Journal of Management Research

Vol. 9, No. 1, April 2009, pp. 3-14

Training and Development in an Era of Downsizing

Franco Gandolfi

Abstract

Downsizing as a restructuring strategy has been actively implemented for the last three decades. While employee reductions were utilized mainly in response to crises prior to the mid-1980s, downsizing developed into a fully-fledged managerial strategy for tens of thousands of companies in the mid- to late-1980s. Since then, downsizing has transformed the international corporate landscape and affected the lives of hundreds of millions of individuals around the world. While the overall effects of downsizing have been widely reported, many misconceptions surrounding the concept of downsizing have remained. This conceptual paper focuses on the role of training and development (T&D) during the downsizing process. In particular, the research depicts the current body of literature associated with the function of HR and its plans, programs, and policies that firms adopting downsizing must provide to their surviving workforces. Finally, the paper offers concluding comments regarding effective downsizing practices that have emerged in the literature.

Keywords: Downsizing, survivors, survivor syndrome, training and development

INTRODUCTION

Back in the 1980s and in the early days of the 1990s, downsizing was viewed as an indicator of organizational decline. Over the past decade or so, however, downsizing has been able to shed that stigma and gained legitimacy as a reorganization strategy (Fisher and White, 2000). Despite considerable evidence showing that many downsized firms have failed to achieve their economic and organizational goals, downsizing has continued to be adopted around the worldeven in the best of economic conditions (Gandolfi, 2007). Clearly, downsizing has been popular and enduring, but not always effective, productive, or valuable (Macky, 2004). This is evidenced in a

substantial body of literature showcasing that downsizing has profound human consequences on the workforce, the so-called aftereffects of downsizing (Littler, Dunford, Bramble, and Hede, 1997). Downsizing survivors, those individuals that remain with the firm, have become of particular concern since they are faced with increased workloads and job responsibilities, on the one hand, and since they have shown to exhibit a number of dysfunctional downsizing-related illnesses, such as the survivor syndrome, on the other hand (Gandolfi, 2006). Human Resource (HR) practitioners and scholars assert that the ignorance of the impact of downsizing on survivors is one of the key reasons for the failure of many downsizing activities and their ensuing long-term problems (Cameron, 1994; Kinnie, Hutchinson and Purcell, 1998; Farrell and Mavondo, 2004).

This conceptual paper examines downsizing in the context of the management of a firms human resources during downsizing. It presents the main theories, assertions, and empirical findings regarding the role of the HR function, in general, and training and development (T&D), more specifically. As such, the paper reviews the existing body of literature associated with the HR plans, programs, and policies that firms adopting downsizing must provide their surviving workforces. Finally, the paper presents a number of concluding comments regarding effective downsizing practices that have emerged in the literature.

DOWNSIZING AND THE HR FUNCTION

The adoption of downsizing as a strategy produces economic, organizational, and human consequences. Empirical and anecdotal evidence suggest strongly that highly anticipated economic and organizational gains have not materialized (Sahdev, 2003; Zyglidopoulos, 2003). Moreover, the occurrence of various sicknesses experienced by the surviving workforces has drawn a great deal of attention (Devine, Reay, Stainton and CollinsNakai, 2003). The perceived breach and violation of the old psychological contract is likely to have contributed to and magnified the failure of many downsizing efforts (Gandolfi, 2006). Interestingly, HR practitioners and scholars believe that the prevalence of the survivor syndrome and other related symptoms constitute a barrier to productivity (Maki, Moore, Grunberg and Greenberg, 2005). Given the absence of financial successes following downsizing coupled with the finding that downsizing firms are frequently left with a narrow-minded, self-absorbed, risk averse, and depressed workforce (Campbell-Jamison, Worrall and Cooper, 2001; Sahdev, 2003), it remains of significance to provide a theoretical explanation as to why downsizing has failed to produce positive outcomes.

There is substantial evidence supporting the notion that firms are poorly prepared for downsizing. An American Management Association (AMA) report showed that more than 70% of surveyed firms had downsized with no downsizing-related HR plans, policies, and programs in place and more than half of the downsized firms had failed to provide adequate support plans for survivors to minimize the negative effects of cutting back (Beylerian and Kleiner, 2003). There is considerable empirical evidence suggesting that firms offer little support for survivors (Amundson, Borgen, Jordan, and Erlebach, 2004), who are believed to be ignored throughout the downsizing process. This corroborates an earlier study postulating that British firms had neglected the needs of the remaining workforce revealing that less than 50% had provided support for the survivors, while nearly 80% of firms had provided professional outplacement services for the downsized victims (Doherty and Horsted, 1995).

Clearly, the blatant ignorance of the impact of downsizing on survivors is one of the major reasons for the failure of many downsizing efforts and their ensuing long-term problems (Devine et al., 2003). The decline of firms during downsizing is largely attributable to the neglect of the human capital (Hitt, Hoskisson, Harrison and Summers, 1994). During periods of downsizing, top management is preoccupied with short-term operational decisions and long-term commitments are thus postponed or neglected. The key to successful downsizing is to focus on people (Allen, 1997) which is consistent with the notion that survivors were kept because they are the cream of the crop (Allen, 1997) and the linchpins of future profitability (Appelbaum, Delage, Labibb and Gault, 1997). While it has been noted that organizations generally prepare well for the victims, they certainly do not anticipate or prepare for the survivors (Appelbaum et al., 1997). Thus, it can be alleged that most downsizing efforts have not been planned, managed, and implemented effectively (Cameron, 1994) causing a great deal of resentment among survivors (Amundson et al., 2004).

There is some understanding that the root cause of the survivor illnesses is a profound shift in the psychological employment contract between the employee and the firm. Under the old employment contract, employees viewed their jobs as a lifetime entitlement and offered loyalty, longevity, and commitment to their companies. In return, firms provided great benefits, security, training, career progression, and lifetime employment. Under the new employment contract, however, loyalty to a firm has been replaced with loyalty to an employees work (Amundson et al., 2004). This suggests that lifetime employment and reciprocal loyalty are obsolete and that the traditional career is therefore dead (James, 1999). Another shift is the move away from the concept of employment towards employability (Doherty and Horsted, 1995), whereby the individual embraces personal career ownership, owns his or her own skills and experience, and aspires to attain skills that are transferable, thereby, attempting to remain marketable and flexible (Lawes, 1996). Also, firms used to view their employees as long-term assets that had to be nurtured, developed, and cultivated, while there is now a tendency to consider employees as short-term costs to be reduced and a variable in the production equation that can be discarded at any time. Therefore, since most current survivors were employed under the old employment contract, where loyalty and commitment prevailed, the announcement and implementation of downsizing signifies a perceived breach and violation of the covenant between the firm and its employees. The paradigm shift from the old to the new covenant and the one-sided breach of the psychological contract is believed to be the root of survivor-related illnesses (Allen, 1997; Zyglidopoulos, 2003).

As HR is primarily concerned with advising firms on the effective allocation and management of its people, what is the role of HR during downsizing? What does research suggest? Cameron (1994), drawing upon a systematic four-year study of downsizing, found that certain strategies were more likely to succeed than others concluding that the most critical factor for downsizing success was the effective management of the HR system. This raises the fundamental issue as to what constitutes effective HR practice? Over the many years of inquiry and study of downsizing, a number of studies have been carried out asserting the specific role of HR during the downsizing process. Some of the following findings that have emerged are of normative, prescriptive nature:

Firms must amend their HR policies and practices during and after downsizing recommending that four components to be rigorously incorporated: integrating information, communication, and transparency; providing support for survivors and victims; adjusting the performance management system, and providing training and development (Kettley, 1995).

Effective HR policy during downsizing must encompass the following four elements: professional advice; support; counseling; and training. Such an approach enables survivors to cope with downsizing more successfully in that the four HR aspects potentially mitigate or neutralize the debilitating effects of the survivor syndrome (Doherty and Horsted, 1995).

Firms need to pursue a strong, communication-based approach in times of major change providing an environment of effective change and a meaningful strategy to cure survivor sicknesses. HR plans must include open, two-way communication channels; a shared vision; participative decision-making; the conduct of perpetual job redesign; and the provision of training (Allen, 1997).

Firms need to focus on employee empowerment as a remedy to the emergence of the survivor syndrome. The way the firm interacts with its employees plays a vital role in the successful implementation of change in that communication is the glue that binds a firm together. Thus, effective HR practice must comprise frequent, frank, and consistent communication; information about the process and progress of downsizing; the articulation of a clear vision; employee participation; and training (Appelbaum, Close and Klasa, 1999).

Survivors frequently experience a postdownsizing drop in morale. The results of a Canadian study show that although there was not a single best approach, some successful practices have the following components: advance planning; open and honest communication; training; information; and communication about the company s new vision (Dolan, Belout, and Balkin, 2000).

Downsizing has created a phenomenon titled the cycle of failure involving a chain of consequences beginning with employee dissatisfaction and ending with organizational inefficiency and decreased profitability. Thus, there must be a strong focus on training for survivors in that training enables survivors to cope with the new responsibilities and tasks (Makawatsakul and Kleiner, 2003).

Downsizing yields dysfunctional human effects, including decreased levels of morale, motivation, and trust. Likewise, the emergence of survivor sicknesses has a direct and adverse impact on work productivity. Thus, recommended personal development interventions are: counseling; training; and transition management workshops (Sahdev, 2003).

Table 1: HR Components for Successful Downsizing

Kettley	Doherty &	Allen	Appelbaum	Dolan	Makawatsakul	Sahdev	Farrell &
(1995)	Horsted	(1997)	et al.	et al.	& Kleiner	(2003)	Mavondo
	(1995)		(1999)	(2000)	(2003)		(2004)
				Advance planning
Information,		Communication	Communication,	Communication,
communication,			information	information
transparency		Vision	Vision	Vision			Vision, mission, and strategic objectives
Support for	Counseling,					Counseling	Coaching and
victims and	support, and					Transition	mentoring
survivors	professional					management	programs
	advice					workshops
Performance		Job redesign
management system				Respect for the seniority rights and depersonalizing of layoffs
		Participative	Participation
		decision-making	& involvement
Training &	Training	Training	Training	Training	Training	Training	Training & skills
Development (T&D)							development

Source: Developed for this research

Firms must introduce downsizing-related HR programs that foster employee empowerment; build recommitment to the firm; and encourage greater employability. Specific survivor programs need to align survivors with the firms new vision, mission, and strategic objectives; incorporate coaching and mentoring programs; and encourage ongoing skills development and training opportunities. A strong emphasis must be placed on T&D assuming that the pursuit of an organizational learning ethic can create a strategic competitive advantage (Farrell and Mavondo, 2004).

Table 1 presents a non-exhaustive overview of some of the main studies conducted and their respective findings in regards to HR components for successful downsizing.

Interestingly, while Table 1 depicts an incomplete picture of the theoretical constructs leading to successful downsizing, all proposed elements correspond with Camerons (1994) original list of critical factors leading to successful downsizing, including employee involvement; teamwork; sharing of communication and information; provision of rewards; conduct of performance appraisals; articulation of a vision; administering of downsizing in a trustworthy and fair manner; and training. Notably, training is the HR component advocated by all scholars and professionals included in this review. Unfortunately, the academic work to date has remained at an abstract, theoretical level and there is limited empirical research published asserting the relationship between HR components and downsizing success. Nonetheless, two main studies are of significance:

Gandolfi (2001) carried out case study research examining the role of T&D in the context of downsizing. He found that Australias largest banks were ill-prepared for downsizing and had failed to implement T&D in an effective manner. Study cases pursued reactive rather than proactive T&D approaches. Gandolfi (2001) concluded that T&D must play a significant role during downsizing and recommended that firms must engage in proactive T&D, embrace an eclectic T&D approach combining generic with firm-specific training, and provide personal development preceding downsizing.

Right Associates carried out a major US survey reporting that while survivors were informed about the likely effects of downsizing, very little was done to introduce new HR programs to promote survivors re-engagement with the firm. The study showed that 88% of firms had failed to implement programs to help improve the survivors performance and confidence levels. Firms forfeited such programs since they felt that they were caught in a dilemma. While firms downsize for primarily monetary reasons, instituting programs for the survivors would require additional financial resources that firms were not willing to spare. Firms were also so concerned about their financial resources that they often overlooked the adverse impact of second-order (i.e., human) consequences (Beylerian and Kleiner, 2003).

DOWNSIZING AND T&D

Why should there be a continuation of downsizing research? Apart from the presented research gaps, there are clear developments justifying the pursuit of academic inquiry, including:

the ongoing popularity of downsizing since the late 1980s,

the frequency and magnitude of reported downsizing failures, the occurrence of survivor-related sicknesses, the assertion that the adoption of downsizing will continue, and

the plea of experts for the development and introduction of proactive HR programs.

Examining and asserting the role and relevance of HR during downsizing is of great importance with the following questions at the heart of future academic inquiry:

1. What is the specific role and relevance ofT&D during downsizing?
2. Can T&D positively influence the outcomesof downsizing?
3. Does T&D constitute an underpinning of thesurvivor syndrome remedy?

While the previous section presented recommended HR components for successful downsizing, more work needs to be carried out on the role of survivor programs. For example, there is a shortage of evidence demonstrating the effectiveness and efficacy of survivor programs for survivors. Correspondingly, a lack of evidence on the role of T&D during downsizing is also

Table 2: Empirical Findings of T&D Elements in the Context of Downsizing

Empirical Finding	Researcher
Most firms do not attempt to establish a social environment conducive to the	Zemke (1990)
development of the workforce, and, ultimately, to the company s prosperity in a period of organizational change. Most surveyed firms have implemented downsizing without any HR policies or	Lee (1992)
programs in place. Most firms fail to anticipate the human consequences of downsizing.	Cascio (1993)
Firms that downsized most effectively had changes in the HR system that	Cameron (1994)
preceded and followed the implementation of downsizing. The decline of downsized firms is attributable to the neglect of human capital.	Hitt et al. (1994)
HR departments are often the primary target of cost-cutting efforts.	Clark & Koonce (1995)
Downsizing fails to achieve its alleged benefits due to the fact that companies lose	Evans, Gunz,
core competencies by cutting muscle instead of fat.	& Jallad (1996)
Survivors are largely ignored before, during, and after downsizing.	Appelbaum et al. (1997)
Firms do not ensure T&D before, during, and after the downsizing.	Appelbaum et al. (1997)
The adverse impact on survivors is one of the major reasons for long-term	Kinnie et al. (1998)
problems of firms associated with downsizing. Firms will continue to downsize well into the next century. Either way, whether	Mitchell (1998)
downsizing or rehiring, companies must train their people. Surveyed firms were ill-prepared for downsizing and failed to implement T&D in	Gandolfi (2001)
an effective manner. Survivors are driven to work harder after downsizing. Firms frequently fail to provide	Makawatsakul &
training to survivors.	Kleiner (2003)
Downsizing does not produce superior organizational performance in the long term	Zyglidopoulos
and surviving employees frequently do not receive the necessary training.	(2003)
Downsized firms frequently neglect the surviving workforce.	Hareli & Tzafrir (2006)
Surveyed firms were ill-prepared for downsizing and survivor syndrome. Survivors were ignored and left to their own devices.	Gandolfi (2007)

Source: Developed for this research

apparent. These aspects constitute research gaps and merit further academic study.

Evidently, T&D must play a critical role in the successful planning and execution of downsizing. This assertion corroborates Camerons (1994) finding of a US firm that had successfully introduced and upgraded training policies for all employees one year prior to the announcement of downsizing (Cameron, 1994). It is clear that a decidedly proactive approach to HR, in general, and T&D, in particular, represents a key factor. While the role of HR in association with downsizing remains under-researched (Hareli and Tzafrir, 2006; Gandolfi, 2007), some empirical findings of T&D elements in the context of downsizing have nonetheless been published. Table 2 presents a non-exhaustive overview.

Having reviewed the body of literature, the following can thus far be concluded:

Downsized firms have implemented downsizing without adequate HR systems in place (Lee, 1992; Cascio, 1993; Appelbaum et al., 1997; Gandolfi, 2007)

Downsized firms have ignored survivors before, during, and after downsizing (Appelbaum et al., 1997; Hareli and Tzafrir, 2006; Gandolfi, 2007)

Downsized firms have failed to ensure T&D before, during, and after downsizing (Appelbaum et al., 1997; Gandolfi, 2006).

The decline and ill-performance of downsized firms is attributable to the neglect of survivors (Hitt et al., 1994; Hareli and Tzafrir, 2006; Gandolfi, 2006)

Survivors are forced to take on new job responsibilities from departing employees and faced with increased overall workloads (Zemke, 1990; Allen, 1997; Mitchell, 1998; Dolan et al., 2000; Makawatsakul and Kleiner, 2003; Gandolfi, 2006).

This rather dire situation poses a number of questions. For example:

How are survivors able to successfully cope with the new circumstances following downsizing?

How are survivors able to perform the new job responsibilities in the absence of adequate training?

How does an ill-experienced and inadequately trained workforce excel in the long run?

These issues will need to be considered and empirically studied in future research. Finally, the following paradox has emerged: A seemingly indifferent management attitude towards downsizing survivors needs to be reconciled with the much-publicized and eloquent mission statements portraying the workforce as the most important aspect of a firm. For example, back in the 1990s, a firms workforce was portrayed as the most important capital (Sofo, 1999), the most valuable resource (Harrington, 1998), the most important asset (Sunoo, 1998), the most valuable asset (Darling and Nurmi, 1996), and a national resource (McMorrow, 1999). Have managers decided that the workforce, which was seen as so critical in the 1990s, is now a liability rather than an asset? Do employees constitute an expense and a cost that is readily expendable? More work will need to be carried out to reconcile the paradox.

The Benefits of T&D

Why then should firms invest in T&D? What are the alleged benefits? A brief review of the T&D literature research depicts the benefits of T&D to be manifold. Table 3 presents an incomplete historical overview of some of the published findings.

As Table 3 depicts, the alleged benefits of T&D for both the firm and the individual employees are distinct, manifold, and diverse. For instance, T&D is at the core of a firms organizational success (Mitchell, 1998) and an absolute necessity (Clarke and Koonce, 1997) for a firms long-term survival. Sadly, empirical evidence also indicates that not every firm recognizes the value of using T&D for strategic ends (Berry, 1990) and as a means of

Table 3: The Benefits of T&D

Source	Findings
Poulter (1982)	Benefits for the individuals are the opportunity for promotion and selfimprovement, improved job satisfaction through increased job performance, the chance to learn new things, and adaptability (i.e., the ability to adapt to and cope with change). Possible benefits for the firm are increased levels of productivity, profitability, efficiency, and effectiveness, as well as reduced rates of absenteeism, labor turnover, accidents, and errors. T&D constitutes an insurance policy (p 7) for an organization.
Commerce Clearing House	Employees are more likely to successfully cope with major change, crises,
(1985)	and critical incidents.
Rabey (1990)	T&D has two main purposes. First, it ensures that work meets required standards of quality, quantity, cost, and time. Ideally, this translates into higher levels of productivity, effectiveness of operations, and a safer and more harmonious work environment. Second, the development of employees meets the foreseeable needs of the firm and seeks to realize the potential of each individual.
Ocholla (1995)	T&D leads to a competitive advantage.
Davidson (1996)	T&D has the capacity to increase overall profitability.
Kramar, McGraw, &	Positive correlation between T&D and organizational performance in that T&D
Schuler (1997)	has the capacity to improve a firm s performance in at least three key areas: labor productivity, overall quality of output, and the firm s ability to adapt to and cope with change.
Sofo (1999)	T&D enhances employee performance, productivity, and efficiency, and improves the quality, structure, and processes of firms. T&D is positively associated with empowerment, participation, and recognition.
Clarke & Koonce (1997)	Positive correlation between T&D and improved organizational performance indicators and individual growth.
Berge et al. (2002)	T&D leads to higher levels of competitiveness. T&D leads to sustainable competitive advantages.
Farrell & Mavondo (2004)	T&D results in potential source of a competitive advantage.
Gomez, Lorente, &	T&D is one of the most significant processes within the strategic management
Cabrera, (2004)	of human resources. Critical role of training in maintaining and developing individual and organizational capabilities. Capacity of training to substantially contribute towards the process of organizational change. T&D is a strategic capability.
Stone (2005)	T&D is a significant source of competitive advantage.
Saks & Belcourt (2006)	T&D leads to higher levels of employee productivity.
Marshall (2007)	Positive correlation between T&D and organizational performance. T&D leads to improved ability to cope with change.

Source: Developed for this research

gaining a competitive advantage (Farrell and Mavondo, 2004), thus ensuring its future (Marshall, 2007). Most importantly, Table 3 shows that scholars have recognized the possible correlation between T&D and employees ability to adjust to and cope with major change (Poulter, 1982; Kramar, McGraw and Schuler, 1997; Gomez, Lorente and Cabrera, 2004; Marshall, 2007). This particular finding has at least three implications:

1. T&D has the potential to prepare anorganizational system and its employees for downsizing in a proactive, strategic fashion;
2. T&D has the potential to enable thesurvivors to cope with altered job tasks and responsibilities and increased workloads effectively; and
3. T&D has the potential to enable thesurvivors to cope with survivor syndrome and other downsizing-related illnesses.

Surprisingly, the study of the role and relevance of T&D during the downsizing process has received little academic attention to date. In one of the few empirical studies conducted on the subject, it was concluded that T&D had the potential to positively impact downsizing outcomes and that T&D also had a positive impact on survivors and survivorrelated illnesses (Gandolfi, 2001). Significantly more work needs to be conducted to verify the findings and to extend the study.

Effective HR-related Practice During Downsizing

Finally, is there a best HR practice during downsizing? Are there HR-related elements that have shown to impact downsizing positively? Downsizing scholars have come up with lists of effective HR practice during downsizing. Accordingly, successful downsizing practices may have some of the following HR characteristics:

1. Downsizing needs to be implemented fromthe top with recommendations from lowerlevel employees and based upon job and task analyses of how work is organized (Cameron, 1994; Makawatsakul and Kleiner, 2003).
2. Executives need to develop a changemanagement plan with a clear vision of the future organizational identity and specific steps to conduct and oversee the transition (Macky, 2004).
3. Management needs to pay special attention tothe survivors through training, counseling, regular information, and two-way communication (Allen, 1997), while victims generally receive outplacement, severance pay, and counseling services (Gandolfi, 2001).
4. Firms need to identify redundancies, excesscosts, and inefficiencies. This can be achieved through internal data gathering and monitoring (Makawatsakul and Kleiner, 2003; Schraeder, Self and Lindsay, 2006).
5. Leaders should facilitate downsizing bypreparing for a high level of activity, including rallying people with a vision of a better firm, offering transition management training, acknowledging uncertainties and concerns, communicating plans and actions, telling the truth, involving people in managing the transition, and establishing a safety net for transition victims

(Makawatsakul and Kleiner, 2003).

Finally, survivors frequently experience feelings of anger, resentment, stress, and apathy, which lead to decreased levels of morale, motivation, and productivity. HR leaders have the opportunity to add value to the downsizing process by taking an early leadership role before, during, and after downsizing to address the healing of the survivors. A potent, effective downsizing plan must include strategies for all six fundamental HR areas, including employee involvement, communication, support programs, selection processes, HR management tools, and T&D (Weakland, 2001; Gandolfi, 2006). The latter component, in particular, is considered to be of primary importance and in line with the findings and claims of this current paper.

CONCLUSION

This conceptual paper examined downsizing in the context of the management of a firms human resources. It presented the main theories, assertions, and empirical findings regarding the role of the HR function in general and T&D, more specifically. The paper reviewed and analyzed the existing literature in relations to HR plans, programs, and policies that downsized firms had provided to the survivors.

Analysis of the article

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