assistance in every affected location. This complexity adds a great amount of time to planning and executing the integration. In addi- tion, there are cultural differences to consider. People from another country are not necessarily going to see things the way you do or un- derstand verbal or cultural nuances in the same way you do. We hear time and time again, “We are different here; this won’t work because of our special culture [or ethnicity, or something else].” Actually, the heart of any change process is meeting the in- dividual needs of people. Regardless of nationality or culture, em- ployees around the world have many of the same universal needs: to know what is happening, how it will affect them, and what they are expected to do next. From our experiences of working on four intercountry acqui- sitions, we do not believe that local people should be left to man- age change and people integration issues. A team of select external or very senior internal company consultants should drive the changes. Local managers are going through all the difficulties of personal change. Their frames of reference are limited by what they know and see. They also are concerned about their own fu- tures. Typically, they are stuck in the old paradigms and unable to accept support or assimilate new ideas critical to the process of change. Naturally, the local managers should be involved. How- ever, the outside expertise should carry weight in making final decisions. The Impact of Resizing on Other HR Programs Depending on the specific resizing activity, there may not be any im- pact on current HR programs, plans, or policies. For example, if your organization had implemented previous resizing activities, your current HR programs may suffice. However, if this is your first resiz- ing experience and the organization has no idea how to proceed, you will need to move swiftly to develop approaches for aspects such as retention or stay bonuses, severance plans, outplacement activi- ties, transition management, and employee counseling. It is important that resizing implications have been included in the philosophy and execution of policies for recruitment, com- pensation, benefits, employee-labor relations, and termination. In- evitably, questions arise on relocation programs, continuation of benefits, salary and bonuses due, and performance management. MOVING AS THE MARKETS MOVE 241 TEAMFLY Team-Fly ® 242 RESIZING THE ORGANIZATION Develop answers to these questions as soon as possible. For exam- ple, some managers use an RIF as an excuse to get rid of poor- performing employees who have not been counseled or warned about their unsatisfactory performance. Any of these unresolved grading, performance, and salary increase issues would surface loudly. This section should serve as a warning to ensure your per- formance management system is functioning as designed to ward off these problems. John Coutts asserted, “Communication is key. You can’t com- municate enough. It is critical to the success of the change. Without it, you have organizational trauma, which can have a tremendous negative impact on the organization, and it never recovers” [inter- view, June 13, 2001]. Obviously, communication is a vital compo- nent of any resizing initiative. Outlining the strategies and actions to be taken in easy-to-understand terms is the first and most es- sential step. The initial definition of the change will serve as a cor- nerstone for all future communications. Resizing research reveals that employees are looking for infor- mation to be delivered in person by their immediate supervisors (Larkin & Larkin, 1996). Executive road shows and presentations are important for establishing the top management perspective. However, follow-up conversations and information sharing are pre- ferred to come from employees’ managers. Information must be written in easy-to-communicate “bites” and be complete with anticipated questions. Putting as much informa- tion in writing and circulating it as early in the process as possible goes a long way toward keeping rumors from running rampant. Continual updates conveniently available to every level of the or- ganization are the backbone of a communications program. All stakeholders must be informed: customers, vendors, regulators, board of directors, managers, and employees. Each must receive targeted communication documents and kept apprised on an on- going basis. The role that individual line managers play is crucial. They should be armed with as much information as possible and receive immediate updates. The importance of their ability to be in touch with their constituents and convey daily messages with conviction should not be underestimated. Communications must be as comprehensive as possible. They should be reinforced by believable action and be consistent and in clear language. Certain key truths should be communicated in every written communication, so that the messages become clear to all stakeholders over time. Exhibit 10.6 provides a checklist of questions to help formulate a communications approach. Change implies acceptance, moving on to some version of busi- ness as usual. However, gaining acceptance and buy-in is the most important element for success. Once the activities associated with resizing begin, there are exponential changes in work patterns. Precise details of who, what, where, when, and how need to be clearly articulated. How you accomplish this task is a critical part of communications planning. MOVING AS THE MARKETS MOVE 243 Exhibit 10.6. Questions for Formulating a Communications Campaign. • Meeting with all management? • Notifications to the press? • Notifications to regulators? • Letters and booklets? • Small group meetings • Scripts for managers and supervisors? • Run-throughs? • Videoconferencing for long-distance staff? • E-mails? • Hotlines for employees? • Meetings with union officials? • Preparation of Frequently Asked Questions • Be as comprehensive as possible in answering all the questions you can identify. Even if they are not all published, they form the frame of reference for all involved in the project. This is a critical step. • It is sometimes thought best to hold back sensitive questions; however, that does not keep them from being asked. Putting the difficult information into print makes it easier to stick to a course of action and easier for employees to begin to accept. • The language and attitude of the answers need to be critically reviewed by legal and regulatory experts to ensure that they will not create a bigger issue. 244 RESIZING THE ORGANIZATION The employees of First Interstate Bank surmised that some- thing was up when several of them happened to be in an elevator with a group of British people who were talking among themselves. When they all exited the elevator on the executive floor, the exec- utive team was asked within minutes what was going on with these unusual visitors. No matter what answers we gave them, employees were skeptical and cynical, and the rumors started immediately. They were remarkably accurate. Conclusion Resizing an organization may be a one-time event or an ongoing facet of remaining competitive in an ever-changing environment. At First Interstate Bank and continuing on with Standard Char- tered Bank in the United States, we resized the organization almost every year as the demands of the business required. We entered new lines of business with consequent increases in staff, and down- sized or exited other lines of business. We moved as the markets moved. Resizing organizations is a constant process, and employees must learn to cope. Human resource executives are the agents of change in organizations and never should be laissez-faire about this aspect of what they do. The following guidelines can be help- ful for annual budget and economic forecasting exercises. They can assist HR and the rest of the senior team in positioning the or- ganization successfully to deal with whatever the economic fates deliver: • Ensure that you understand your external environment and the economic factors with an impact on your business in the short and long terms. Perform an environmental scan at least every two years, and more often if your organization is in a fast-changing industry. • Make sure your HR philosophy, policies, and programs are closely aligned with business strategy. This does not mean HR poli- cies change annually, but the philosophy that underlies them may change. Changing compensation practices quickly to attract and retain high-tech employees reflects a corporate value of flexibility. • Business realities may force you to reassess your values and philosophy in order to remain competitive. For example, IBM changed its practice of no layoffs when its market position fell apart in the 1990s. • Develop the ability to understand and articulate what worst- case and best-case actions may be necessary if budgets are ex- ceeded or not met. If the business environment is changing or prospects for the next fiscal year are superb or dismal, are you pre- pared to resize if necessary? • Your internal communications program needs to be ready for any eventuality. Ensure that it is strong enough to combat the inevitable rumor mill through innovative and swift techniques for getting your messages out. Resizing is not a simple task. However, if the HR leader and the other members of the senior management team take the time to build a philosophy of trust and the strategies to support that phi- losophy, action planning and subsequent results can be successful. References Cohen, A., & Thomas, C. B. (2001, April 16). Inside a layoff. Time Maga- zine. Larkin, T. J., & Larkin, S. (1996, May-June). Reaching and changing front- line employees. Harvard Business Review, pp. 95–104. Ulrich, D. (1997). Human resource champions. Boston: Harvard Business School Press. Savage, E. S. (2002). Chapter 11 plant closings. California Labor Law Di- gest, 1, 353–362. MOVING AS THE MARKETS MOVE 245 CHAPTER 11 How to Implement Organizational Resizing Roger D. Sommer For many executives, conducting a layoff is about as undesirable as undergoing major dental work. Consequently, these mass cut- backs may be referred to as the “root canal of management.” No one wants to undergo a root canal, but if you must have it done, you want the dentist to be fully competent. The same is true with major resizings. This chapter addresses the many issues that sur- round resizing, how to implement it correctly, and the conse- quences of not doing it right. In the past, some managers might have asserted: “What’s the big deal? You tell them to clean out their desk or toolbox, and they leave. It’s over with, you get back to work, and then go about your business!” Such is not the case today. The “big deal” is that we are dealing with employees’ lives. By eliminating their employment, we are not only inflicting a major economic blow, but we are af- fecting their self-esteem, their family’s security, and their relation- ships with their former coworkers (Kalifon, 1995; Noer, 1997). Furthermore, we operate in a litigious society and in a workplace bounded by complex laws at the federal, state, and local levels. Consequently, management must proceed with knowledge and caution—just as the endodontist does in skillfully executing that root canal we have been delaying. 246 Consider All the Stakeholders Downsizings, divestitures, and plant closings all have distinct and special considerations. However, what is common to each situation is that a variety of stakeholders will be significantly affected. Each party will react to what is happening by making adjustments, seek- ing to control the process, minimize it, or even stop it. These re- actions depend on how directly the individual stakeholders are affected by the resizing and how much control they can reasonably exercise over the ensuring developments (see Table 11.1). Employees Based on my experience in dealing with hundreds of employee terminations, both mass downsizings and individual firings, the most obvious stakeholder is the employee. Employees generally HOW TO IMPLEMENT ORGANIZATIONAL RESIZING 247 Table 11.1. Summary of Stakeholder Concerns. Stakeholder Concerns Employees Continued employment, pay and benefits, loss of coworkers, working harder, trust of management, uncertainty Executives and Job loss, career concerns, compensation issues, managers employee treatment, departmental productivity Board of directors Need to be informed, fiduciary responsibility Labor union Loss of members, contract enforcement, decreased dues, possible negotiation issues Customers Ability to deliver, quality issues Vendors Loss of orders, credit worthiness, future relationship uncertainty Governmental Laws followed, assistance needed agencies Community leaders Community’s reputation, loss of taxes, unemployment, media attention Investors Stock prices 248 RESIZING THE ORGANIZATION experience fear of the unknown and concern over their continued employment and the prospect of obtaining new positions. Those em- ployees leaving the organization may experience feelings of sad- ness over lost relationships, and those remaining often have a feeling of guilt since they were spared job loss. Depending on past communications from upper-level management, employees may feel betrayed by the rosy pictures painted by executives or by si- lence from the top when communications is needed most. Executives and Managers Executives and managers determine the need for the resizing and implement it. Some may be affected themselves. If so, their con- cerns are similar to those of their employees. If they are not des- ignated to leave the organization, it does not mean that they are unaffected. Numerous fears and anxieties may cross their minds. What will be the impact on their careers and their chances for ad- vancement? Do they agree with the actions being taken? Would this be a good time to consider other employment options? What will happen to bonuses and stock options? Such questions and con- cerns need to be addressed in a factual and caring manner. Now is not the time to distract or lose key players who may believe that the resizing will adversely affect their careers. Labor Unions The employees of the organization being resized may or may be represented by a labor union. If they are, the union has a vital in- terest in how its members are treated. Organized labor will insist that the contract provisions regarding seniority and layoffs be strictly followed. Union leaders and members alike need to be as- sured that employees not in the bargaining unit also will partici- pate in the reduction. As a practical matter, the loss of dues income may be a concern. Depending on the severity of the resizing, the union may be entitled to bargain over the effects of the cutbacks (severance pay, group insurance continuation, and similar mem- ber safeguards). The Community The importance to the community will depend on the size of the company and the extent of resizing relative to the population of the community or that of the neighborhood in which the facility is located. The concerns of community officials frequently center on unemployment, the impact on tax rolls, and the assistance given employees who are departing the organization. These officials need to be fully informed of developments, in advance if possible. Community leaders need to be kept abreast of downsizing an- nouncements so they can prepare their responses. Economic con- ditions change. Sometime in the future, the company may want to seek approval for expansion plans or other conditions. People tend to have long memories. Vendors and Customers Among the other parties affected by a resizing are the vendors to the organization. Depending on the magnitude of the resizing, suppliers will be concerned about the volume of future business they can expect. In addition, the credit worthiness of the firm may be questioned. It should be noted that suppliers might express their concerns to another class of stakeholders: the customers. Moreover, customers frequently question the company’s ability to deliver the products or services as scheduled and with the quality expected. Depending on the availability of alternative suppliers and the closeness of the relationship with the resizing firm, cus- tomers may reexamine this relationship or shift orders to other suppliers. Divestitures Divestitures represent the sale of the entire organization or a por- tion of it. Consequently, they often have a greater impact on em- ployees than do mass layoffs or plant closings due to the protracted nature of most divestitures and the uncertainty it generates on all levels. Uncertainty starts the minute word gets out that the com- pany or the facility is for sale. Rumors abound in the absence of HOW TO IMPLEMENT ORGANIZATIONAL RESIZING 249 250 RESIZING THE ORGANIZATION specific information. Frequent questions include: Which compa- nies are the potential buyers, and what are their reputations in such circumstances? What will happen to the employees and the management team? Will the new company shut down this facility? What will happen to my pay and benefits if I stay? What will be- come of my chances for promotion? What will happen to my job and me? Managers too may worry about the viability of the new or- ganization, its corporate culture, and the loss of ties with the orga- nization. There are no quick answers, and uncertainty may last for six months to a year. Productivity suffers, and rumors flourish (De Meuse & Tornow, 1990; Noer, 1993). Although typically the identity of the potential buyers is closely guarded, employees are resourceful. When an employer I previ- ously worked for was for sale and the unknown buyer was visiting the facility, enterprising employees checked the wing identification on the unmarked corporate jet and quickly determined the name of the corporation. Word traveled swiftly throughout the organi- zation. The identity of the buyer can have a calming effect, or it can have the opposite impact. If an investment firm is the buyer, there is more uncertainty since it is assumed that the company will be resold at some future date. If the buyer has a reputation as a good corporate citizen, it may allay some employee fears. Impact on Employees Frequently, there is uncertainty whether the buyer will honor future contracts and whether the buyer will be acceptable to the customer. In the case of an asset sale, the new buyer is not obligated to take the employees. Sometimes the new owners require all current em- ployees to reapply for the jobs they already hold, taking a physical exam and a drug test. Only individuals who successfully pass these requirements remain as employees under the new ownership. Given these and other such hurdles, what should top manage- ment do during this lengthy period of time? These leaders need to identify key managers and employees whom it cannot afford to lose and then take care of them. Options for retention include contracts, stay or retention bonuses, golden parachutes, and en- hanced separation packages. . safeguards). The Community The importance to the community will depend on the size of the company and the extent of resizing relative to the population of the community or that of the neighborhood. determine the need for the resizing and implement it. Some may be affected themselves. If so, their con- cerns are similar to those of their employees. If they are not des- ignated to leave the organization, . resizing are the vendors to the organization. Depending on the magnitude of the resizing, suppliers will be concerned about the volume of future business they can expect. In addition, the credit