those
leaving get a bad deal, those staying will feel guilty. If people leaving (or staying) are lied to about
things such as how they will be treated, or the terms of their severance, they will feel betrayed.
Survivor's guilt is common when some departments are cut while others stay intact.
Unions are typically big losers in a plant closure. Sometimes there is deception or misunderstanding.
For example, a union may be promised that a plant will remain open in exchange for certain
concessions - but these concessions may not be enough for the plant to survive. There are often
environmental factors beyond the control of just changing work rules or increasing productivity. Union
members and representatives often can feel angry and betrayed. The other common scenario is that a
plant closure is announced before a union is informed. The question of when to tell union officials such
news is a delicate one. It is usually best if they are told shortly ahead of the general populace. For
example, a union meeting with the highest management personnel prior to a plant wide meeting would
be appropriate. You can ask that they do not disclose the information (Rumors will probably be so
heavy that it doesn't matter.) It generally enhances future bargaining relationships to give a union the
courtesy of prior information (although not too far in advance or you set the union members up for
conflict.)
Treating a union as a partner often works well, especially if you have a philosophy and a history of
partnership. At my plant site, there were several wins for all parties around a "Rule of 75" that allowed
people to retire at a combined years of service and age (For example a 55 year-old with 20 years of
service.) It is absolutely essential to start realizing that seemingly small things can be important. For
example, the rule of 75 enabled employees to say, "I retired from the company," rather than, "I was laid
off."
Managers provided employees with recommendations, and some employees received "stay pay" to
remain through closure. Giving employees the first chance to purchase plant equipment was another
appreciated gesture. The union at the plant was heavily involved in forming advisory teams, setting
transfer procedures, and selecting outplacement counselors. They were helpful in spotting those who
were emotionally unstable and helping them. A few employees judged to be emotional security risks
were placed on disability.
There used to be an unwritten contract in America between top managers and workers that, if you
made a good effort to do your job, you could count on having that job as long as the firm stayed in business. But this contract virtually disappeared in the 1990's and there have been unintended
consequences. Loyalty and morale suffered and employees became reluctant to volunteer labor saving
innovations that could lead to layoffs. And many organizations learned that the benefits of downsizing
were, at best, short-term.
But the challenge of downsizing with dignity continues to puzzle managers and employees in today's
fast-paced world. Being involved in a plant closure was one of the most emotional experiences I have
ever been through as a manager. It was a profound growth experience for both employees and
managers. It was a time when the principle of "doing with" was validated by trusting and productive
relationships between managers, the union, and employees. And the value of sharing both professional
information and personal insight maintained a strong sense of community as we literally tore down the
walls of our organization. During this time, I felt that I could live by my principles. There was no other
road map than the one I had within. |
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| About the Author: |
Ann E. Feyerherm, Ph.D.
Director of MSOD Program; Chair,
Organization Theory and
Management Discipline; Associate
Professor of Organization and
Management, Pepperdine
University.
Dr. Feyerherm is Director of the
M.S. in Organization Development
Program and Chair of the
Organization Theory and
Management Discipline. Before
earning her doctorate, Dr.
Feyerherm spent 11 years as a
manager of organization
development at Procter & Gamble,
where she was involved in
employee relations, organization
design, and corporate downsizing.
As a consultant, she has worked
with Healthways, Honeywell,
Monsanto, Frito-Lay, Two Chefs on
a Roll and Boeing on projects such
as improving multifunctional teams,
creating learning organizations,
negotiating effectively, leadership
development and managing change.
Dr. Feyerherm conducted research
on the role of leadership in
negotiating regulatory policy. She is
particularly interested in mediation
and negotiation of environmental
issues and in inter-organizational
collaboration across government,
business, and environmental
communities. In addition, she is
interested in increasing human
capacity through strength-based
approache s. Her work has been
published in the Leadership
Quarterly, The Graziadio Business
Report, and several book chapters.
She regularly presents at the
Academy of Management and
Western Academy of Management.
Dr. Feyerherm currently serves in a
five year leadership position of the
Organization Development and
Change Division of the Academy of
Management. |
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| March 2009 |
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