Organizations that are known for being innovation leaders are typically flexible and agile, with an ability to quickly adapt to changing circumstances and quickly reinvent themselves, when necessary. In many situations, innovation can be fostered when organizations are able to free themselves of burdens that prevent them from being more effective or efficient.
Our experience repeatedly affirms that organizations function in similar ways to human systems, so it stand to reason that, in the same way that individuals and teams of individuals sometimes need to reinvent themselves, organizations do as well. But changing organizations through reinvention or redesign typically requires change to human systems, and that most often means changing belief systems and sometimes rewards systems as well. Obviously those aren't simple changes, so they often require outside assistance.
Reinvention and redesign usually requires time and energy, and both bring the potential for significant risk. Even more risk is incurred when organizations need to downsize and divest. But there are ways that even high risk scenarios can be opportunities for the kind of positive change that fosters innovation and enhanced performance. Why? Because when organizations are undergoing change, there is generally an opportunity for innovation. For more information about the change management aspects of reinvention and redesign, see our Change Management and Culture Transformation brochures.) __________________________________________________________________________________________
Drivers of Reinvention and Redesign
Let's look at what typically drives reinvention and redesign. Here's a partial list of drivers:
- new technology that's created changes in work flow - changes in the market that affect supply and demand - failure to effectively compete with new players or existing competitors - business or business units that don't with with cores services or competencies - poor financial performance of certain businesses, functions, or geographic locations - duplicative, labor-intensive processes or those with too many hand-offs - insufficient staffing to keep pace with customer or client needs - unclear goals or lack of accountability mechanisms - associates and leaders who lack critical skill sets __________________________________________________________________________________________
Results of Reinvention and Redesign
Enhanced technology and process redesign efforts can eliminate duplicative or labor-intensive processes, and they often result in centralization of services or the creation of centers of excellence and shared services functions. These changes, however efficient, can often result in outsourcing, facility closures, and layoffs.
No matter how carefully downsizing and layoffs are executed, they can have a negative impact on surviving employees. Consequently, we encourage clients to think of these options as last resort scenarios. Most important, downsizing should never be used as a strategy for communicating with investors, Board members, or other key stakeholders that current leadership (or new leadership) is capable of taking a tough-minded approach to doing business.
We also warn clients about trusting downsizing strategies to outside counsel or internal legal departments, whose primary focus is on reducing the risk of litigation. Although risk management is a critically important element during downsizing, it needs to be balanced by a focus on protecting the intellectual capital and morale of surviving leaders and associates. This is best done through effective change management processes, which typically include comprehensive communication strategies. The visual below depicts some opposing views on how downsizing and layoffs should be conducted:
Primary Focus on Risk Avoidance or Risk Mitigation
Primary Focus on Organizational Effectiveness
Last hired; first to go or layoffs of a certain across-the-board percentage
Least adaptable employees and those who are least able to transfer skill sets to newly created roles
Telephone conference calls, group meetings, or e-mail notifications.
Only the facts, rather than explanations that can be interpreted as implied or explicit promises.
Meetings with direct managers and representatives from the Human Resources Department who can communicate the reasons for downsizing or divestiture and thank employees for previous contributions
One viable method of managing risk during restructuring and downsizing is a peer review process. A committee makes restructuring and redesign decisions and decides who should stay, who should be redeployed, and who should go. Ideally this committee has representation from all functional areas of the organization and is comprised of individuals who mirror the employee population, in terms of diversity. If implemented correctly, a committee approach, or peer review process, can ensure that layoff criteria is applied across the board and minimize any intentional or inadvertent discrimination. At minimum, we advise clients who are considering downsizing or divestiture effort to consult with an experienced attorney who's knowledgeable about employment law. We also encourage clients to become familiar with provisions of the WARN act, which provides for adequate notice of layoffs involving a certain number of employees. These are only ways that organizations can mitigate legal risk, but there are other risks that go beyond legal risk. There are also significant risks if an organization is unable to retain key talent. __________________________________________________________________________________________
The Cost of Mismanaging Downsizing or Divestiture
Unfortunately, some organizations ignore or deny all the signs that dictate the necessity of downsizing until there is inadequate time for effective planning. In those situations, layoffs are viewed as needing to take place immediately, to reduce the financial drain of excess staff or other costs. In these scenarios, downsizing or divestiture are often implemented hastily and with insufficient planning or consideration of alternatives. Difficult decisions, such as how much notice should be given, what transition support should be provided, and who should be laid off aren't given as much attention as they warrant.
This is unfortunate because it can affect the future success of the organization to the same degree that it affects the future of laid off--and surviving--employees. These feelings are exacerbated when downsizing has been executed without compassion that leaves laid off employees feeling angry and disappointed and surviving employees feeling guilty and demotivated.
Surviving employees typically experience a wide spectrum of feelings, long after layoffs, that can range from excessive guilt or blaming to withdrawal, risk averse behavior, and low morale that affects the quality and quantity of their work. We help surviving employees re-channel their energies into efforts to support new structures and business strategies. __________________________________________________________________________________________
Alternatives to Downsizing and Divestiture
Many people view layoffs and the sale of divisions or geographic locations as last resort scenarios because of the trust that is inevitably injured between the organization and its leaders and associates. But layoffs and facility closures often do more than erode trust. They can also be costly options, in the long run, for organizations that might have been able to achieve similar results with less disruptive initiatives. We work with clients to evaluate alternatives to layoffs and facility closures that include: - discontinued or decreased use of temporary or contract employees - freezes on compensation (i.e., salary increases, bonuses, etc.) - hiring freezes - voluntary layoffs - early retirement or buyout incentives - reduced work hours (i.e., 4-day work weeks in exchange for reduced pay) - unpaid leaves of absence (i.e., furloughs) __________________________________________________________________________________________
Transition Strategies That Maximize Productivity and Retention When restructuring, downsizing, or divestiture can't be avoided, senior leaders need to create and carefully communicate a vision of where the organization needs to go and what strategies (goals, objectives, and initiatives) will get it there. As with other change management initiatives, there also has to be buy-in and sponsorship.
But is it really possible that downsizing and divestiture can create opportunities? Yes, but to accomplish this, it's imperative that restructuring and downsizing or divestiture respect the individuals involved as well as their previous contributions.Change management needs to be carefully orchestrated when restructuring and divesting. Dramatic, unprecedented, or radical change requires different initiatives and communication strategies than do more gradual, incremental changes. __________________________________________________________________________________________________________________
We've saved this topic for last because of its importance and also because it's typically overlooked. Organizations that are downsizing or divesting need to focus intently on preserving their intellectual capital and organizational history. For this reason, we encourage clients to ensure that high-performing employees and leaders get as much attention as those who were laid off. After all, it's these critical survivors who will carry out new organizational strategies, goals, and objectives. And it is these survivors who will be impacted by how downsized employees are treated. Some leaders know that survivor guilt can be a debilitating phenomenon that drains energy from the organization, but many others believe that survivors should be happy that they still have jobs, so they don't devote the necessary time and effort required to retain them and ensure that they're motivated.
Our experience tells us that survivors are usually the ones who inherit a larger workload, more responsibilities, and perhaps even tasks that they're untrained for or for which they less than competent in taking on. So it's safe to say that there's stress on all fronts during downsizing. And often this occurs despite the best of intentions--when all efforts were made to consider alternatives and downsizing was thought to be the only viable option for reducing costs, for preserving resources, for increasing productivity, improving profitability, and in the case of not-for-profit organizations, ensuring organizational effectiveness and perhaps even survival. __________________________________________________________________________________________
Positive Outcomes of Reinvention and Redesign
As we said earlier, organizations can do more than simply manage the risk inherent in reinvention or redesign. They can leverage risk by creating opportunities for growth and/or increased organizational effectiveness--even during initiatives that typically have negative connotations.
Is that really possible? Absolutely! We've helped many clients turn adversity into opportunity by recognizing that, if restructuring--and even downsizing and divesting--is done thoughtfully and carefully, it can provide the impetus for positive change. Innovation Outcomes works in partnership with clients to leverage restructuring and divesting to:
- achieve positive financial and non-financial results - adopt and maintain a resilient approach to change and have leaders be a model of resiliency for associates - build environments that support redesign initiatives - identify ongoing improvements to organizational effectiveness and efficiency - solve complex problems and ensure ownership through collaborative problem solving - successfully implement change processes through effective communication that explains the rationale behind change - manage differences effectively to minimize or eliminate implementation obstacles - reinforce accountability through honest feedback - help individuals transfer skill sets to more appropriate roles or environments - retain high-performing employees who are key to newly designed or restructured organizations
__________________________________________________________________________________________ To read what clients say about our Reinvention & Redesign services, click here. __________________________________________________________________________________________
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