The current state of downsizing in Australia

Our cover story this month is by Sandy Dodge 

Over the last three decades, Australia has become familiar with the term 'downsizing'. With the economic downturns of the 1970's, the 'oil shocks' of the 70's and 80's, the recessions of the 90's, and fluctuating global and domestic stock markets, downsizing has become a way for companies to stay afloat in times of market uncertainty. 

Downsizing occurs when an organisation reduces staff numbers because it believes that is the only way it can continue to compete in the marketplace or effect a restructuring.  

Australia has seen widespread corporate downsizing over the past few decades, and it is still a common practice among businesses. One only has to look at the regular reports in the popular press of downsizing activities in the financial sector. But today, many organisations are realising that downsizing has ramifications for remaining staff. 

According to HR Director William Pesci, of Moon Industries, downsized organisations generally need some time to settle after a restructure. 'In my experience in the human resources sector, I have seen a multitude of negative effects on staff who remain after a restructure. Staff can experience what is known as the "survivor syndrome", where they display decreased levels of trust, commitment, and morale towards the organisation.'  

'This,' adds William, 'is particularly evident in organisations where the restructuring process has not been handled in a "best practice" manner.' 

Jolita Stein is one such employee whose perception of and resultant lack of trust in her previous company caused her to question her stability in the organisation. 'When my previous employer went through their restructure, I thought "Could this be me next?" They didn't seem to support the staff who were leaving, which made us all feel pretty dispensable. I remember wondering if that was how I would be treated if I was no longer required. It was a very uncertain time for me.'  

Such a loss of value of the 'psychological contract' that runs in tandem with the physical contract of employment cannot be overlooked or discounted as unimportant. 

Annie Reeves, an HR specialist with 10 years' experience working with organisations to refine their restructuring processes, believes that there are things organisations can do to lessen the negative effects of a restructure. 'Many good employers (Employers of Choice) have realised that separation should be handled in a multi-faceted manner. It helps the organisation by counteracting the potential loss of good faith.'' 

Annie recommends the following to organisations: 

• Look for alternatives to retrenchment (eg redeployment, granting leave, job sharing, part-time work, opportunities for staff reduction due to natural attrition, early retirement schemes, voluntary redundancy, contract work, and so on)
• Commence consultations with stakeholders as soon as practicable after a firm decision has been made to restructure.
• Be sympathetic and humane in the treatment of workers during redeployment and/or retrenchment processes.
• Provide outplacement services to all identified staff to ensure they are fully informed and aware of opportunities outside the current organisation.
• Provide opportunities for retraining and travel to attend job interviews and courses that may equip staff with skills to find new employment.
• Provide counselling services for remaining staff so that they can discuss any issues of concern to them.

There are avenues for recourse should one feel he or she has been improperly dealt with in the course of a restructure. The various Industrial Tribunals regularly hear cases brought by individuals for unfair dismissal due to perceived poor separation policies and procedures. Reinstatement and compensation are common outcomes of poorly handled separation activities. 

When considering an organisational restructuring, it appears wise to contact your industrial/employer association for advice on legislative, award and best practice requirements. In this way you will be sure to avoid the many pitfalls and problems that can happen in such situations.