Sometimes, with the issue of insolvency looming on the horizon, the only way to save a business is to let some parts go, and in most cases, that means making staff redundant or, at the very least, moving them from their current job to another completely different one.
This can be a very upsetting time (especially for those you have to lose), but if you want to keep the remaining parts of your business running in an effective manner, you need to ensure that your employees are on board and as happy as they can be.
They need to understand why it has all happened and what the future holds for them and the business.
This process is not easy, but it is essential to do it correctly. This article covers some of the important points and if followed, will help your business through a difficult period and be able to move on to better times.
The Process of Downscaling
Basically, the challenging reality of commercial operations sometimes necessitates difficult decisions, particularly when financial pressures mount. Downscaling a business is rarely a pleasant experience for anyone involved, yet it remains an essential strategy for ensuring organisational survival during turbulent economic periods. While leadership teams naturally focus on the financial and operational aspects of restructuring, maintaining staff morale and engagement throughout this process is equally crucial for long-term success.
When implementing workforce reductions, the manner in which remaining team members are supported can significantly impact your organisation’s future performance. Handled poorly, downscaling may trigger decreased productivity, increased absenteeism, and unwanted staff departures. Conversely, a thoughtful approach can strengthen company culture and position the business for recovery.
Understanding the Impact of Downscaling on Your Business
When an organisation undergoes restructuring that involves redundancies, the effects extend far beyond those directly affected. The remaining workforce often experiences what psychologists term ‘survivor syndrome’ – a complex emotional response characterised by guilt about retaining their positions, grief over lost workplace relationships, anxiety regarding increased workloads, and uncertainty about the company’s future trajectory.
Research from Stockholm University reveals that following redundancies, remaining staff typically experience a 41% decline in job satisfaction alongside a 20% reduction in performance. This productivity dip stems from multiple factors: disrupted team dynamics, knowledge gaps left by departing colleagues, and a pervasive sense of insecurity about future employment prospects.
The Unspoken but Important Psychological Contract
The psychological contract – that unwritten understanding between employer and employee regarding mutual expectations – becomes severely strained during downscaling exercises. When team members witness colleagues being made redundant despite their contributions and loyalty, it fundamentally challenges their perception of organisational fairness and meritocracy.
Additionally, downscaling frequently triggers a defensive mindset among remaining staff. Rather than focusing on innovation or collaborative problem-solving, employees may concentrate solely on demonstrating their individual value through measurable outputs, further hampering creativity and cross-departmental cooperation.
Planning Your Communication Strategy
Transparent communication forms the cornerstone of successful business downscaling. Before announcing any redundancies, develop a comprehensive communication plan that addresses the concerns of all stakeholders – particularly your remaining workforce.
Begin by articulating clear, jargon-free explanations for the necessity of downscaling. Avoid corporate buzzwords like ‘leveraging synergies’ or ‘strategic pivoting’ that may alienate staff and obscure genuine understanding. Instead, present the business case in straightforward language that connects organisational challenges to the proposed solutions.
Schedule multiple communication touchpoints throughout the process. These should include initial announcements, consultation periods, implementation updates, and post-restructuring follow-ups. Each communication should reinforce the rationale behind decisions while acknowledging the human impact of these changes.
Consider carefully who delivers which messages. While major announcements typically come from senior leadership to demonstrate accountability, departmental managers often serve as crucial intermediaries who can contextualise changes for their teams and address specific concerns. Equip these managers with comprehensive information and guidance on handling difficult conversations.
Two Way Communication is Vital
Remember that communication extends beyond formal announcements. Create opportunities for two-way dialogue through team meetings, anonymous feedback channels, and one-to-one conversations. This participatory approach helps identify emerging concerns while demonstrating respect for employees’ perspectives.
Implementing Fair Selection Processes
When downscaling necessitates redundancies, the perceived fairness of selection criteria becomes paramount. Employees who believe the process was conducted equitably are more likely to maintain trust in leadership, even amid difficult circumstances.
Establish objective selection criteria based on skills, performance records, and business requirements rather than personal relationships or subjective impressions. Document these criteria thoroughly and apply them consistently across all departments and seniority levels.
Conduct meaningful consultations rather than presenting decisions as foregone conclusions. This involves genuinely considering alternative suggestions, exploring options like reduced hours or voluntary redundancy schemes, and demonstrating how feedback influences final decisions.
Allow Time for Full Consultation
Allocate sufficient time for the consultation process – typically a minimum of 5-7 days for smaller-scale redundancies, with longer periods legally required when larger numbers are involved. Clearly communicate the timeline from the outset to provide structure during an inherently uncertain period.
Maintain meticulous records of all communications, selection decisions, and consultation outcomes. This documentation serves dual purposes: protecting the organisation legally while also demonstrating commitment to procedural fairness.
Supporting Those Who Remain
After implementing necessary redundancies, refocus attention on supporting your remaining staff members. Their emotional well-being and continued engagement will determine how successfully your organisation navigates the post-downscaling period.
Acknowledge the complex emotions that survivors may experience, including guilt, anxiety, and uncertainty. Create safe spaces for expressing these feelings through team discussions or confidential support channels. Simply recognising these reactions as normal can help staff process their experiences more effectively.
Address practical concerns regarding workload redistribution promptly. Review responsibilities to ensure remaining team members aren’t overwhelmed by absorbing additional duties without adequate support. This might involve temporarily adjusting expectations, providing additional resources, or reprioritising projects.
Maintain heightened visibility of leadership during this transitional period. Regular check-ins, open-door policies, and informal conversations signal ongoing commitment to staff well-being. These interactions also provide valuable insights into emerging challenges that might otherwise remain hidden.
Consider implementing or highlighting existing mental health resources, such as Employee Assistance Programmes or counselling services. Extending these benefits to recently departed staff for a defined period (typically three months) demonstrates compassion while reassuring remaining employees about the support available should they face similar circumstances.
Rebuilding Team Dynamics
Redundancies inevitably disrupt established team structures and working relationships. Proactively addressing these changes helps forge new connections and restore collaborative momentum.
Organise team building activities London that acknowledge the organisation’s new reality while fostering connections between remaining staff members. These need not be elaborate or expensive – even simple shared experiences like virtual coffee breaks or collaborative problem-solving exercises can strengthen interpersonal bonds.
Create opportunities for knowledge sharing to address gaps left by departing colleagues. This may involve documenting processes, conducting cross-training sessions, or establishing mentoring arrangements. Beyond their practical value, these initiatives demonstrate an investment in the development of remaining staff.
Review and potentially adjust team goals to reflect new capabilities and priorities. Involving team members in this recalibration process increases ownership and alignment with organisational objectives. Celebrate small wins along this journey to rebuild confidence and momentum.
Encourage open discussion about how team dynamics have changed and how members can support each other through the transition. These conversations help normalise the adjustment process while identifying specific areas where additional support might be beneficial.
Looking Forward: Rebuilding Trust and Engagement
Recovering from downscaling requires deliberate efforts to rebuild organisational trust and reignite employee engagement. This process begins with acknowledging past challenges while refocusing attention on future opportunities.
Develop and communicate a clear vision for the organisation’s future that gives meaning to the difficult changes implemented. Employees need to understand how their contributions connect to this broader purpose and how downscaling has positioned the company for sustainable success.
Invest in developing remaining staff through training opportunities, expanded responsibilities, or career progression discussions. These investments signal confidence in both individual employees and the organisation’s future, counterbalancing the uncertainty created during downscaling.
Establish feedback mechanisms to monitor engagement levels and identify emerging concerns. Regular pulse surveys, focus groups, and one-to-one discussions provide valuable insights while demonstrating commitment to employee well-being. Track key indicators like staff turnover, absence rates, and productivity metrics to gauge recovery progress.
Remember that rebuilding trust takes time and consistent action. Each fulfilled promise and transparent communication strengthens the foundation for renewed engagement, gradually restoring the psychological contract between employer and employee.
Downscaling a business inevitably creates challenges, but with thoughtful planning and genuine concern for employee well-being, organisations can emerge with their culture and team spirit intact. By prioritising transparent communication, fair processes, and ongoing support, leaders can maintain the trust and commitment of their most valuable asset – their people.
Where Downsizing is Not Enough
But where do you turn when losing parts of the business is still not enough to save the company? Luckily there are quite a few alternatives, but selecting the right one for your business is not always easy.So, if you are unsure that downsizing will be sufficient, please contact Anthony Batty – see https://www.antonybatty.com). We have extensive knowledge of the insolvency and business structuring processes and will be able to guide you on to the best path to follow. And do remember, if you feel that your business is facing severe financial distress, that contacting an expert as soon as possible is vital.
