How to Deal with Downsizing Effects on Employees

Modern recessions, monetary crises, and pandemics have resulted in downsizing among companies worldwide. They do not only feel the effects of downsizing on employees but also on the remaining employees and the companies in general. Dealing with the effects requires careful and thorough strategies, especially if you have to run a business with fewer employees.

Here is everything you need to know about the effects of downsizing and the solution for adjusting.

Why Do Companies Downsize?

Unlike regular job termination, downsizing happens to multiple people simultaneously, reducing the workforce significantly. Downsizing is usually a decision based on business-related considerations, not the faults of individual employees. 

Industry decline and recession are among the most common causes of downsizing. The challenging social and political atmospheres, shifting industry trends, and changes in market demands can push companies to downsize. Sometimes, their focus is not on gaining profits but on staying afloat or fulfilling responsibilities.

Mergers and acquisitions are also common causes. When they happen, massive structural changes and cuts in various departments can result in downsizing. Some companies even downsize before the actual merger and acquisition happen, a move to increase their level of viability. 

Finally, there are more specific reasons for downsizing. A company probably downsizes as a response to competitors who do the same. This way, it can ride the waves and keep its competitive weight. The current situation, such as the pandemic, has also affected many businesses, forcing them to downsize following a poorer economy.

The Effects of Downsizing on Remaining Employees

Downsizing already impacts the terminated employees negatively. However, effects on downsizing on employees also happen to those remaining. A 2020 study published in the National Library of Medicine journal explained several effects of downsizing on remaining employees, such as:

Negative Rumination

Large-scale termination is scary for employees, even when they are among those who still have jobs. The resulting uncertainty can cause negative rumination, a continuous stream of negative thoughts where the individual cannot stop imagining the worst outcome. It can add up to the stress level.

Mental and Physical Fatigue

Employees in a downsized company often have to deal with double work burdens without additional payment. They must also deal with restructuring and additional stress in doing other people’s jobs, which can be very different from what they usually do. All these are multiplied by stress and anxieties.

As a result, the remaining employee's developmental fatigue. It can also grow into physical fatigue, manifesting into diseases that affect the immune system.

Decreasing Productivity

Stress and fatigue can also impact productivity. Aside from the extra work burden, it can be from uncertainties about the future, low morale, unpleasant work atmosphere, and conflicts with other employees or superiors. 

Poor Interpersonal Relationship

Stress, fatigue, uncertainties, and extra work burdens can negatively impact the interpersonal relationships. Employees may develop mood swings, higher levels of aggression, and an inability to handle daily conflicts. The stress may also result in resentment, including toward the company and everyone associated with it.

When the interpersonal relationship suffers, communication within the company becomes poorer too. It can result in adverse effects because communication is one of the pillars of a good workplace.

How to Handle the Business after Downsizing

Effects of downsizing on employees can result in long-term problems for the business. However, you cannot deny that business still needs to be run. Here are some tips for handling your business after downsizing.

Adjusting Compensation

Adjusting compensation, benefits, and other financial aspects seems like an extra burden for your remaining employees. However, you will need those employees to support your business as best as possible. Spending extra money for this is difficult, but you can still negotiate to develop numbers that satisfy everyone.

Engaging Employees in Positive Way

Make sure to communicate with the remaining employees and reassure them about the situation. Make them know that you understand the difficulties and explain why downsizing and restructuring are essential. Your employees should feel that they can be open to you.

Using Digital Management Tool

Digital management tool like Nimbly uses a fully digital system, complete with features that streamline various activities. These tools can be adjusted and streamlined from task checklists to data analytics for reporting, making your work efficient even with fewer employees. Company effects of downsizing on employees create various effects, from physical and mental fatigues to poor relationship quality. Find out how you can reduce it with Free Consultation session with our expert team, and see how efficient your job can be even with fewer employees.

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