downsizing t&d

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Training and Development in an Era of

Downsizing

Franco Gandolfi

Abstract

Downsizing as a restructuring strategy has been actively implemented for the last three decades. Whileemployee reductions were utilized mainly in response to crises prior to the mid-1980s, downsizingdeveloped into a fully-fledged managerial strategy for tens of thousands of companies in the mid- tolate-1980s. Since then, downsizing has transformed the international corporate landscape and affectedthe lives of hundreds of millions of individuals around the world. While the overall effects of downsizinghave been widely reported, many misconceptions surrounding the concept of downsizing have remained.This conceptual paper focuses on the role of training and development (T&D) during the downsizingprocess. In particular, the research depicts the current body of literature associated with the function ofHR and its plans, programs, and policies that firms adopting downsizing must provide to their survivingworkforces. Finally, the paper offers concluding comments regarding effective downsizing practices thathave emerged in the literature.

Keywords: Downsizing, survivors, survivor syndrome, training and development

INTRODUCTION

Back in the 1980s and in the early days of the

1990s, downsizing was viewed as an indicator of

organizational decline. Over the past decade or so,

however, downsizing has been able to shed that

stigma and gained legitimacy as a reorganization

strategy (Fisher and White, 2000). Despite

considerable evidence showing that many

downsized firms have failed to achieve their

economic and organizational goals, downsizing has

continued to be adopted around the world evenin the best of economic conditions (Gandolfi,

2007). Clearly, downsizing has been popular and

enduring, but not always effective, productive, or

valuable (Macky, 2004). This is evidenced in a

substantial body of literature showcasing that

downsizing has profound human consequences on

the workforce, the so-called aftereffects of

downsizing (Littler, Dunford, Bramble, and Hede,

1997). Downsizing survivors, those individuals that

remain with the firm, have become of particular

concern since they are faced with increased

workloads and job responsibilities, on the one

hand, and since they have shown to exhibit a

number of dysfunctional downsizing-related

illnesses, such as the survivor syndrome, on theother hand (Gandolfi, 2006). Human Resource

(HR) practitioners and scholars assert that the

ignorance of the impact of downsizing on

survivors is one of the key reasons for the failure

of many downsizing activities and their ensuing

long-term problems (Cameron, 1994; Kinnie,

Hutchinson and Purcell, 1998; Farrell and

Mavondo, 2004).

This conceptual paper examines downsizing in the

context of the management of a firms human

resources during downsizing. It presents the maintheories, assertions, and empirical findings

Franco GandolfiDirector MBA/EMBA ProgramsRegent UniversitySchool of Global Leadership & Enterpreneurship1000 Regent University DriveVirginia Beach, VA 23464-9800

Journal of Management ResearchVol. 9, No. 1, April 2009, pp. 3-14


2/134 Journal of Management Research

regarding the role of the HR function, in general,

and training and development (T&D), more

specifically. As such, the paper reviews the existing

body of literature associated with the HR plans,

programs, and policies that firms adopting

downsizing must provide their surviving

workforces. Finally, the paper presents a number of

concluding comments regarding effective

downsizing practices that have emerged in the

literature.

DOWNSIZING AND THE HR

FUNCTION

The adoption of downsizing as a strategy produceseconomic, organizational, and human

consequences. Empirical and anecdotal evidence

suggest strongly that highly anticipated economic

and organizational gains have not materialized

(Sahdev, 2003; Zyglidopoulos, 2003). Moreover, the

occurrence of various sicknesses experienced by

the surviving workforces has drawn a great deal of

attention (Devine, Reay, Stainton and Collins-

Nakai, 2003). The perceived breach and violation

of the old psychological contract is likely to have

contributed to and magnified the failure of many

downsizing efforts (Gandolfi, 2006). Interestingly,HR practitioners and scholars believe that the

prevalence of the survivor syndrome and other

related symptoms constitute a barrier to

productivity (Maki, Moore, Grunberg and

Greenberg, 2005). Given the absence of financial

successes following downsizing coupled with the

finding that downsizing firms are frequently left

with a narrow-minded, self-absorbed, risk averse,

and depressed workforce (Campbell-Jamison,

Worrall and Cooper, 2001; Sahdev, 2003), it

remains of significance to provide a theoreticalexplanation as to why downsizing has failed to

produce positive outcomes.

There is substantial evidence supporting the notion

that firms are poorly prepared for downsizing. An

American Management Association (AMA) report

showed that more than 70% of surveyed firms had

downsized with no downsizing-related HR plans,

policies, and programs in place and more than half

of the downsized firms had failed to provide

adequate support plans for survivors to minimize

the negative effects of cutting back (Beylerian and

Kleiner, 2003). There is considerable empirical

evidence suggesting that firms offer little support

for survivors (Amundson, Borgen, Jordan, and

Erlebach, 2004), who are believed to be ignored

throughout the downsizing process. This

corroborates an earlier study postulating that

British firms had neglected the needs of the

remaining workforce revealing that less than 50%

had provided support for the survivors, while

nearly 80% of firms had provided professional

outplacement services for the downsized victims

(Doherty and Horsted, 1995).

Clearly, the blatant ignorance of the impact of

downsizing on survivors is one of the major

reasons for the failure of many downsizing efforts

and their ensuing long-term problems (Devine et

al., 2003). The decline of firms during downsizing

is largely attributable to the neglect of the human

capital (Hitt, Hoskisson, Harrison and Summers,

1994). During periods of downsizing, top

management is preoccupied with short-term

operational decisions and long-term commitments

are thus postponed or neglected. The key to

successful downsizing is to focus on people (Allen,1997) which is consistent with the notion that

survivors were kept because they are the cream of

the crop (Allen, 1997) and the linchpins of future

profitability (Appelbaum, Delage, Labibb and

Gault, 1997). While it has been noted that

organizations generally prepare well for the victims,

they certainly do not anticipate or prepare for the

survivors (Appelbaum et al., 1997). Thus, it can be

alleged that most downsizing efforts have not been

planned, managed, and implemented effectively

(Cameron, 1994) causing a great deal ofresentment among survivors (Amundson et al.,

2004).

There is some understanding that the root cause of

the survivor illnesses is a profound shift in the

psychological employment contract between the

employee and the firm. Under the old employment

contract, employees viewed their jobs as a lifetime

entitlement and offered loyalty, longevity, and

commitment to their companies. In return, firms


3/13Volume 9, Number 1 April 2009 5

provided great benefits, security, training, career

progression, and lifetime employment. Under the

new employment contract, however, loyalty to a

firm has been replaced with loyalty to an

employees work (Amundson et al., 2004). This

suggests that lifetime employment and reciprocal

loyalty are obsolete and that the traditional career

is therefore dead (James, 1999). Another shift is the

move away from the concept of employment

towards employability (Doherty and Horsted,

1995), whereby the individual embraces personal

career ownership, owns his or her own skills and

experience, and aspires to attain skills that are

transferable, thereby, attempting to remain

marketable and flexible (Lawes, 1996). Also, firmsused to view their employees as long-term assets

that had to be nurtured, developed, and cultivated,

while there is now a tendency to consider

employees as short-term costs to be reduced and a

variable in the production equation that can be

discarded at any time. Therefore, since most

current survivors were employed under the old

employment contract, where loyalty and

commitment prevailed, the announcement and

implementation of downsizing signifies a perceived

breach and violation of the covenant between the

firm and its employees. The paradigm shift from

the old to the new covenant and the one-sided

breach of the psychological contract is believed to

be the root of survivor-related illnesses (Allen,

1997; Zyglidopoulos, 2003).

As HR is primarily concerned with advising firms

on the effective allocation and management of its

people, what is the role of HR during downsizing?

What does research suggest? Cameron (1994),

drawing upon a systematic four-year study of

downsizing, found that certain strategies were morelikely to succeed than others concluding that the

most critical factor for downsizing success was the effective

management of the HR system. This raises the

fundamental issue as to what constitutes effective

HR practice? Over the many years of inquiry and

study of downsizing, a number of studies have

been carried out asserting the specific role of HR

during the downsizing process. Some of the

following findings that have emerged are of

normative, prescriptive nature:

Firms must amend their HR policies and

practices during and after downsizing

recommending that four components to be

rigorously incorporated: integrating

information, communication, and

transparency; providing support for survivors

and victims; adjusting the performance

management system, and providing training

and development (Kettley, 1995).

Effective HR policy during downsizing must

encompass the following four elements:

professional advice; support; counseling; and

training. Such an approach enables survivors

to cope with downsizing more successfully in

that the four HR aspects potentially mitigate

or neutralize the debilitating effects of the

survivor syndrome (Doherty and Horsted,

1995).

Firms need to pursue a strong,

communication-based approach in times of

major change providing an environment of

effective change and a meaningful strategy to

cure survivor sicknesses. HR plans must

include open, two-way communication

channels; a shared vision; participativedecision-making; the conduct of perpetual

job redesign; and the provision of training

(Allen, 1997).

Firms need to focus on employee

empowerment as a remedy to the emergence

of the survivor syndrome. The way the firm

interacts with its employees plays a vital role

in the successful implementation of change

in that communication is the glue that binds

a firm together. Thus, effective HR practice

must comprise frequent, frank, and consistentcommunication; information about the

process and progress of downsizing; the

articulation of a clear vision; employee

participation; and training (Appelbaum, Close

and Klasa, 1999).

Survivors frequently experience a post-

downsizing drop in morale. The results of a

Canadian study show that although there was

not a single best approach, some successful



practices have the following components:

advance planning; open and honest

communication; training; information; and

communication about the companys new

vision (Dolan, Belout, and Balkin, 2000).

Downsizing has created a phenomenon titled

the cycle of failure involving a chain of

consequences beginning with employee

dissatisfaction and ending with organizational

inefficiency and decreased profitability. Thus,

there must be a strong focus on training for

survivors in that training enables survivors to

cope with the new responsibilities and tasks

(Makawatsakul and Kleiner, 2003).

Downsizing yields dysfunctional human

effects, including decreased levels of morale,

motivation, and trust. Likewise, the

emergence of survivor sicknesses has a direct

and adverse impact on work productivity.

Thus, recommended personal development

interventions are: counseling; training; and

transition management workshops (Sahdev,

2003).

Firms must introduce downsizing-related HR

programs that foster employee empowerment;

build recommitment to the firm; and

encourage greater employability. Specific

survivor programs need to align survivors

with the firms new vision, mission, and

strategic objectives; incorporate coaching and

mentoring programs; and encourage ongoing

skills development and training opportunities.

A strong emphasis must be placed on T&D

assuming that the pursuit of an

organizational learning ethic can create a

strategic competitive advantage (Farrell and

Mavondo, 2004).

Table 1: HR Components for Successful Downsizing

Kettley Doherty & Allen Appelbaum Dolan Makawatsakul Sahdev Farrell &

(1995) Horsted (1997) et al. et al. & Kleiner (2003) Mavondo

(1995) (1999) (2000) (2003) (2004)

Advance

planning

Information, Communication Communication, Communication,

communication, information information

transparency

Vision Vision Vision Vision, mission,

and strategic

objectives

Support for Counseling, Counseling Coaching and

victims and support, and Transition mentoring

survivors professional management programs

advice workshops

Performance Job redesign

management

system

Respect for the

seniority rights and

depersonalizing

of layoffs

Participative Part icipat ion

decision-making & involvement

Training & Training Training Training Training Training Training Training & skills

Development development

(T&D)

Source: Developed for this research



Table 1 presents a non-exhaustive overview of

some of the main studies conducted and their

respective findings in regards to HR components

for successful downsizing.

Interestingly, while Table 1 depicts an incomplete

picture of the theoretical constructs leading to

successful downsizing, all proposed elements

correspond with Camerons (1994) original list of

critical factors leading to successful downsizing,

including employee involvement; teamwork;

sharing of communication and information;

provision of rewards; conduct of performance

appraisals; articulation of a vision; administering

of downsizing in a trustworthy and fair manner;

and training. Notably, training is the HR

component advocated by all scholars and

professionals included in this review.

Unfortunately, the academic work to date has

remained at an abstract, theoretical level and there

is limited empirical research published asserting the

relationship between HR components and

downsizing success. Nonetheless, two main studies

are of significance:

Gandolfi (2001) carried out case study research

examining the role of T&D in the context ofdownsizing. He found that Australias largest banks

were ill-prepared for downsizing and had failed to

implement T&D in an effective manner. Study

cases pursued reactive rather than proactive T&D

approaches. Gandolfi (2001) concluded that T&D

must play a significant role during downsizing and

recommended that firms must engage in proactive

T&D, embrace an eclectic T&D approach

combining generic with firm-specific training, and

provide personal development preceding

downsizing.

Right Associates carried out a major US survey

reporting that while survivors were informed about

the likely effects of downsizing, very little was

done to introduce new HR programs to promote

survivors re-engagement with the firm. The study

showed that 88% of firms had failed to implement

programs to help improve the survivors

performance and confidence levels. Firms forfeited

such programs since they felt that they were caught

in a dilemma. While firms downsize for primarily

monetary reasons, instituting programs for the

survivors would require additional financial

resources that firms were not willing to spare.

Firms were also so concerned about their financial

resources that they often overlooked the adverse

impact of second-order (i.e., human) consequences

(Beylerian and Kleiner, 2003).

DOWNSIZING AND T&D

Why should there be a continuation of downsizing

research? Apart from the presented research gaps,

there are clear developments justifying the pursuit

of academic inquiry, including:

the ongoing popularity of downsizing sincethe late 1980s,

the frequency and magnitude of reported

downsizing failures,

the occurrence of survivor-related sicknesses,

the assertion that the adoption of downsizing

will continue, and

the plea of experts for the development and

introduction of proactive HR programs.

Examining and asserting the role and relevance of

HR during downsizing is of great importance with

the following questions at the heart of future

academic inquiry:

1. What is the specific role and relevance of

T&D during downsizing?

2. Can T&D positively influence the outcomes

of downsizing?

3. Does T&D constitute an underpinning of the

survivor syndrome remedy?

While the previous section presented

recommended HR components for successful

downsizing, more work needs to be carried out on

the role of survivor programs. For example, there

is a shortage of evidence demonstrating the

effectiveness and efficacy of survivor programs for

survivors. Correspondingly, a lack of evidence on

the role of T&D during downsizing is also



Table 2: Empirical Findings of T&D Elements in the Context of Downsizing

Empirical Finding Researcher

Most firms do not attempt to establish a social environment conducive to the Zemke (1990)

development of the workforce, and, ultimately, to the companys prosperity in a

period of organizational change.

Most surveyed firms have implemented downsizing without any HR policies or Lee (1992)

programs in place.

Most f irms fail to anticipate the human consequences of downsizing. Cascio (1993)

Firms that downsized most effectively had changes in the HR system that Cameron (1994)

preceded and followed the implementation of downsizing.

The decline of downsized firms is attributable to the neglect of human capital. Hitt et al. (1994)

HR departments are often the primary target of cost-cutting efforts. Clark & Koonce

(1995)

Downsizing fails to achieve its alleged benefits due to the fact that companies lose Evans, Gunz,

core competencies by cutting muscle instead of fat. & Jallad (1996)

Survivors are largely ignored before, during, and after downsizing. Appelbaum et al.

(1997)

Firms do not ensure T&D before, during, and after the downsizing. Appelbaum et al .

(1997)

The adverse impact on survivors is one of the major reasons for long-term Kinnie et al. (1998)

problems of firms associated with downsizing.

Firms will continue to downsize well into the next century. Either way, whether Mitchell (1998)

downsizing or rehiring, companies must train their people.

Surveyed firms were ill-prepared for downsizing and failed to implement T&D in Gandolfi (2001)

an effective manner.

Survivors are driven to work harder after downsizing. Firms frequently fail to provide Makawatsakul &

training to survivors. Kleiner (2003)

Downsizing does not produce superior organizational performance in the long term Zyglidopoulos

and surviving employees frequently do not receive the necessary training. (2003)

Downsized firms frequently neglect the surviving workforce. Hareli & Tzafrir

(2006)

Surveyed firms were ill-prepared for downsizing and survivor syndrome. Gandolfi (2007)

Survivors were ignored and left to their own devices.




apparent. These aspects constitute research gaps

and merit further academic study.

Evidently, T&D must play a critical role in thesuccessful planning and execution of downsizing.

This assertion corroborates Camerons (1994)

finding of a US firm that had successfully

introduced and upgraded training policies for all

employees one year prior to the announcement of

downsizing (Cameron, 1994). It is clear that a

decidedly proactive approach to HR, in general,

and T&D, in particular, represents a key factor.

While the role of HR in association with

downsizing remains under-researched (Hareli and

Tzafrir, 2006; Gandolfi, 2007), some empirical

findings of T&D elements in the context of

downsizing have nonetheless been published. Table

2 presents a non-exhaustive overview.

Having reviewed the body of literature, the

following can thus far be concluded:

Downsized firms have implemented

downsizing without adequate HR systems in

place (Lee, 1992; Cascio, 1993; Appelbaum et

al., 1997; Gandolfi, 2007)

Downsized firms have ignored survivorsbefore, during, and after downsizing

(Appelbaum et al., 1997; Hareli and Tzafrir,

2006; Gandolfi, 2007)

Downsized firms have failed to ensure T&D

before, during, and after downsizing

(Appelbaum et al., 1997; Gandolfi, 2006).

The decline and ill-performance of

downsized firms is attributable to the neglect

of survivors (Hitt et al., 1994; Hareli and

Tzafrir, 2006; Gandolfi, 2006)

Survivors are forced to take on new job

responsibilities from departing employees and

faced with increased overall workloads

(Zemke, 1990; Allen, 1997; Mitchell, 1998;

Dolan et al., 2000; Makawatsakul and

Kleiner, 2003; Gandolfi, 2006).

This rather dire situation poses a number of

questions. For example:

How are survivors able to successfully cope

with the new circumstances following

downsizing?

How are survivors able to perform the new

job responsibilities in the absence of

adequate training?

How does an ill-experienced and inadequately

trained workforce excel in the long run?

These issues will need to be considered and

empirically studied in future research. Finally, the

following paradox has emerged: A seemingly

indifferent management attitude towards

downsizing survivors needs to be reconciled withthe much-publicized and eloquent mission

statements portraying the workforce as the most

important aspect of a firm. For example, back in

the 1990s, a firms workforce was portrayed as the

most important capital (Sofo, 1999), the most

valuable resource (Harrington, 1998), the most

important asset (Sunoo, 1998), the most valuable

asset (Darling and Nurmi, 1996), and a national

resource (McMorrow, 1999). Have managers

decided that the workforce, which was seen as so

critical in the 1990s, is now a liability rather than

an asset? Do employees constitute an expense anda cost that is readily expendable? More work will

need to be carried out to reconcile the paradox.

The Benefits of T&D

Why then should firms invest in T&D? What are

the alleged benefits? A brief review of the T&D

literature research depicts the benefits of T&D to

be manifold. Table 3 presents an incomplete

historical overview of some of the published

findings.As Table 3 depicts, the alleged benefits of T&D

for both the firm and the individual employees are

distinct, manifold, and diverse. For instance, T&D

is at the core of a firms organizational success

(Mitchell, 1998) and an absolute necessity (Clarke

and Koonce, 1997) for a firms long-term survival.

Sadly, empirical evidence also indicates that not

every firm recognizes the value of using T&D for

strategic ends (Berry, 1990) and as a means of



Table 3: The Benefits of T&D

Source Findings

Poulter (1982) Benefits for the individuals are the opportunity for promotion and self-

improvement, improved job satisfaction through increased job performance,

the chance to learn new things, and adaptability (i.e., the ability to adapt to

and cope with change).

Possible benefits for the firm are increased levels of productivity, profitability,

efficiency, and effectiveness, as well as reduced rates of absenteeism, labor

turnover, accidents, and errors.

T&D constitutes an insurance policy (p 7) for an organization.

Commerce Clearing House Employees are more likely to successfully cope with major change, crises,

(1985) and critical incidents.

Rabey (1990) T&D has two main purposes. First, it ensures that work meets required

standards of quality, quantity, cost, and time. Ideal ly, this translates into higherlevels of productivity, effectiveness of operations, and a safer and more

harmonious work environment. Second, the development of employees meets

the foreseeable needs of the firm and seeks to realize the potential of each

individual.

Ocholla (1995) T&D leads to a competitive advantage.

Davidson (1996) T&D has the capacity to increase overall profitability.

Kramar, McGraw, & Positive correlation between T&D and organizational performance in that T&D

Schuler (1997) has the capacity to improve a firms performance in at least three key areas:

labor productivity, overall quality of output, and the firms ability to adapt to

and cope with change.

Sofo (1999) T&D enhances employee performance, productivity, and efficiency, and

improves the quality, structure, and processes of firms. T&D is positively associated with empowerment, participation, and recognition.

Clarke & Koonce (1997) Positive correlation between T&D and improved organizational performance

indicators and individual growth.

Berge et al. (2002) T&D leads to higher levels of competitiveness.

T&D leads to sustainable competitive advantages.

Farrell & Mavondo (2004) T&D results in potential source of a competitive advantage.

Gomez, Lorente, & T&D is one of the most significant processes within the strategic management

Cabrera, (2004) of human resources.

Critical role of training in maintaining and developing individual and

organizational capabilities.

Capacity of training to substantially contribute towards the process oforganizational change.

T&D is a strategic capability.

Stone (2005) T&D is a signif icant source of competit ive advantage.

Saks & Belcourt (2006) T&D leads to higher levels of employee productivity.

Marshall (2007) Positive correlation between T&D and organizational performance.

T&D leads to improved ability to cope with change.




gaining a competitive advantage (Farrell and

Mavondo, 2004), thus ensuring its future (Marshall,

2007). Most importantly, Table 3 shows that

scholars have recognized the possible correlation

between T&D and employees ability to adjust to

and cope with major change (Poulter, 1982;

Kramar, McGraw and Schuler, 1997; Gomez,

Lorente and Cabrera, 2004; Marshall, 2007). This

particular finding has at least three implications:

1. T&D has the potential to prepare an

organizational system and its employees for

downsizing in a proactive, strategic fashion;

2. T&D has the potential to enable the

survivors to cope with altered job tasks andresponsibilities and increased workloads

effectively; and

3. T&D has the potential to enable the

survivors to cope with survivor syndrome

and other downsizing-related illnesses.

Surprisingly, the study of the role and relevance of

T&D during the downsizing process has received

little academic attention to date. In one of the few

empirical studies conducted on the subject, it was

concluded that T&D had the potential to positivelyimpact downsizing outcomes and that T&D also

had a positive impact on survivors and survivor-

related illnesses (Gandolfi, 2001). Significantly

more work needs to be conducted to verify the

findings and to extend the study.

Effective HR-related Practice During

Downsizing

Finally, is there a best HR practice during

downsizing? Are there HR-related elements that

have shown to impact downsizing positively?Downsizing scholars have come up with lists of

effective HR practice during downsizing.

Accordingly, successful downsizing practices may

have some of the following HR characteristics:

1. Downsizing needs to be implemented from

the top with recommendations from lower-

level employees and based upon job and task

analyses of how work is organized (Cameron,

1994; Makawatsakul and Kleiner, 2003).

2. Executives need to develop a change-

management plan with a clear vision of thefuture organizational identity and specific

steps to conduct and oversee the transition

(Macky, 2004).

3. Management needs to pay special attention to

the survivors through training, counseling,

regular information, and two-way

communication (Allen, 1997), while victims

generally receive outplacement, severance pay,

and counseling services (Gandolfi, 2001).

4. Firms need to identify redundancies, excesscosts, and inefficiencies. This can be achieved

through internal data gathering and

monitoring (Makawatsakul and Kleiner, 2003;

Schraeder, Self and Lindsay, 2006).

5. Leaders should facilitate downsizing by

preparing for a high level of activity,

including rallying people with a vision of a

better firm, offering transition management

training, acknowledging uncertainties and

concerns, communicating plans and actions,

telling the truth, involving people inmanaging the transition, and establishing a

safety net for transition victims

(Makawatsakul and Kleiner, 2003).

Finally, survivors frequently experience feelings of

anger, resentment, stress, and apathy, which lead to

decreased levels of morale, motivation, and

productivity. HR leaders have the opportunity to

add value to the downsizing process by taking an

early leadership role before, during, and after

downsizing to address the healing of the survivors.

A potent, effective downsizing plan must includestrategies for all six fundamental HR areas,

including employee involvement, communication,

support programs, selection processes, HR

management tools, and T&D (Weakland, 2001;

Gandolfi, 2006). The latter component, in

particular, is considered to be of primary

importance and in line with the findings and claims

of this current paper.



CONCLUSION

This conceptual paper examined downsizing in the

context of the management of a firms humanresources. It presented the main theories,assertions, and empirical findings regarding the role

of the HR function in general and T&D, morespecifically. The paper reviewed and analyzed theexisting literature in relations to HR plans,

programs, and policies that downsized firms hadprovided to the survivors.

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