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Economics, Human Resources, Leadership, Strategy

Downsizing Implementations, Effectiveness, and Flow

downsizingIn this recent economy, downsizing has been common place, and probably necessary in many cases. The way this is implemented, however, has profound affects on employee effectiveness and flow. Many of us have seen this several times over the last five or so years and can confirm that it has personally challenged our flow and effectiveness as executives, as well as most of the other people in the affected organizations.

During a budget crisis, senior managers typically consider the work to be done and the people involved in their organizations without any help from their subordinate managers. Therefore, their detailed knowledge of the tasks to be continued and the employees’ capacity to complete them are limited. Yet, they don’t usually consult their direct reports because of the need for secrecy. So, they end up making assumptions about the ability of individuals to assume various roles, frequently not knowing when capability or capacity has been exceeded.

Flow, which Mihaly Csikszentmihalyi defined in Good Business (2003) to be a distinct “sense of enjoyment” (p. 39) derived from an engaging activity, is directly related to a balance between opportunity and capacity. The work must be a challenge, but achievable.

Many times, the managers or executives themselves are forced to agree to “step in” and try to manage a department or function in detail. This happened to a client two years ago when it had to give up Engineering Project Leaders. So, the structure that required project leaders was “filled” by the engineering functional managers or even the senior engineering manager. Even though the senior engineering manager had the skills, it was boring to her and created some apathy, which is another serious obstacle to flow (Csikszentmihalyi, 2003), not to mention the time sink. Shortly thereafter, the client lost an Engineering Specification manager and senior engineering manager had to step in to manage that department in detail. Through recent time usage analysis, we determined that this costs the client’s senior engineering manager 7-8 hours of time a week, compared to only 1 hour per week for each of the other engineering departments. This was clearly not an effective use of her time.

Unless the replacement organization is properly planned in detail, and employees are prepared for new responsibilities before they have to perform them, the resultant task responsibility discontinuity kills flow. Slightly increasing opportunity drives employees to stretch and learn new skills in order to experience flow often, which creates happiness (Csikszentmihalyi, 2003). However, severe downsizing can add significant imbalance over a short period of time, thrusting the employee into the anxiety area. If this happens frequently or severely enough, this can literally drive away good employees you want to keep.

In the Effective Executive (2006), Peter F. Drucker indicates effective executives should focus on the outside customer, only one or two tasks that he/she can accomplish, conceptual issues instead of procedures, and results instead of efficiency. With lots of new assignments, the attentions of retained employees are focused inward, rather than out toward the customer. Instead of focusing on one or two things that can make a difference, a typical retained employee is forced to take on several new responsibilities. The employee is forced back into a procedural focus, away from conceptualizing. He/she is forced to focus on efficiency as a means of re-establishing equilibrium, as opposed to focusing on results.

Many times the organizational structure becomes fragmented, or broken because an ill prepared company is not able to restructure quickly enough after the downsizing event, or there is a lack of people to fit the existing structure. The structure is often maintained because there is typically no reduction in expectations. Many times there are no detailed discussions of what is not going to get done (i.e. what holes are acceptable in the structure). This is driven mainly by the lack of detailed knowledge of the tasks covered by the employees let go. There is just a commitment to “making it work”.

Since teams lose some trust of members making the layoff decisions, teamwork, which is required for effective human relations (Drucker, 2006), is undermined. Without trust, employees don’t feel safe in bringing up conflicting ideas and the foundation of teamwork breaks down (Lencioni, 2005).

Too many companies focus soley on the economic drivers and react with massive quick downsizing, not looking at the goals of the business beyond economics (Csikszentmihalyi, 2003). These solutions, at best, even if well planned, seldom look at the long term. They are only surviving the moment and damage the company’s ability to thrive in the future. You probably want your company to both survive the moment and build for the future. These don’t have to be mutually exclusive.

To that end, we want to enable our client organizations toward slow, deliberate, cost control measures coupled with individual growth plans and periodic restructuring to gradually implement major changes. Individual growth plans and periodic restructuring are both designed to build skills and, therefore capability and capacity, over time.

When you build skills in individuals, you build up what Csikszentmihalyi calls differentiation of that individual (2003, p.29). This, coupled with integration (the layering of human relationships and networks), are the two “pillars of happiness” (2003, pp 28-29). One is said to be complex, or fully evolved, when there is balance between these two pillars. According to Csikszentmihalyi, “one of the key tasks of management is to create an organization that stimulates the complexity of those who belong to it.” (2003, p. 69)

We believe that when people are balanced between differentiation and integration, and are encouraged by management to pursue a balance between opportunity and capacity, thereby experiencing flow, not only are they happier, they are more productive. This is true cost effectiveness.

If we as managers create the organization that stimulates complexity with foresight, the new skills we need people to assume will be there. As we restructure the company gradually to meet the upcoming organizational goals, we will have capable people to cover the skills needed.

If we still occasionally need to reduce headcount in response to economic conditions, we need to spend more time and attention to reducing expectations or eliminating tasks for the remaining people to accomplish. For identifying overhead that is no longer needed, we recommend what Brian Tracy calls “zero-based thinking” (Tracy, 2008), which is to ask “knowing what I know now, should we still do this?”. This is a very good tool to peel away activities that can be eliminated without negative side affects.

In a similar vein, in Management: Tasks, Responsibilities, Practices (1974, pp.93-94), Drucker accentuates the need for “planned abandonment”. This is a constant, periodic, and even systematic process which is essential to lean operations. It is much preferred over ad hoc abandonment as a result of a quickly planned lay off. Knowing which programs, products, and tasks you want to eliminate requires constantly asking what is the business, who is the customer, and what is value to the customer (Drucker, 1974).

If we do that, we can refine our business focus toward that customer and move our people away from those obsolete activities by gradually differentiating them toward new, more needed skills. We can restructure the organization to better serve the customer in such a way that many people are flowing in effective balance of opportunity and capacity.

References

Csikszentmihalyi, M. (2003). Good business. New York: The Penguin Group.

Drucker, P. F. (1974). Management: Tasks, responsibilities, practices. New York: Harper & Row, Publishers, Inc.

Drucker, P. F. (2006). The effective executive. New York: Harper Collins Publishers.

Lencioni, P. (2005). Overcoming the five dysfunctions of a team. San Francisco: Jossey-Bass.

Tracy, B. (2008, November 26). How to trigger great ideas. Message posted to http://www.briantracy.com/blog/business-success/how-to-trigger-great-ideas/

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