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The cycles of a business compel all of its stakeholders to face the challenges of change, and successful supervisors must be able to read these changes like an open book. In today's competitive market, most companies have come to realize that changes are an imperative component of success, and that those changes must frequently, though regrettably, involve downsizing. From a quantifiable standpoint, the eliminated employees are no longer of concern to the employer, however those who remain on the job are equally affected by the attitude and behavioral changes that downsizing unleashes. Thus it is paramount for employers to understand the domino effect that downsizing can have on employee morale and subsequently, productivity.

While the decision to downsize is most often made for strategic and financial reasons, many organizations neglect to factor in the psychological impact of downsizing on those who remain. When downsizing is dealt with inappropriately, the difficulties it was created to overcome can actually be magnified as a result of loyalty and attitude issues that can negatively affect job performance. However when handled properly, the insecurities that arise in employees due to fear of losing their own jobs, can have a positive influence on production efforts.

Once management is able to understand that the root of their employees’ resistance to change is based on insecurity, they can plan for it and overcome it before it becomes a significant obstacle. This can be accomplished in a variety of manners including assuring existing employees of their job security, and incorporating stronger benefit programs and pension plans that both expect and reward long term employment. Of course, different people in different jobs will always have diverse perceptions of the situation. Some may view the experience of others being laid off as a blessing, and are ultimately grateful that their position still exists. Others may feel betrayed by management for laying off close colleagues and igniting insecurity among the ranks. Thus they may begin to assume that, as a result of the downsizing strategy, their aspirations no longer correspond with management’s overall objectives for the company. This can lead to problems in both morale and productivity; problems that could be avoided if management employees the key element of good business: communication.

Companies striving to increase the bottom line by decreasing their personnel must take into account the cost of employee discontent and must strive to manage any downsizing practices to ensure the continued support, loyalty and productivity of remaining employees. In the end, much of this is based on common sense and a natural respect for the opinions, emotions and thoughts of an organization’s most valuable asset; its people.