The economic impact of the COVID-19 pandemic has unfortunately meant that many business leaders are having to take the difficult decision to make structural changes and reductions in headcount.

If your organisation is currently going through the process of downsizing, then you must ensure you give your company the best chance to thrive in the new era of work by effectively managing the psychological impact of redundancy on your survivors – those employees who remain after their colleagues have been let go.

Reality is around the corner

Downsizing and redundancy can be a sensitive topic to discuss despite statistics that illustrate its increasing prevalence rates, especially during economic instability. Whilst many governments have provided businesses with temporary lifelines, such as furlough schemes to maintain their workforces over the last several months, these have only really delayed the inevitable. Millions of peoples’ employment has or will be significantly negatively impacted within the next half of this calendar year and will continue into the following year too. Quite rightly this is a scary thought for many, as livelihoods, career ambitions, lifestyles and relationships are impacted – at the heart of this all, people are affected and impacted.

Many of the leaders I work with are currently discussing what their reformed workforces could and will look like as their service delivery model has rapidly and forcibly been required to mould and change. Noticeably, clients that have been able to flex and pivot their service offering – the ways in which they collaborate, lead and make decisions – are the ones that have navigated more effectively through the last several months, compared to those that have been rigid, slow to act or too cautious to make decisions.

My current work is focusing on helping organisations manage and prepare for the forthcoming psychological impact of downsizing. Most of the research and intervention out there is focused on those that are made redundant i.e. the victims, whilst a lot of my work is focused on those that remain, the ‘survivors’. Very relevantly, my Master’s degree thesis focused on this very topic nearly two decades ago, and my recent review of the literature highlights little progress or development has been made on the research of the impact on survivors. Therefore, I would like to share my learnings based on my theoretical knowledge as well as, from my executive coaching experience on how organisations can prepare to minimise the psychological impact on its survivors.

Corporate myth that holds no truth

Quite surprisingly, survivors are often an afterthought because management are so accustomed to thinking about whom to let go, when to do it and how much severance pay to offer, that very little thought is given to the emotional and workplace needs of the survivors. There is even a corporate myth behind this notion of ignoring the survivors: ‘they’re so pleased they’ve survived, that we don’t have to worry about them’.

I challenge this myth as the psychological impact of redundancy or downsizing on the survivors is hugely important because once an organisation imposes downsizing, it is the survivors who are expected to make the organisation function and ultimately succeed with fewer personnel. Therefore, it can be argued that an organisation’s post redundancy success is dependent upon the reactions of the survivors.

Complex psychological reactions have considerable consequences

Literature suggests that survivors can experience a mix of reactions which includes: anger, depression, guilt, distrust, vulnerability, powerlessness, loss of morale and motivation, and some have coined the term ‘survivor sickness’.

Survivors’ psychological reactions are very complex and are shaped greatly by processes such as the organisation’s strategic vision, communication, policies and the treatment of victims. The extent to which survivors appraise the downsizing process will influence their response to it. For example, if redundancies are ‘compulsory’ and little information is communicated to employees about the reasons why, it can have an adverse effect whereby psychological wellbeing is disrupted leading to lower productivity levels and overall ineffective corporate functioning.

The power of psychological contracts cannot be underestimated

Survivor’s psychological contract is greatly affected by downsizing. Psychological contracts comprise of subjective beliefs regarding an unstated agreement between an employee and their employer, whereby continued employment is offered in return for loyalty and hard work. Although the nature of psychological contracts is dynamic, frequently re-negotiated and individualistic, they are firmly based on trust and loyalty. Overall, studies indicate that redundancy is seen as a violation of the psychological contract, which has been found to lead to a reduced sense of obligation to employers and subsequently a decrease in organisational loyalty.

What can be learnt from all this, is the importance of the way in which processes are handled and the way in which redundancy victims are treated, as this all affects the survivor’s perceptions of the overall downsizing exercise. Survivors are likely to redefine their psychological contract, usually relocating their loyalty away from the company, and often taking the view ‘I will get as much out of the company as I can’. For instance, survivors may take advantage of building portfolios of portable skills and marketable experience than company-specific skills, so that they can be more employable by a variety of organisations.

Therefore, unless organisations are prepared to redesign their side of the psychological contracts to reflect new work environments/conditions, culture, communication, processes etc, the new psychological contract is more than likely to become an impoverished version of the old contract, and therefore have even greater adverse effects on loyalty and commitment.

Ripple effect of disrupted and altered social networks

Additionally, downsizing cannot simply be viewed from an individual perspective, but also influenced by disruptions to the social networks in which they are embedded. Studies show that survivor’s reactions will vary depending on the relationship ties they have with their colleagues that are affected, in terms of frequency, intensity and closeness of these relationships, and the extent to which their networks are altered, i.e. survivor’s social network.

For many, ‘work’ is not simply for ‘money’, it’s also for a sense of belonging, purpose and meaning, and the workplace can be regarded as their ‘symbolic family’. Those that people interact with regularly become part of their social structure and downsizing causes separation from members of the ‘family’, which can also affect survivors too. Therefore, organisations need to be aware that downsizing is an attack on the social fabric of a firm because each redundancy victim has ties to others within a firm’s social network. Consequently, these network alterations can have the potential to disrupt relationships, work patterns, communication flows and thus make it even harder for survivors to continue with their work after a downsizing exercise.

It is not only how the victims are treated throughout the downsizing, but also the treatment of survivors is paramount to how engaged, accepting and supportive they are of the organisation’s actions and conduct. Downsizing often creates new and increased responsibilities for survivors, as the same amount of work is usually done by fewer people, which can lead to increased role overload and reduced role clarity too.

Four key ways to manage and minimise the psychological impact:

I have outlined below four key ways in which every organisation can assist its survivors in absorbing the experience more favourably and move forward in line with the organisation’s new direction or vision.

1. Communicate why the downsizing action will rejuvenate the organisation, as this will help survivors to perceive it as being fair and just.

2. Communicate a clear revised vision which will enable survivors to trust that the leaders have the competence to turn the company around and instil lost confidence.

3. Redesign work and responsibilities to enhance the intrinsic quality of survivors’ work, so that survivors can focus their attention on coping with the downsizing, rather than being distracted by unsatisfactory work design levels.

4. Provide relevant training for survivors to ensure they are equipped to take on their revised roles and feel competent and empowered. This will also help to regain trust in their leaders and will allow them to comprehend their role in the future vision of the company.

The psychological impact of downsizing and redundancy on those that are left to ensure the organisation thrives can be minimised through effective preparation, focused planning and a sincere desire to take care of those that survive, not just those that leave.

AUTHOR

Simi Rayat
Leadership Coach
Simi works as a ‘Leadership Coach’ helping Xennial and Millennial leaders on their leadership journey to embrace and solve leadership challenges. Simi is the founder of Wellbeing Face Ltd and she works with clients across the globe in both private and public sector, across a diverse range of industries. Her coaching style and approach is underpinned by her deep expertise and passion in the psychology of people and her pragmatic application of leadership development. Using this integrated and eclectic approach, Simi is able to create significant ‘ah haa’ moments for her clients and bring about compelling shifts in their thinking, behaviours and outcomes which lead to incredible and sustainable results.

With over 15 years of business psychology consulting experience, working in the UK, Australia and Canada, Simi is an insightful specialist in shaping behaviour at the individual, group and organisational level. She specialises in the areas of: personal impact, self-awareness and leadership capability. She is the former founder and owner of Minds for the Future, a thriving Melbourne based psychology practice, which she profitably sold in 2015 and it continues to prosper.

Her clients describe her coaching style as ‘energising’, ‘thought-provoking’ and ‘pragmatic’. She challenges thinking and empowers her clients to take control and apply their best. Many of her long standing clients view her as their trusted advisor and valuable sounding board.