Cost cutting … at all costs?

Changes with people impact – handle with care!

Business optimization projects and restructuring with people impact, require a vision beyond cost-cutting.

When companies are looking at cost-cutting, they normally do not address that as such. ‘Business optimization’, ‘Improvement Project’, or other fancy project names are often used to front the cost-cutting that is foreseen. We all know that the consequences often are: ‘doing more with fewer people’.

Initially, both for management and EWCs, there is always the focus on the impact on the people forced to leave the company. But what is the impact on the people staying? Their motivation and state of mind? Their work conditions?

There is a substantial risk of adverse effects when the focus is just on downsizing the workforce. Company change, involving cost cutting with negative people impact, must be done with great care. 

Suicides
One of the most extreme examples of a restructuring gone bad, must have been the ongoing restructuring at Orange, or France Telecom as it was called at the time, in the first decades of the 2000s. Restructuring and reorganizations that resulted in 39 cases of ‘suffering at work’ or institutional harassment: 19 suicides and 12 attempted suicides (that we know of) as well as 8 depressions.

Casualties not so much among the people that were made redundant, but among people that were staying in the company and suffered new and largely unacceptable job conditions. The French courts ultimately fined the company and held 3 individual top managers and its CEO accountable and responsible for manslaughter. They were all individually sentenced to prison.

Pruning with care
It is perhaps an extreme case and let us hope it will never happen again. But unfortunately we still see companies restructuring in an unethical manner and completely failing to see that taking good care of your people is essential for the future of your business. Just like with plants and trees, the goal of pruning and cutting back is to make the resulting plant stronger and more resilient. This means that you don’t cut just randomly, or too deep, or take out the wrong branches. Because then the tree or bush suffers and might even die.

For companies, it means that you should always do your restructurings with great care. Careful in every meaning of the word. Caring for the people that must leave and caring for the remaining employees. You need those employees and their motivation to keep the business sustainable. Employees will only stay healthy, even in difficult times, if they see and feel, that the company has their interests at heart.

If they witness their co-workers being made redundant without a longer-term vision and appropriate support, they will no longer trust the company to act in their best interests. They will be mistrusting and no longer be willing to go the extra mile.

Vicious circle
Motivation and output will enter a vicious circle, and the best people leave on their own initiative. Or more and more people will report being sick. Or worse.

And then there will be the need for another reorganization, and then yet another.
Many companies have been suffering from such continuous restructuring, mainly because they never applied a suitable and sustainable way of dealing with these issues.

EWCs
Management needs to work closely with its employees, its capital, if you like. Work Councils at all levels, are an essential and effective instrument to prevent restructurings to backfire and unnecessarily causing more damage than needed.

Companies with a desire to succeed and thrive on change, need to handle restructuring with care and take their (European) Works councils seriously.