Reengineering and Dumbsizing: Mismanagement of the Knowledge Resource©

To understand the reasons for the radical restructuring process that has recently been occurring in the most modern organizations, people first need to appreciate the underlying transformation of their environment. This is an unusual era of change. Although the Greek philosopher Heraclitus noted that, “There is nothing permanent except change,” back in 500 B.C., the nature of change itself has recently changed.

Paul Shay, a futurist and former vice president of a prestigious think tank, concluded that, “There are rare times in history when changes are so profound that it amounts to a change of kind, rather than degree; and this is the fourth such change in the history of Western civilization! (The first was the transformation from barbarianism to Greek civilization, the second was the Renaissance, and the third was the Industrial Revolution).”

In the past, change was predictable, incremental, and evolutionary. In other words, it was linear. In modern times, however, change is the opposite: It’s “nonlinear.” It’s unpredictable, rapid, and revolutionary. Therefore, it’s considerably more challenging.

The main driving forces behind this fourth transformation of change were the development of the personal computer (PC) and global telecommunications technologies. In the span of less than two decades, these technologies have totally revolutionized the world. For example, more new information has been generated in the past 30 years than in the previous 5,000 years, and the total amount of new information being generated is now doubling in time frames of less than five years. While the amount of new information is increasing, product life cycles are shrinking. What once took a generation for Ford’s Model T is now down to several months for PCs.

The PC and telecommunication technologies have not only changed the processes used to produce goods and services, but also how those processes are managed. For example, the traditional management hierarchy no longer makes business sense because the critical wisdom and information needed to run the new processes are no longer containable at the top. In addition, automation and other advances have reduced the number of employees needed to produce goods and services, resulting in unemployment.

In sum, there has been an evolution from an industrial economy, which is based on natural resources and manual labor, to an information economy, which is based on intellectual capital and knowledge workers. Dealing with rapid, nonlinear change has been a challenge for both management and employees. This challenge is compounded by the erosion of personal time for rest, reflection, and planning. By 1989, the average American was already working the equivalent of an extra month per year as compared to his or her counterpart 20 years previously.

The bottom line is that companies have had to retool their businesses without the benefit of historical precedents and without adequate time to properly assess all of the critical factors. Understandably, some major errors were made, but too many companies are continuing to make the same mistakes. They are failing to understand the basic concepts of knowledge management, which enable sustainable profitability.

Deep ecology and successful corporate cultures

Since organizations are composed of people, it is instructive to examine how living systems successfully adapt to changing environments. In The Web of Life, physicist and philosopher Fritjof Capra describes the scientific discoveries underlying the paradigm shift from a mechanistic view to a holistic systems view of the world. In the holistic systems view, which is called “deep ecology,” the world is perceived as an integrated whole rather than a dissociated collection of parts. Thus, deep ecology requires:

  • A shift in values, from self-serving egocentrism to a concern for the well-being of others
  • A shift in power, from domination over others to influence of others
  • A shift in social organization, from hierarchies to networks

Companies can benefit by adapting the deep ecology view when running their businesses. Capra identified several basic principles of deep ecology for sustainable organizations, including:

  • Interdependence. Interdependence is about mutual dependence. The success of a whole community depends on the success of the individual members, and the success of each member depends on the success of the community as a whole.
  • Flexibility. Flexibility results from multiple feedback loops that bring the system back into balance whenever there is a deviation from the norm. The greater the flexibility, the greater the ability to adapt to changing conditions.
  • Diversity. Diversity yields greater resiliency for adapting to changing conditions, since there are many information sources and resources with which to cope with problems.

In summary, sustainable organizations are intelligent systems that learn and apply what they have learned.

These three basic principles of deep ecology are scientifically based concepts, but more important, they are also exemplified by research data on corporate performance. James Collins and Jerry Porras of Stanford University set out to discover what makes truly exceptional companies different from all of the others. They examined 18 exceptional companies that were the premier institutions in their industries, were widely admired, averaged being in business nearly 100 years, and had outperformed the general stock market by a factor of 15 since 1926. They then compared each company to its top competitors. The results were published in their book Built to Last: Successful Habits of Visionary Companies.

Collins and Porras discovered that the exceptional companies shared several timeless qualities:

  • They have core values. These core values form solid foundations that do not change because of current fads. (They seem to function like DNA: They organize the processes required for thriving and enable the transfer of effective design knowledge to future generations, ensuring long-term survival.) It is important to note, however, that if exceptional companies stray from their core values, they deenergize their employees and lose their competitive edge. Such was the case with IBM, when it lost is audacious boldness for investing in the future and became more conservative and protective.
  • They are driven by more than making money. The exceptional companies pursue a cluster of objectives; while making money is one of those objectives, it is not necessarily the primary one. Yet, these exceptional companies are more profitable than their competitors, which are driven primarily by making money.
  • They focus on continuous improvement. The companies focus more on continually improving themselves rather than on beating the competition.
  • They learn from failures. The companies rely more on trial-and-error experimentation than on academic strategic planning.

These qualities combine to form an organizational culture that is conducive to success – and profits. Similarly, in their book Corporate Culture and Performance, John Kotter and James Heskett of Harvard University demonstrate that there is a relationship between organizational culture and profitability. In their analysis of more than 200 leading companies, Kotter and Heskett found that an “adaptive” corporate culture has a significant effect on long-term economic performance. (An adaptive culture is characterized by visionary leadership, walking the talk, attentiveness to all stakeholders, empowerment of employees, and dedication to continuous improvement.) In terms of financial performance, those companies with adaptive cultures increased their revenues over an 11-year period by 682% and improved their net incomes by 756% compared to 166% and 1% respectively, for those companies that were not adaptive to change.

Given these figures, it’s ironic that many executives regard values and culture as “soft” factors. Most likely, these executives also don’t understand the real value of the knowledge resource in their employees. David Packard, one of the founders of the Hewlett-Packard Company, put it succinctly when he said:

I want to discuss why a company exists in the first place. In other words, why are we here? I think that many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reason for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company. Now they are able to accomplish something collectively that they could not accomplish separately – they make a contribution to society, a phrase that sounds trite but is fundamental.

The concepts of making a contribution to society, interdependence, flexibility, and diversity are more often the exception rather than the rule in companies today. Companies more often focus solely on making a short-term profit, view employees as disposable commodities, and create unadaptive cultures. A stark example of this is the recent trend of reengineering.

The problems with reengineering

Reengineering is the radical redesign of a company’s processes, organization, and culture to achieve breakthrough increased performance (vs. the slower, incremental improvements associated with total quality management). The classic book on the subject is Michael Hammer and James Champy’s book, Reengineering the Corporation: A Manifesto for Business Revolution. In their introduction, they not so humbly purport to replace the basic set of organizing principles for business of the past 200 years. They state that, “In business reengineering, all job titles and old organizational arrangements – departments, divisions, groups, and so on cease to matter. They are artifacts of another age…How people and companies did things yesterday doesn’t matter to the business reengineer.”

Although “reengineering” is not the same semantically as “downsizing,” in practice, the two terms have become relatively synonymous. For example, an article from the Wall Street Journal referred to Hammer as, “the management guru whose ideas launched tens of thousands of pink slips.” Some of the other widely used synonyms are “reorganization,” “restructuring,” “rationalizing,” and “layoffs.” Then there are the Orwellian euphemisms, such as “rightsizing,” “delayering,” and “dehiring.” The bottom line is that reengineering is usually applied for expedient cost cutting rather than for value-added objectives and growth.

Hammer and Champy’s book launched a fad that caught on in many companies. While the concept of taking a fresh look at a company’s underlying business processes instead of just continuing to do things the same way is sound, the business reengineers inexcusably suffer from a major blind spot. They fail to see that a business is a business because of its people and that it exists by serving the needs of the people. Surgically cutting away part of the employee body and leaving the remaining employees hemorrhaging dangerously impairs the company’s vitality. Three years after the publication of Reengineering the Corporation, Hammer admitted that he “wasn’t smart enough” about the importance of factoring in people. He blamed his own engineering background and said he had not been sufficiently appreciative of the human dimension.

The damage, however, had already been done. Companies had hopped on the bandwagon, with often disastrous results.

Negative side effects of reengineering on the company

Instead of making companies lean and mean, reengineering more often makes them lean and lame. Reengineering negatively affects both a company’s bottom line and its future vitality.

Here is a sample of reports on how reengineering has affected companies’ bottom lines:

  • In their article, “Business Process Re-Engineering RIP,” Enid Mumford and Rick Hendricks revisited some of the supposed success stories inReengineering the Corporation such as Capital Holding Corporation, Hallmark, and Mutual Benefit Life. What they found was failure. They wrote: “This is the story of the rise and fall of business process re-engineering in the U.S. It is a tale of fashion and fads, of unfulfilled promises and financial catastrophes.” Mumford and Hendricks found that many of the companies were eventually left with processes that were more difficult to manage than the previous ones. In addition, their costs had increased, they were getting poorer returns on assets and equity, and their employees were demoralized. Mumford and Hendricks concluded that, “values are as important, if not more important, than they have ever been. Yet many companies tend toward short-term, issues-focussed, expedient managerial behavior. These approaches, together with short-term contracts, longer working hours, and increased stress, can produce an alienated work force which has little or no identification with its employer. All the promises of improved quality, better service, and a stronger customer orientation are brought to nothing.”
  • Training & Development magazine reported that reengineering was failing in about 70% of organizations because of inadequate consideration of the human factor.
  • According to surveys by the American Management Associations, every year since 1988, at least 30% (and sometimes more than 50%) of large and mid-size U.S. companies have downsized. But 66% of the constricting companies did not report any increase in productivity and 55% did not improve their operating profits.
  • A survey of 1,468 companies by the Society for Human Resource Management found that productivity had actually deteriorated from downsizing in more than 50% of them.
  • The University of Wisconsin conducted a study of the relationship between layoffs and profitability in FORTUNE 100 companies. It revealed that financial performance over a five-year period actually worsened because of downsizing.
  • A survey of 1,005 downsized companies by Wyatt Associates found that 68% were not successful in increasing their profits.

Besides the bottom line, reengineering attacks the vitality of companies. There are may instructive analogies on how reengineering drains the life out of an organization. For example, reengineering has been compared to:

  • Anorexia nervosa. The organization becomes thin, but less healthy. First, the organization’s fat is depleted, then its muscle, and eventually even its brainpower.
  • Bloodletting. Reengineering is akin to the not-so-old but pseudoscientific medical practive of bloodletting, which was supposed to help rid patients of harmful substances, but actually weakened them.
  • Computer viruses. Just like a computer virus, reengineering decreases organizational memory because layoffs are often covertly targeted to older, usually more experienced employees (i.e., over 40 years of age). Loss of organizational memory also occurs when desirable, highly trained employees decide to jump ship because they are offered the lifeboat of an early retirement package or because their faith in the company’s future is shattered. Finally, the destruction of the information grapevine and the informal bridges between key employees of various departments results in loss of the tacit knowledge embedded in the working institutional memory.

The remnants of the reengineered companies are no longer vital social institutions. There is little heart left to recharge the stressed-out employees who survived the downsizing or to rebuild the bond between them and their companies. Specifically, reengineered companies experience:

Deterioration of teamwork. Although company leaders usually call for an increased emphasis on teamwork and communities of practice, in reality, teamwork actually deteriorates. For the shell-shocked survivors, information is power, so they don’t voluntarily share it with others. Employees guard information, believing that it will make them less likely to be let go in the next wave of downsizing. The net result is a decrease of collaborative intelligence.

Teamwork also deteriorates due to the use of technology to replace human interaction. For example, voice mail is used to replace secretaries, while telecommuting and “virtual teams” take the place of in-person meetings. The reduction of face-to-face contacts, however, substantially reduces the employees’ willingness to put themselves out for others.

Delayed decision making. Decision making suffers because the stressed employees fear making a bad judgment call and, as a result, tend to postpone decisions until the dust settles (of course, it never does). So analysis paralysis and passing the buck often occur at a time when there is a need for fast, decisive actions.

Crippled support functions. Human resources, education and training, and other support functions often fall victim to reengineering because they are usually perceived as being too soft. The human resources function tends to regress back to the personnel department. What staff and money are left are usually devoted to the financial and legal issues surrounding the downsizings, such as employee termination, early retirement packages, outplacement programs, wages and benefits, and disability claims. As a result, there is little or no support and training for the survivors, both of which are crucial for their effectiveness and resiliency to cope with future changes.

Decreased creativity. Reengineering creates conditions of anxiety and anger that hinder creativity, resulting in lost opportunities for the company.

Negative side effects of reengineering on the survivors

Aside from the tragic personal costs to those who become unemployed, reengineering also negatively affects the remaining employees. It is gradually being recognized that the survivors of downsizing also suffer from stress. In fact, sometimes they feels as if they ended up with the poorer deal in terms of not obtaining an attractive benefits package, being burdened with a heavier workload (as they usually have to do more with less), being in a less congenial workplace, and not having future job security. In addition, they are less likely to receive stress and change management training and counseling, which is often made available only to downsizing victims through outplacement programs.

Survivors are also plagued by a sense of guilt. For example, they might feel guilty for not standing up more for the downsizing victims or feel they were less qualified than those who were discharged. On top of the guilt, they might fear not being able to adjust to the new tasks, roles, and relationships. Hence, they become the walking wounded, physically, emotionally, and behaviorally.

The manifestations of stress

Stress is the automatic reaction that people experience emotionally and physiologically when they have to adapt to any situation. Hans Selye, who is known as the father of the stress concept, found that when the “adaptation energy” of laboratory animals became depleted as a result of their trying to cope with excessive change, they became more vulnerable to various diseases. In addition, it was found that even merely worrying about change can trigger stress, deplete life energy, and cause vulnerability to illnesses.

In the 1960s, Thomas Holmes and Richard Rahe took Selye’s research a step further when they studied the relationship between the amount of change humans could endure in a year and what happened to their future well-being. As Selye had theorized, they found that once somebody had experienced an excessive drain of energy from trying to cope with the stress of change, they were much more likely to become ill. They also found that there was often a lag time of up to two years between when the stressful changes were actually experienced and the resulting development of the illness

Holmes and Rahe’s research suggests that the stress-related illnesses now being seen in employees from reengineering are just the tip of the iceberg; more will soon be emerging. The impact will be like a tidal wave because the downsized organizations will no longer have the slack to fill in for those who become sick, which will result in even greater stress loads and more illnesses for the remaining employees.

In addition to the impact on manpower, stress-related illnesses will take its toll financially. (According to the U.S. Health Care Financing Administration, companies are projected to spend more than 60% of their after-tax profits on the provision of medical care for their employees by the year 2000.) Consider these reports:

  • The American Institute of Stress estimates that job stress now costs the U.S. economy about $300 billion per year. (This is a composite figure representing lost production, medical expenses, Workers’ Compensation, and disability costs.)
  • A 1991 survey on employee stress by the Northwestern National Life Insurance Co. of Minneapolis, MN, found a 200% increase in stress-related disability claims between 1982 and 1990. In addition, the stress-related disabilities had become more severe and were less responsible to rehabilitation (i.e., the success rate decreased from 88% in 1982 to 33% in 1990). The impact was worst in those companies that had undergone restructuring.
  • Stress claims is the fastest rising category of Workers’ Compensation payouts.
  • Safety experts have found a strong correlation between restructuring and the rise in costs from increased sick time and accidents.
  • The incidence of people suffering from severe anxiety is rapidly increasing due to the higher levels of stress in modern society. About 25 million American adults currently suffer from this condition, and it is projected that about 65 million people (nearly 25% of the population) will suffer from an anxiety disorder at some point in their lifetimes.
  • Anti-anxiety drugs are among the most widely prescribed drugs of any type. In just the past two years, the number of prescriptions for Prozac and related antidepressants has jumped 20%. Plus, there is “self-medication,” with about one in seven adults in the United States being a problem drinker.
  • More people seek relief from depression each year than from any other medical condition, including the common cold. The Medical Outcomes Study found that depression is associated with as much or more disability than major medical conditions, including heart disease.

Stress not only affects people physically, but also emotionally and behaviorally. Their emotional and behavioral reactions are partially explained by Abraham Maslow’s hierarchy of human needs. People have various levels of needs that they seek to meet in progressive order of complexity. For example, people will try to meet their need for food and water (a lower-level need) before their need for self-actualization (a higher-level need). Along with food and water, security is one of the most basic needs; consequently, since reengineering threatens people’s need for security, they find it to be a very stressful situation.

Reengineering can also threaten people’s need for self-esteem (a higher-level need). Organizational changes threaten employees’ attachments to familiar roles, relationships, skills, territories, schedules, processes, and power. These attachments are often an integral part of their self-identity and self-worth. In other words, for many people, who they are is largely defined by what work they do. By changing the work they do, reengineering threatens how they view themselves and their worth.

Successfully coping with change requires the sequential and complementary processes of detachment and then reattachment (i.e., letting go of the old and moving on by adjusting to the new). As they deal with the processes of detaching and reattaching, employees usually go through four stages: denial, resistance, resignation, and involvement. (Some, however, never progress all the way through to the involvement stage.)

Ideally, employees should be allowed to discuss their feelings of grieving and fear during the detaching and reattaching processes. Such discussions provide a release as well as validation and support. Employees also need time (and, in some cases, assistance) to make the transition through the four stages.

Unfortunately, “dysfunctional organizational denial” is the operative norm in many reengineered companies. There is an implicit message to employees not to acknowledge their feelings, but rather to just accept the changes. But denial only deepens employees’ feelings of hurt, fear, and anger, which could result in a wide range of undesirable emotions and behaviors:

  • Employees become preoccupied with their feelings, causing them to daydream or gossip.
  • Employees become deenergized and less committed, causing them to work slower and make more errors.
  • Employees become distrustful and irritable, causing morale and teamwork to deteriorate.
  • Employees might sabotage the company by intentionally not communicating, sacrificing quality, being inconsiderate of customers, stealing, publicizing proprietary information, or bad-mouthing the company to customers and suppliers.

Managers can experience similar feelings and display similar behaviors. They are, however, in a double-bind because of their sense of loyalty to their staff and their responsibility to senior managers. In addition, they often are left with the responsibility for doing more with less resources. Consequently, they often end up feeling drained and cynical.

The situation is usually very different for the senior executives, because they are the doers rather than the victims. They often obtain positive psychological stroking when the stock market praises them for having the judgment and courage for doing “what had to be done” and then rewards them by increasing the market value of their companies (albeit temporarily).

Healing the wounds

What can be done in the aftermath of reengineering to avoid stressing out the survivors? Many comprehensive studies have demonstrated that the return on investment of corporate wellness programs in which stress management is the key factor ranges from 3-to-1 up to 10-to-1. But, unfortunately, most reengineered companies tend to overly focus on cost-containment for medical expenses rather than preventative measures. (This is in contrast to the conventional business practices of investing in preventive maintenance and risk reduction.) In an effort to lower costs, many reenginerred companies tend to restrict medical coverage, especially for mental health care benefits. This is shortsighted. Not only are many employees increasingly impaired emotionally from the stress of reengineering, but studies also reveal that mental health counseling actually reduces the subsequent use of more costly medical treatments.

Those companies that do offer assistance to reengineering survivors usually do so inadequately. For example, most programs are poorly funded, are often staffed by lesser-trained counselors instead of psychiatrists or psychologists, function in a mostly reactive mode, and are allotted insufficient time. Hence, they are restricted to offering more of a Band-Aid than the truly comprehensive solution that is potentially available with state-of-the-art stress management training.

Another factor restricting the wider acceptance of stress management training is fear, both on the part of the companies and potential attendees. Companies fear admitting liability for exposing their employees to unhealthy levels of stress; employees fear admitting vulnerability by seeking help.

But given the fact that stress now costs the U.S. economy billions of dollars each year, it would be smarter for companies to face their fear and invest in properly caring for the survivors because they can and should be considered as appreciating assets.

As previously stated, even merely worrying about change can trigger stress and deplete vital energy. Therefore, a key point in stress management training is to teach employees to be resilient by adopting a more appropriate attitude. This can be accomplished through:

Personal growth. In this era of relenting change, people must learn to more properly define their sense of self-worth and satisfaction in terms of who they are internally (i.e., their accumulated wisdom and the alignment with their values) rather than by what they have in their external environment.

Ideally, people should expend their personal energies productively by solving problems and exploiting opportunities rather than worrying about what they cannot change. This wisdom is aptly represented in the paraphrase of the popular “Serenity Prayer” by the Minister Reinhold Niebuhr: Give us the serenity to accept what cannot be changed, the courage to change what should be changed, and the wisdom to know the difference. The underlying notion is that sometimes it is wise to let go and instead apply one’s energy to what is controllable, where it will really add value.

Spiritual growth. The workplace has become the primary source of community. It is the place where employees spend most of their time, have some of their most meaningful relationships, and define themselves.

Despite the fact that employees bring most of their emotional needs to the workplace, companies are becoming increasingly antihumanistic and insecure environments. Consequently, in these stressful times, employees would probably be well served by regularly practicing inward reflection and contemplation to achieve calmness, wisdom, and resiliency. They should also heed the wisdom of Selye, who concluded that developing an “altruistic ego” was one of the most powerful antidotes against stress. Developing an altruistic ego essentially means caring about other people’s needs and committing personal resources to help them. This dovetails with Packard’s notion of why companies exist in the first place.

Organizational leaders, meanwhile, would be well served by accepting their stewardship responsibilities and realizing that employees are not simply earning a living, but also making a life for themselves. They need to bring spirituality into the workplace to foster personal growth, to convey a sense of heartfelt community, and to make meaningful contributions to the betterment of society. As the December 1996 issue of the Harvard Business School Bulletin stated, “For many managers today, the greatest business challenges are no longer technical; rather, they involve figuring out how to put more ‘soul’ into the workplace.”

Spirituality, in essence, is about the experience of depth in life and concern for purposes that extend beyond oneself. This notion of spirituality is convergent with the modern scientific conception of deep ecology, particularly in terms of its basic principle of interdependence.

Another application of spirituality in business is the use of intuition. It’s ironic that surveys reveal the dependency of most successful leaders on intuition rather than on extrapolations from experiences or logical analyses of current data when making decisions. Yet they are shy to speak openly about their source of guidance and instead cloak it in a logic trail.

Nevertheless, in this current era of nonlinear change, intuition is the means for innovative thinking and cultivating inspiring visions to take employees from fear to hope and to engage their commitment for success.

Advice to lead by

Leaders who are about to take the reengineering and downsizing plunge should heed this advice: Don’t do it if there are other practical and creative alternatives. For example, leaders could instead:

  • Reduce the organizational fat in terms of processes rather than people (e.g., eliminate unproductive meetings, poor communication, lack of accountability, excessive response time, or excessive waste of material resources).
  • Reduce or eliminate bonuses.
  • Reduce the work force through attrition.
  • Reduce the use of temporary workers.
  • Reduce the use of external contract services.
  • Restrict overtime.
  • Shorten the work week (e.g., work one day less every one or two weeks).
  • Reduce benefits (e.g., cost-of-living increases or vacation pay).
  • Institute leave without pay.
  • Reduce pay levels.
  • Retrain and transfer employees so they can add more value.
  • Use job banks.

If leaders believe they have to reengineer their companies and downsize the work force, they should at least follow these guidelines:

  • Don’t do it repeatedly. Repeated reengineering and downsizing is akin to death by a thousand cuts.
  • Provide as much advance notification as possible. Employees should not be kept in limbo; they need time to make appropriate preparations.
  • Communicate directly, honestly, and empathetically with employees. Such communication will minimize their distress and help them successfully go through the detaching and reattaching processes.
  • Ensure that management walks the talk. When words and actions are in conflict, people are influenced more by actions.
  • Establish two-way communication rather than hoarding information at the top and releasing it on a top-down, need-to-know basis. Two-way communication takes the steam out of the rumor mill and provides potentially corrective feedback.
  • Justify the need for the change. Leaders should explain that is the positions, not the employees, that are no longer viable or needed.
  • Honor the past by acknowledging its rightful place in the company’s development.Doing so will help employees avoid feeling that their previous work and accomplishments have been a waste of time.
  • Present the downsizing process as part of a clearly articulated vision of a desired future for the organization. Leaders should show how the changes will benefit the organization, the employees’ future prospects, and the customers.
  • Involve employees in designing and implementing the reengineering process. The organization will benefit from employees’ collective wisdom, and the employees will have a vested interest in the success of the process.
  • Downsize gradually. A study by the University of Michigan found that most companies that achieved organizational improvements from downsizing did so because they used a slow, studied, and participatory approach. Whereas, in contrast, most companies downsize quickly (i.e., less than two months for planning and implementation) and are unsuccessful.
  • Provide safety nets for those who will be laid off to ease their transition. Safety nets can include adequate lead time and benefit packages that include extended health coverage, counseling, stress and change management training, new skills training, and outplacement services. Safety nets also lower the stress on the survivors by reducing their guilt and anxieties about their own futures.
  • Act in a socially responsible way to minimize the adverse effect of layoffs in the surrounding communities. For example, a company could provide resources to community social workers, support groups, and agencies as well as assist community leaders in recruiting new companies to the area.
  • Reduce the workload in accordance with the reduced work force. Leaders should not expect the survivors to do more with less.
  • Reinforce risk taking. The survivors will tend to become protective and cautious, so the leaders must reinforce risk taking for innovation by following W. Edwards Deming’s precept to “drive out fear.”

This paper was first presented at the Annual Meeting of the Academy of Organizational and Occupational Psychiatry in Orlando, FL. A revised version was also presented at the Austin Dialogue on Knowledge Management in Austin, TX. It was published in an issue of “Quality Progress” and is copyrighted by its Publisher – American Society for Quality.