Economic Recovery Signs and Effects

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As the Economy Recovers, Be Aware of the Longer-Term Effects of a Prior Downsizing

Economic Recovery Signs and Effects
The signs of a serious economic downturn and/or recession seem to be everywhere – individuals and companies are filing for bankruptcy protection, corporations are downsizing to save money, and sales of consumer goods, both large and small, have declined dramatically. Few people are immune to some side effect of negative economic fallout.

Before an “official” economic recovery occurs, there are usually signs that indicate that a recovery may be imminent or, at least, on the horizon. These signs typically fall into three categories:

1. Employment. Layoffs dramatically slow or even cease. Major downsizing activities also typically cease. In some cases, new hiring activities begin.
   
   
2. Housing. The real estate industry typically suffers badly during times of national or global economic stress as a result of massive employment downturns; people simply do not buy homes, nor do companies invest in new commercial real estate during these periods. Recovery signs usually include stabilizing prices, reduced inventory of homes for sale, and an increase in real estate sales (lack of declining sales numbers).
   
   
3. Consumer spending. As the economy worsens, consumer spending on big-ticket and smaller purchases first slows, then usually almost stops. A leveling of consumer spending followed by small but consistent increases is a sign of the birth of a recovery.

Usually, the positive effects are identified by economists before the general public even realizes that a recovery has begun. Unfortunately, even as the employment market improves, there are often some serious longer-term effects of prior downsizing actions. Interestingly, past research indicates that most companies never received any real benefit from downsizing, except for the obvious immediate cost savings.

Understanding the potential effects of a prior downsizing can help you neutralize many of the negative issues that may develop. The preventative actions or curing activities are relatively simple and straightforward. Here are some suggestions to assist your efforts to keep your company in a high-performing mode.

Deal With Longer-Term Effects of a Prior Downsizing
Here are some downsizing actions and the longer-term effects that they typically generate.

Action: Management gives the impression that they're more concerned about the separated employees than those who remain.

Effect: Many employees are resentful and believe that they've been betrayed by management.

Consider: Immediately after downsizing, be careful to publicly express your sincere concern for the welfare of the remaining employees. Should you sense this effect some time after the downsizing actions, display your strong appreciation for the efforts of the remaining staff and their performance during the “dark days” of the reduced staff during the recession.

Action: The company offers multiple types of assistance for downsized employees (exit help, retraining options, psychological counseling, etc.), but provides little professional assistance for remaining staff.

Effect: Remaining employees collectively feel a strong level of distrust of management.

Consider: Explain to your staff that you understand their feelings and that the company tried to provide as much assistance as possible to downsized co-workers. Remaining staff deserves credit for helping the company survive during the economic difficulty, so express appreciation of employee performance.

Action: Remaining staff are given additional duties and responsibilities without any additional compensation, sometimes even without a thank you.

Effect: Those asked to do more work during difficult periods lose respect for management.

Consider: Publicly recognize the loyalty, effort, and performance of your staff during the worst of the economic downturn. Give them the feeling that their efforts helped save the company from potential ruin.

These are but a few of the major longer-term negative effects of downsizing. From these few examples, you can see why proactive management and taking some steps to employ “preventive psychological medicine” are the best ways to neutralize the many potential staff problems. If this was not done immediately after the downsizing, it is important that you take action now. If you continue to avoid dealing with these issues, further negative results can occur.

If left unaddressed, these longer-term effects can permeate the entire company's corporate culture once they take root. Over time, you might suffer serious workplace and performance issues because of this downsizing fallout; however, dealing with the aforementioned problems and others that often develop (internal employee conflicts, feelings of betrayal, attitudes of futility, low performance caused by listlessness and distrust, etc.) gives you the ability to cure any existing or potential downsizing effects. If you can reverse these issues as the economy recovers, you can regenerate a high-performing staff, helping your company be ready to enjoy the coming financial revival.