Must Cutbacks Lead to Decreased Productivity?

As we have noted in a couple of our recent blogs, when companies cut staff and tighten their belts, they hope to maintain or even increase productivity. Employee and corporate morale may be down when coworkers are dismissed, workload increases, pay is cut or frozen, and it becomes an issue to requisition a pencil, much less supplies to keep inventory up. Keeping up productivity after cuts, much less increasing it, is challenging, yet the goals are not mutually exclusive.

Studies by Leadership IQ show that 75% of "layoff survivors" report that both their personal productivity and customer service decline after a layoff, while 69% say that quality of the company's product or service goes down too. Rather than feel grateful they were spared, survivors feel guilty, angry, and anxious.

By carefully planning cuts and layoffs, companies can minimize these after effects through good communication. Many times when cuts occur, employees are angry because they see inefficiencies that contributed to the need for the cutbacks. In ideal circumstances, a company can involve its workers in cost-reduction talks and solicit their suggestions - and take heed of the worthwhile ones. If layoffs come, employees have had time to buy into the needed workforce reductions.

This is true whether cutbacks are due to the economy or because more technology was implemented that eliminates jobs. A company which anticipates further developments, uses attrition to reduce personnel, and sells the workers on the benefits of the new system will have a workforce that is more prepared to work with the new technology and reap the benefits it might offer.

When cuts occur, employees get nervous when they see their supervisors huddled in secret meetings.A better approach is to have the supervisors accessible and available. Again, if employees are called up to help with the transition, they are more likely to be cooperative than resentful. They are more likely to pull their contracted team together and become productive.

This goes without saying, but an important part of a company's communication after cutbacks is non-verbal. When a reduced workforce sees management going on business trips to exotic locations, buying new furniture, and otherwise engaging in "excessive" spending, morale suffers. If doesn't matter whether these things were financed from a different budget or a grant, people feel angry unless management shares the rational with them.

These suggestions apply in companies of any size. For a small company, the forced departure of one or two people can have the same impact as the exodus of hundreds from a large company. Good planning and communication can minimize the pain and impact of cutbacks and set the stage for increased productivity.