Topic: Wellness, Work Environment
Publication: Human Resource Management (JAN 2011)
Article: The effects of downsizing on labor productivity, the value of showing consideration for employees’ morale and welfare in high-performance work systems
Authors: R.D. Iverson, C.D. Zatzick
Reviewed By: Rebecca Eckart
As economic conditions weaken, downsizing has become an increased reality for many organizations. Typically aimed at decreasing operational costs, often downsizing has the unintended consequence of also lowering employee productivity and morale.
To harness costs and increase efficiency, an increasing number of organizations are adopting High -Performance Work Systems (HPWS).These are typically defined by multiple separate but interconnected human resource practices aimed at increasing employee commitment, skills, and productivity. Examples include such practices as selective hiring, information sharing, job design, employee participation, and HR planning. HPWS center on encouraging and motivating employees to use their enhanced skills and knowledge to increase individual productivity and thus aid in the accomplishment of organizational goals.
HPWS are often a significantly large resource and cost expense for organizations, leading researchers to investigate HPWS in the context of downsizing. Iverson and Zatzick (2011) report that organizations with HPWS have lower levels of productivity following downsizing, but this relationship is more pronounced for those that give little consideration to employees’ morale and well-being during the process.
However, when HPWS organizations demonstrate high levels of consideration for employees’ morale and welfare during downsizing, the same decrease didn’t exist. Thus in times of dwindling budgets and workforces, the cost of failing to show consideration for employees during downsizing is financially noteworthy.
Operating in a HPWS that is thinking about downsizing? Consider investing in increased communication, candid openness by management, fair treatment during layoffs, counseling for remaining employees, and enhanced employee involvement. Bottom line, an employee-friendly downsizing policy (i.e., demonstrated compassion and consideration for employees) in a HPWS environment could buffer some of the negative impact that downsizing typically levies on labor productivity.
Iverson, R.D., & Zatzick, C.D. (2011). The effects of downsizing on labor productivity, the value of showing consideration for employees’ morale and welfare in high-performance work systems. Human Resource Management, 50(1), 29-44