Downsizing: Effectively Managing Survivors

(1)

Downsizing: Effectively Managing Survivors

Examining the Influence of Survivors Syndrome on the Competitiveness of

Schuitema N.V.

(2)

Master Thesis Downsizing: Effectively Managing Survivors 2

Downsizing: Effectively Managing Survivors

Examining the Influence of Survivors Syndrome on the Competitiveness of

Schuitema N.V. - Master thesis June 2009 SEBASTIAAN MADLENER Student number: 1654888 University of Groningen, Faculty of Economics and Business. Master of Science in Business Administration,

Specialization Change Management.

Supervisor: L. de Waal Co-assessor: C. Reezicht

Supervisor at Schuitema N.V.: M. Verhoeven

Egelantiersstraat 14B4 1015PL Amsterdam

(3)

PREFACE

Veni, vidi, vici (Julius Caesar, 74BC). For most students, writing their thesis is one of the more difficult, intensive and perhaps one of the more frustrating experiences. A necessary evil, that stands between finishing an academic career and taking the first steps on the labour market. While writing this preface and reflecting on the work that was completed, I can agree that writing a thesis is a challenge that requires a lot of work. However, all the difficulties and obstacles that I needed to overcome all turned out to be positive learning experiences, contributing to the quality of my research and eventually led to this thesis.

The opportunity to carry out my research at Schuitema N.V., presented me with a unique opportunity to experience an organisational change up-close and personal. During the research and writing process, I frequently received help, feedback and inspiration from a number of people, who I would like to thank for their contribution. First, I would like thank Marjolein Verhoeven, my supervisor at Schuitema N.V. and Petra van Kampen, Tanja Snoeren, Marion Hoed, Jacobien Phaff, Nieske Winters, who are the advisors of the Human Resource Development team where I worked. Thank you all, for your feedback, advice, motivation, inspiration and information. Second, I would like to thank Joke Huetink for her constructive feedback and help in structuring the thesis and research. Furthermore, I want to thank all the people at Schuitema N.V. that assisted me in any possible way. Third, my appreciation to mom & dad, Anna and Fleur, for keeping me motivated, reading the drafts and all the support. Last, I would like to thank my University supervisor, Leen de Waal. Thank you for your (crystal) clear and to the point comments, feedback and for pointing me in the right direction.

Enjoy.

Kind regards,

(4)

ABSTRACT

Downsizing is an accepted method for affecting change. It can bring numerous benefits for an organisation and it contributes to the competitive position of an organisation. Downsizing is about abolishing redundant positions, teams and departments. As a result, this intervention method can have a tremendous effect on the workforce. This is especially true for employees that remain employed by the organisation. These survivors are needed to get the organisation back on track; they are responsible for making the organisation competitive once more. However, these are the same employees who just lost their colleagues and friends, who are being asked to do the same (or more) work with less people. They are the same people that might lose their motivation, their trust in the organisation or are wondering why their colleagues became redundant and they are asked to stay. These emotions are symptoms related to the survivor syndrome. This syndrome affects survivors of downsizing interventions in a way that they can become demoralised or lose their motivation. An organisation that is not paying attention to these symptoms might - eventually - be worse off than before the intervention. For that reason, it is vital to respond to these symptoms. Because, the happier the survivors will be, the more successful downsizing will turn out and enhance the overall competitiveness of the organisation. In response to changes in the competitive environment, Schuitema N.V. is adapting its organisational structure and is currently in the middle of an intervention described above. The manner in which a downsizing intervention is implemented has an enormous influence on the perception of the survivors. It is this perception, in combination with the survivors ability to cope with the new situation that makes a downsizing intervention a failure or success.

(5)

1. INTRODUCTION

In order to keep the competitive edge, organisations and businesses are constantly adapting. When the competitive position of an organisation is threatened, management should take corrective action. Downsizing is one of the management methods designed to realign the organisation to market requirements.

The change method of downsizing is designed to increase the organisational performance by reducing the workforce (Kozlowski, 1993). The removal of redundant employees should lead to a series of positive outcomes for the organisation, as a result enhancing the competitive position. The negative side of downsizing is the impact that this intervention method inflicts on the workforce. Cameron describes it as: throwing a grenade into a crowded room (1994:197). Better known as the survivor syndrome. This definition was first used in the context of survivors of the holocaust (Kets de Vries & Balazs, 1997). In organisational life, it is used to describe reactions and behaviour of people that survived a downsizing intervention. Survivor syndrome could have a serious intervening effect on the outcome of a downsizing intervention, as it can affect the expected competitiveness.

In this thesis, the possible effect of the survivor syndrome on the success of a downsizing intervention is studied. The case study conducted at Schuitema N.V. focuses on limiting the negative effects of survivor syndrome.

1.1. SCHUITEMA N.V.

(8)

1.2. MOTIVATION & BACKGROUND

Because of the supermarktoorlog (price war in the food-retail sector) that began in 2003, the supermarket sector has seen a tremendous transformation that changed the competitive position of Schuitema N.V. The outbreak of this war changed the Dutch supermarket sector significantly. In search for a larger market share, competitive supermarket formulas started to lower the prices of their products. Consequently, pressure on other supermarket formulas to lower their prices increased. As a result, competition within the supermarket branch increased, pushing the competitors closer together. Schuitema N.V. lost market share and felt pressure to increase performance. Analysis of the decline indicates that Schuitema N.V. - as a result of the price war - lost part of its unique competitive position in the market. The organisation noticed a decrease in sales volume and consequently lost market share. The analysis concluded that quality of the services provided by support functions were lagging markets best-practice standards. This was caused by two elements.

On the one hand, the current culture at Schuitema N.V. is labelled as reactive. The decision-making structure is founded on gut-feeling and experience, instead on quantitative data and market analyses.

On the other hand, improvements are needed to enhance IT systems efficiency, logistical operations and administrative processes. Furthermore, the cooperation between Schuitema N.V. and the entrepreneurs is under pressure. Different points of view increase pressure on the relationship. This is caused by entrepreneurs short-term focus in contrast to the long-term focus of Schuitema N.V.

In addition, market research regarding the customers perception of C1000s pricing level (price experience), concluded that customers perceive the prices as high. As a result, customers traded their loyalty for cheaper products offered by competitors. One should keep in mind that customers perception lags the current situation.

Besides price perception, customer behaviour changed in many other aspects as well. Firstly, demographic changes resulted in more families with dual incomes and an increase in the number of elderly people. Secondly, people wish for less hassle and greater convenience regarding shopping and cooking. Consumers increasingly expect supermarkets to concede to their needs and expect supermarkets to function more and more as a commodity service.

(9)

situation affecting Schuitema N.V. underlines that changes must be made in order to retain a position as a main party in the Dutch supermarket sector.

1.3. RESEARCH OBJECTIVE

Based on what is mentioned in the introduction and background information, it is clear that Schuitema N.V. needs to take action in order to remain competitive in the retail sector. Schuitema N.V. has launched an intensive change project, including downsizing. Downsizing is an intervention that can bring many positive results for an organisation. However, it might have a disastrous effect on the surviving workforce. Therefore, the objective of this thesis is to answer the following question:

To what extent can Schuitema N.V. become more competitive by effectively managing the negative consequences (Survivor Syndrome) of downsizing?

In formulating an answer to this question, Schuitema N.V. should be able to manage the negative consequences that downsizing may have on the workforce effectively. The reactions of the remaining workforce to a downsizing intervention are the central elements in this thesis. As a result, the remaining employees might experience negative emotions. The manifestation of these negative emotions is collectively known as the Survivor Syndrome (Tsai et al., 2007; Kets de Vries & Balasz, 1997).

(10)

1.3.1. COMPETITIVENESS

Competitiveness is the starting point of the model. Competitiveness is defined as a set of attributes, which allows an organisation to compete in the market. Based on aforementioned background, Schuitema N.V. needs to design a strategy to handle disappointing results of the organisation. Accordingly, on the 28th_{of February 2008 the}

board of directors initiated a change programme with the objective to re-align the organisation with the changing environment.

Core of the change project is the transformation from wholesaler to retailer. The main goal is to increase market share up to 20% by 2010, an increase of roughly 8%. In order to realise this goal Schuitema N.V. developed the Build & Buy strategy. The Build strategy consists of an intensified marketing strategy, improved service by support functions and a new realisation of the relationship with the entrepreneurs. The Buy strategy is focussed on increasing market share by means of mergers and acquisitions. The exact specifics of this strategy will be discussed in chapter 2.

(11)

1.3.2. DOWNSIZING

Downsizing is the second element in the research objective. This intervention is designed to reduce the workforce in an organisation and should lead to making a company more efficient compared to its competitors (Kets de Vries & Balazs, 1997:12). According to Kozlowski et al. downsizing is: a deliberate organisational decision to reduce the workforce that is intended to improve organisational performance (1993:267). The aim of this intervention is to make an organisation more competitive by continuing the operation with a reduced number of employees. Downsizing provides benefits as: a reduction in salary expenses, increased workforce quality (Tsai et al. 2007), faster decision-making, increased quality, greater efficiency and productivity (Freeman & Cameron, 1993) as well as, enhanced earnings, decreased bureaucracy, improved communication and better alignment with the environment (Kets de Vries & Balazs, 1997; Cascio, 1993).

Based on the Build strategy described earlier, improvement of the support functions is required. Therefore, the restructuring of certain functions, teams and departments is essential. As a result, redundancies will become noticeable. Therefore, downsizing is a central element of the change programme.

1.3.3. SURVIVOR SYNDROME

Besides the benefits, there are numerous negative elements associated with downsizing. Most visible are the redundant employees that are forced to leave the organisation. The objective of this research is to focus on the Survivor Syndrome, the third element of this research objective.

(12)

(13)

2. RESEARCH DESIGN

This chapter provides a detailed explanation how this research is constructed. It explains the theoretical justification and preliminary inquiry that leads to the criteria that are used to construct the conceptual model. This model is tested within the organisational context, from which the research findings, conclusion and recommendations come forth.

The research design - presented in figure 2 - provides a graphical representation how the study will be conducted. The research is based around the criteria that are derived from preliminary interviews and an extensive literature review of academic articles. These criteria will function as a framework allowing the responses of surviving employees (interviewees) to be put in perspective. An analysis of the results will lead to a series of recommendations aimed at reducing the effect of the survivor syndrome. All elements in the research design are explained in more detail.

2.1. DOWNSIZING

The first element is downsizing. In search for an all-embracing definition for downsizing, it is clear that many authors provide similar definitions. Cascio defines downsizing as: the planned elimination of positions or jobs (1993:96), whereas

(14)

Kozlowski et al. use: a deliberate organisational decision to reduce the workforce that is intended to improve organisational performance (1993:267) as definition. Downsizing was the action taken by firms to strategically reduce redundant workforce, improve the quality of human capital and eventually maintain and increase their competitive advantages is used by Tsai et al. (2007: 159). Interpreting the different definition for downsizing leads to the conclusion, that downsizing is designed for making a company more efficient compared to its competitors (Kets de Vries & Balazs, 1997:12).

All downsizing interventions have four reoccurring characteristics (Freeman & Cameron, 1993).

First, the introduction of downsizing as an intervention for organisational change is a well-considerate, deliberate management decision. The decision to reduce the workforce is caused by the awareness (often at the level of the board of directors) that the organisation is in trouble. This is often triggered by a change in the environment that affects the competitiveness of the organisation. The decision to use downsizing results from the environment (externally driven). In addition, it can also be internally driven. By focusing on the advantages, that downsizing can achieve. Downsizing has evolved from a last-resort intervention, to a widely accepted management strategy that can be implemented continuously as part of day-to-day operations (Ropp, 1987; Tsai et al. 2007).

Second, downsizing implies workforce reduction. The same amount of work needs to be completed with a smaller input of labour resources. Consequently, an organisation needs to deal with redundant employees.

The third characteristic is described by Freeman & Cameron (1993). All downsizing should lead to improved effectiveness and efficiency. This leads to a better competitive position.

The final characteristic discusses the change in work processes after downsizing. Downsizing can lead to different work patterns. These new work patterns should be directed in a way that benefits the new structure of the organisation. Furthermore, it provides the opportunity for a process re-design.

(15)

Kets de Vries & Balazs, 1997; Tsai, Yen, Huang & Huang, 2007; Allen, Freeman, Russell, Reizenstein & Rentz, 2001; Cascio, 1993; Freeman & Cameron, 1993).

All the beneficial elements of downsizing contribute to the competitive position of an organisation that is dealing with environmental changes, enhancing the organisations efficiency.

2.2. SURVIVOR SYNDROME

The second concept is the survivor syndrome. Survivor syndrome is the (emotional) response of the surviving employees towards the organisation, concerning the perception of how the downsizing is carried out. This perception is expressed in various forms of negative and/or unproductive types of behaviour. The prevailing causes according to various authors will be explained in more detail.

The first cause for this type of behaviour is a result of the survivors perception regarding the unfairness of the downsizing intervention (Brockner et al., 1993; Hemingway & Conte, 2003; Thornhill and Saunders, 1998). Brockner et al. (1993) argue that survivors will react more in line with the survivor syndrome when the lay-offs are perceived as unfair. In situations where management decides to downsize and is incapable in providing a clear explanation why downsizing is the right course, survivor syndrome may occur. This indicates that management can influence the perception of the survivors concerning (un)fairness of organisational change (Hemingway & Conte, 2003).

(16)

behaviour of employees. the greater the survivors perception of violation, the greater their susceptibility to survivors sickness seems to be (Kets de Vries & Balazs, 1997:27). Therefore, it is vital for organisations that do use downsizing as an instrument for change to limit the violation of the psychological contract.

The third aspect is introduced by Sahdev (2004). The author argues that a lack of future vision influences the organisations performance and can trigger the survivor syndrome. without clearly articulating the vision for the future, or if the new vision is distant and diverse from the existing beliefs that prevail in the organisation and no effort is made to clarify the future of the organisation, then downsizing actions often reflect a cash-flow driven exercise (Sahdev, 2004:169). This means that if management is not in the position to portray a well-defined goal for its surviving workforce surviving syndrome symptoms can start popping up. Rice and Dreillinger (1991), Thornhill et al. (1997) and Sahdev (2004) all argue that without a future vision survivors feel less committed because they are missing the perspective of a future vision. The surviving workforce has need for a clear goal.

2.3. PRELIMINARY INQUIRY

Preliminary interviews were held with key personnel, consultants and managers to get a holistic image of the organisation. These interviews provided a clear and up-to-date picture of what is included in the organisational change, what is already completed and what is to be expected in future.

2.4. COMPETITIVENESS

The changes proposed by the board of directors on the 28th_{of February are designed to}

(17)

Knowledge (GfK), a well-known market research organisation that specialises in the retail sector.

The second element is aimed at developing and improving the quality of the support functions and associated processes. The objective is to develop the retail chain. The front-of-the-chain, is committed to best in class. At the back, improvements are aimed at a more effectively and efficient operation. Targets are; rightsizing overhead, automation & systems, logistical improvements and primary retail process design.

Third, the remodelling of the relationship between Schuitema and the entrepreneurs. Due to the price war, the interests of the parties are dispersed, pressuring the cooperation between the parties. The remodelling is aimed at revising the roles, tasks and responsibilities. Schuitema is in charge for chain optimisation and the entrepreneurs are responsible for the front. Both parties should show trust, acknowledge one another, and work side by side to increase the transparency of the chain.

The Buy component focuses on increasing the market share by engaging in mergers and/or acquisitions. In the period 2008 2010, the organisation intends to obtain 7.5% market share either by acquiring a substantial competitor or by growing through a series of smaller add-on. It is expected that in the following years a drastic change will occur in terms of mergers and acquisitions in the supermarket sector. Certain supermarket formulas will consolidate in order to remain competitive. Schuitema N.V., as the second largest player in the market can play a significant role in this.

The first three factors (downsizing, survivor syndrome and preliminary inquiry) function as the foundation from which the conceptual model will be constructed. The information and knowledge provided by academic literature and the interviews resulted in a theoretical foundation that created the construction of the conceptual model.

(18)

The conceptual model provides a representation of the relationships that exist between the elements of the research objective and subsequently shows how the research objective will be answered. The interviews that were conducted provide the empirical input for this thesis. The empiric environment will be observed by interviewing the employees and management. The lines that flow from the conceptual model to the respective boxes in figure 2 (page 13) represent this. The exact method as well as conceptual model is explained in chapter 3.

2.6. MANAGEMENT

Management is subdivided in higher management and line management. Higher management is defined as those persons who are on the board of directors and who made the decision that Schuitema N.V. needed organisational change in order guarantee its competitiveness and future. Higher management is excluded from this research because higher management initiated the change project. However, did not deal with the survivors directly. Yet, according to Thornhill et al. (1997), the commitment of higher management towards the organisational change must be expressed very clearly. It is important that this also interpreted by the surviving workforce.

The implementation of the organisational change project - the actual downsizing is carried out by the line managers. These managers are defined as those persons who are assigned to implement the organisational change. Line managers are directly involved in the downsizing process and have frequent and direct contact with the survivors and redundant employees, line managers are very much at the sharp end of a redundancy programme (Thornhill et al. 1997:87). Line managers are the persons to whom survivors will turn in case of ambiguity and doubts and therefore can influence the perception of the survivor. Survivor syndrome will be reduced when line managers can take away the uncertainties experienced by the survivors.

The line managers are interviewed to get a clear picture on how their actions can reduce the negative elements of the survivor syndrome and can lead to a better acceptance of the organisational.

2.7. EMPLOYEES

(19)

centre in Elst. A group of the employees knew at the beginning of the intervention that they would remain employed by Schuitema N.V.

The other group was initially redundant and they were informed about the consequences. However, these employees applied internally for a new position and remained employed eventually by the organisation. This group initially experienced the feeling of job loss with all the related emotions. Later on they became survivors of the downsize intervention. Moreover, these employees provide valuable information regarding the way Schuitema N.V. dealt with redundancies and how the organisation tries to limit the negative effects of survivor syndrome.

2.8. RESEARCH FINDINGS

The research findings that result from the interviews will be assessed according the criteria that were constructed from the literature and the preliminary inquiry. Inferences will be made regarding the performance of the organisation in reducing the negative consequences of downsizing.

The assumptions that are made based on the research findings lead to a series of conclusions and recommendations. This is represented with the line from the research findings to the conclusions & recommendations in figure 2 (page 13).

2.9. CONCLUSIONS & RECOMMENDATIONS

(20)

3. CONCEPTUAL MODEL

The conceptual model is constructed based on the information obtained from the literature research and the initial inquiry. The information from the research design combined with the questions from the organisation resulted in the conceptual model presented in figure 3 (page 20). The different elements in the model will be explained in the following paragraphs. The conceptual model is tested empirically and the results are presented in chapter five.

FIGURE 3 Conceptual Model

Competitiveness

Retaining market share Efficiency Effectiveness Downsizing Manner of execution by management Potentially Negative Impact for Surviving

Employees

Uncertainty Low trust Suspicious towards

management Lower job satisfaction

Lower commitment Perceived Fairness Interdependency Matching attitudes Previous experience Insecurity Fairness Expectations Environmental conditions Positive for Organisation Reduced overhead Decreased bureaucracy Increased productivity Faster decision making

Smoother communication Survivors strategies model Clarity of future direction Senior Management Communications Line Management Planning Learning Increases willingness innovation and revitalizes

(21)

3.1. COMPETITIVENESS

The organisational change project that was initiated by Schuitema N.V. is aimed to enhance the overall competitiveness. The objective is increase the market share up to 20% by 2010. This required if Schuitema wishes to remain a major party in the food-retail sector and continue to remain profitable.

Part of the organisational change project is the improvement and redesign of the support functions. Downsizing is used within those departments to: make[ing] a company more efficient compared to its competitors (1997:12).

3.2. DOWNSIZING OUTCOMES

Downsizing can lead to reduced overhead, decreased bureaucracy, increased productivity, faster decision-making and smoother communication (Shaw & Barrett-Power, 1997; Cascio, 1993). These elements enhance an organisations competitiveness. As a result, downsizing has become a popular tool for organisations in distress that want to reduce their costs and overhead in order to become competitive again.

However, the flipside of the coin is that downsizing can have a disastrous effect on the surviving employees (Kets de Vries & Balazs, 1997; Brockner et al, 1985). These survivors can experience a variety of negative emotions, commonly known as the survivor syndrome (Tsai et al. 2007). The symptoms of survivor syndrome are: reduced motivation, physical discomfort, reduced creativity, increased fatigue, anger, risk avoidance and absenteeism (Tsai et al. 2007; Tourish et al., 2004). These emotions have a negative effect on the personnel and reduce the effect of the downsizing intervention. Armstrong-Stassen (1994) argues that the success of organisational downsizing depends on the reactions and ability to cope of those who remain within the organisation after the intervention. The reactions of the surviving employees will depend on the chosen strategy and the method of implementation. This demonstrates that management can influence the negative perceptions of downsizing and therefore can limit the influence of survivor syndrome.

3.3. PERCEPTION

(22)

The academic literature provides theories and methods aimed at manipulating certain attributes that can influence the perspective of the workforce. Three theories that discuss methods of influencing the perception of survivors are introduced in the conceptual model (figure 3, page 20). When management takes into account the elements of the Survivors Strategies Model (Thornhill et al., 1997), Perceived Fairness (Brockner et al., 1993; Hemingway & Conte, 2003) and Learning (Tsai et al., 2007) they can influence the perception of the survivors and the effects of the survivor syndrome. As a result, influencing the success of a downsize intervention and the competitiveness of the organisation.

Line managers can influence the perception of the surviving workforce and should entrust themselves in dealing with the human factor, the perception of those of remain within the organisation during and after the downsizing intervention. By committing themselves to the well-being of the workforce, they are in the position to manage the negative perceptions related to downsizing.

3.4. THREE METHODS TO INFLUENCE SURVIVOR SYNDROME

In the previous paragraphs, it is explained that if management - in the perception of the workforce - inadequately implements a downsizing intervention, higher levels of survivor syndrome will be the result. Management can influence this perception of the survivors and therefore the intensity of the survivor syndrome can be managed. This is graphically represented in the conceptual model (figure 3, page 20).

The following three theories provide (higher & line) management with approaches and tools that can anticipate and reduce the potential triggers for survivor syndrome. Moreover, the theories offer solutions and insights how to limit the effects of survivor syndrome on the workforce.

3.4.1. SURVIVORS STRATEGY MODEL

(23)

areas can intervene to reduce the incidence or alleviate the effects of sympatric survivor responses towards those made redundant (Thornhill et al., 1997:95). Interviews or questionnaires constructed around these five areas provide management with insight regarding the survivors reaction. The strength of the SSM is that it represents the individual responses of the survivors. The responses are grouped an analysed and provide the organisation with an overview where to improve and further reduce the negative effects.

As explained above, the SSM is used during a downsizing intervention in order to provide management with a snapshot of the organisation in transition. However, it can also be used before implementation. Allowing the organisation to measure beforehand what can trigger negative issues when downsizing. This way the organisation can anticipate on potential triggers.

3.4.2. PERCEIVED FAIRNESS

Brockner and Greenberg (1990) argue that survivors can exhibit two types of responses. The first is described as a Sympathetic, which means that in the perception of the survivor the redundant employees are treated unfairly by the organisation. This can result in negative attitudes and behaviours directed at the organisation. The second response is called Unsympathetic; in this situation, survivors express their negative emotions toward the redundant employees. The survivor feels that the downsizing was justified. It is in the interest of the organisation to have unsympathetic responses, or at least limit the sympathetic responses.

(24)

Campbell argues the survivors reactions are influenced by the perceived fairness of the (management) decisions and decision making process (1999:18). Management can influence this perception by focusing on four areas in the downsizing process (Campbell, 1999; Thornhill et al., 1997).

The first area focuses on the perceived fairness in the decision making process. Implementing decision-making process that is transparent and consultative will give the employees a feeling of ownership or process control regarding the decision making process. Besides that, selecting which employees become redundant should be fair. Perception of fairness increases with the involvement of the line manager (Campbell, 1999; Thornhill and Saunders, 1998; Hemingway & Conte, 2003).

Second, the news that people may become redundant has enormous impact on the workforce. Personnel will crave for information and it is in the best interest of the organisation to provide as much information as possible. Survivors react favourable when they perceive that the organisation has done everything possible to provide answers to the questions the workforce might have (Brockner et al., 1985; Hemingway & Conte, 2003; Campbell, 1999; Thornhill and Saunders, 1998).

The third area stresses the importance of continuous communication directed at the workforce. The information needs to accurate, up-to-date and detailed. A downsizing situation can cause survivors to question higher management. Communication and information from higher management contributes to increased perceived fairness, trust and commitment from the surviving workforce (Tourish et al. 2004; Hemingway & Conte, 2003; Campbell, 1999; Thornhill and Saunders, 1998).

Finally, Aftercare is an important factor that should not be neglected. Higher management cannot expect that all will work well, right after downsizing. Management should accept that the new organisational layout and ways of working might cause stress and frustration with the survivors (Campbell, 1999; Thornhill & Saunders, 1998; Kets de Vries & Balazs, 1997; Tsai, et al., 2007). Therefore, management should give support to the survivors that are adjusting to the new way of working.

An organisation that is prepared and has educated its workforce has a better change in achieving success.

3.4.3. LEARNING

(25)

organisation needs to redefine itself. Survivors must deal with increased work pressure. Often undertaking tasks and roles in which they are not proficient. In order to ensure qualified personnel the surviving workforce needs to further develop their current competencies and learn additional and new skills. These are needed to promote the organisations new vision, direction and eventually result in the organisations competitive advantage (Tsai et al., 2007).

Fast individual and organisational learning is the key determinant for developing future competitive advantages (Vera & Crossan, 2004; Jalajas & Brommer, 1999). According to Tsai et al. (2007) argue that the expected benefits after a downsizing are not realized because the surviving workforce suffers from surviving syndrome. This has a negative effect on survivors learning ability. Learning is vital in strengthening an organisations competitive advantage. Therefore, organisations should adapt HRM policies to facilitate and support the learning of the new core competencies in the post-downsize era. ...because HRM practices depended on learning to interact with intellectual capital and strategic capabilities. Through the process, firms could create valuable, rare, inimitable and organized resources (Tsai et al., 2007:160). When survivors are motivated to learn they will embrace the new competencies and personal learning arises. As a result, organisational learning becomes a fact and it enhances the unique competitive advantages of an organisation this illustrates that change or adaptation in the individuals perception is needed to effect change on an organisational scale. Organisations change through people.

Tsai et al. (2007) concluded from their research that increased willingness to learn and innovate would revitalize the organisation as a whole. Therefore, HRM practitioners should aim to increase the motivational factors and reduce the impeding factors to individual learning. This ensures commitment and increased competitive advantage. Which remains the ultimate goal of downsizing, learning is the element that revitalizes the organisation. Learning bolsters the commitment and performance.

(26)

3.5. QUESTIONS

In order to answer the research objective the following questions are derived from the conceptual model.

What criteria will be used to assess the influence of Survivor Syndrome on the relation between downsizing and competitiveness?

How will management and (surviving) employees be assessed and approached in view of the established criteria?

To what extent is the survivor syndrome affecting the employees at Schuitema N.V.?

In relation to the established criteria how should Schuitema N.V. best approach surviving employees on motivational matters?

(27)

4. METHODOLOGY

This chapter discusses the data collection methods and process to provide clear answers to the research questions. This thesis is based on two types of data collection methods, a literature review and an empirical research.

4.1. LITERATURE REVIEW

The literature collected for this thesis has several functions. First, it contributes to the development of the research objective (Baarda et al., 1996). Second, the literature review acts as a foundation for the conceptual model. Third, it contributes to the theoretical framework as a whole.

Online search engines like: Business Source Premier, Google Scholar, Emerald and Web of Science were used to search and collect relevant literature. The following keywords were used in the search for academic articles: Survivor syndrome, redundancy, downsizing, organisational change, perceived fairness and learning. From the selected literature, several theories were selected that provided insights and means on how to limit and/or reduce the amount of negative pressure a downsizing intervention can cause on the workforce.

4.2. EMPIRICAL RESEARCH

The theoretical framework provides a theoretical insight that identifies obstructions that employees and management experience in a downsizing situation. Therefore, the perception of surviving employees, concerning the intervention method is a vital element. For that reason, a semi-structured interview method was chosen as the primary data collection method. This method is designed for research in the social sciences; it provides the flexibility of adding questions during the actual interview, in reaction to the responses presented by the interviewees (Baarda et al., 1996).

(28)

4.2.1. INTERVIEWS

The empirical data collected and used in this thesis is the result of a series of interview sessions held with employees of Schuitema N.V. To ensure a high level of objectivity the interviewer kept several interfering aspects in mind that could influence the results of the interview. Therefore, the interviews were designed according the methodology described by Emans (2002). According to the theory, there are a number of techniques to ensure the objectivity of an interview: 1) Presenting a neutral attitude towards the interviewee to limit the interference as much as possible. 2) Ensure the interviewee that the interview is confidential. This allows the employee to speak more freely and contributes to a better representation of the state and emotions experienced by the employees. 3) The interviewer can make notes. This allows the interviewer to listen to the interview again or to refresh the mind by listening to a particular question.

The interviews are subject to a number of ground rules. Emans (2002) introduces the following three: do not skip any questions; do not deviate from the sequence of the questions and stick to the exact formulation of the questions.

The interviews were semi-structured and the questions were open-ended, granting flexibility for some minor changes and adaptations.

4.3. EVALUATION

The appropriateness of the answers depends on how the interviewee translates his or her cognitions into answers. The evaluation of the answers focuses on four criteria that should lead to relevant, clear and objective answers. The following four criteria are introduced by Emans (2002):

Validity: consensus between the thoughts and answers of the interviewee Completeness: did the interviewee mention everything that is relevant Relevancy: is the provided answer relevant to the question asked

Intelligibility: an answer complies when the interviewer is able to write down the answer without doubts.

4.4. PARTICIPANTS

(29)

that participated in the interviews worked within different teams all part of the logistical department. At the Schuitema N.V. Headquarters, several interviews were held with employees whose departments would seize to exist.

4.5. DATA PROCESSING

Baarda et al. (2005) describe a series of steps and methods required for a solid qualitative research analysis. Following these steps leads to a sound analysis of the interview outcomes.

Label the data: All the relevant text from the interviews was labelled. A label is characteristic for a certain fragment of an interview and must say something significant about the text.

Organize connections: The research question acts as the central perspective from which the labelling and analysis are conducted. This is necessary to label and categorize the more than 150 sentences and paragraphs that resulted from the interviews.

Interpretation and structure: The initial analysis of the labels presented a series of reoccurring labels. The synonymous labels were grouped under a single, embracing label. Labels that share a common characteristic can be sub-divided in different dimensions (Baarda et al., 2005).

Determine the validity of the labels: Labels have a high level of validity when they provide sufficient coverage when new data is introduced. Baarda et al. (2005) recommend testing the initial labelling on a small selection of interviews to see whether the labels are valid before using the labels for the rest of the data.

Define central labels: The central labels result from a careful analysis that translates the labels from the interviews to a higher level of abstraction. Within this thesis, the labels are categorized under the central labels that flow from the conceptual model. The advantage of assigning the labels to the eight components presented in the conceptual model (figure 3, page 23), is that it provides a clear visible representation of the bottlenecks within the model. By applying this method, it becomes easier to analyse the relations between the central labels consequently, answering the central research question. The central labels are as follows:

1. Competitiveness 2. Downsizing

(30)

4. Potential negative impact for survivors 5. Positive impact for the organisation 6. Survivors strategy model

7. Perceived fairness 8. Learning

Determine the inter-subjectivity: The inter-subjectivity determines to what extent the research results are biased by the interpretation of the researcher. In order to validate the inter-subjectivity of the research, three internal advisors of Schuitema N.V. cooperated in an exercise to gauge the inter-subjectivity.

The internal advisors had no prior involvement with the research, to ensure the objectivity. Each consultant was given three interviews and the central labels from the conceptual model, and they were asked to assign the sentences to a central label. The objective was to see whether the advisors would come to the same classification. A meeting followed to discuss the results and to explain the differences and fine-tune the definitions. The meeting was concluded with a final categorization of the sentences and paragraphs. This would function as a the foundation in answering the central research question

(31)

5. RESULTS

This chapter will present and discuss the outcomes of the empirical research. The analyses of the interviews indicated that certain sentences and phrases frequently reoccurred. These phrases were labelled and assigned to one of the eight central labels mentioned in the conceptual model.

Baarda et al. (2005), stress the importance of a comprehensible definition of the central label. The definition should clearly define what is and what is not included within a particular label. In this thesis, the following definitions will be applied:

TABLE 1

Central labels & Definitions Central label Definition

Competitiveness Making the organisation more efficient and effective than its competitors.

Downsizing The manner in which the organisational change and downsizing is executed.

Survivor syndrome An emotional response that is triggered when a survivor perceives that there are certain elements associated to downsizing that do not match accordingly to the employees perception. This is expressed in various types of unproductive behaviour.

Potential negative impact for survivors

The negative consequences downsizing can have on surviving employees that affected by the survivor syndrome.

Positive impact for the organisation

The positive outcomes that downsizing can bring for the organisation.

Survivors strategy model Diagnostic model that helps identify five crucial points that can reduce the negative perception and feelings of survivors.

Perceived (positive) fairness The reduction of negative emotions of survivors trough the fair treatment of redundant employees and proper implementing of the downsize intervention.

(32)

(33)

Master Thesis Downsizing: Effectively Managing Survivors 33 FIGURE 4

Categorization Interview Results

Competitiveness

Retaining market share Efficiency Effectiveness Downsizing Manner of execution by management Potentially Negative Impact for Surviving

Employees

Low trust Suspicious towards

management Lower job satisfaction

Lower commitment Tiresome situation Perceived Fairness Interdependency Matching attitudes Previous experience Insecurity Fairness Expectations Environmental conditions Positive For Organisation Reduced overhead Decreased bureaucracy Increased productivity Faster decision making

Smoother communication Survivors strategies model Clarity of future direction Senior Management Communications Line Management Planning Learning Increases willingness innovation and revitalizes

Survivor Syndrome Reduced motivation Physical discomfort Reduced creativity Increased fatigue Anger Risk avoidance Absenteeism Uncertainty + + + + - Reduced commitment: 8i, 9c, 11k, 15s, Reduced motivation: 2m, 5l, 8c, 8d, 8o, 14m, 14n, 15u, 12M Uncertainty: 1b, 1j, 5h, 7k, 8h, 8n, 11i, 11t, 12k, 15j, 15t

Perceived fairness: 1aa, 1bb, 1cc, 2cc, 2dd, 4u, 4z, 4aa, 4bb, 4cc, 5z, 5aa, 6t, 7v, 7x, 10p, 11g, 11v, 12n, 13l, 13m, 14jj, 14ll, 15hh Clarity of future direction: 13f, 14y,

14bb, 14cc,

Senior management: 1w, 1x, 2v, 3w, 5w, 6s, 8m, 11p, 11q, 11r, 15r, Communication: 1u, 1ee, 2z, 2aa, 3aa, 5q, 8j, 8k, 10k, 11l, 11m, 11o, 12o, 13c, 13h, 14x, 15p, 15q, Line management: 1v, 6u, 10m, 12l, Planning: 3x, 4r, 4v, 4ff, 5y, 8p, 8q, 13g, 13k, 13o, 14w, 15o, 15bb Learning: 1dd, 2ff, 5bb, 8r, 14pp Procedural: 1d, 1l, 1o, 2d, 2g, 2r, 4d, 5d, 5e, 8e, 10h, 12g, 14d, 14q, 15d, 15m Good: 1f, 1q, 1y, 2s, 4c, 7e, 10f, 12b, 13e, 14f, 15f, 15g, Bad: 1i, 1r, 2l, 2q, 3p, 3r, 3u, 4j, 4o, 5m, 5r, 5s, 5l, 7m, 7n, 8h, 11d, 11e.

General: 1a, 2a, 2f, 3a, 4a, 4n, 5a, 5g, 6a, 7a, 7b, 8a, 9a, 10a, 12a, 13a, 14a, 15a Expectation: 2i, 3h, 4b, 4i, 5b, 7g, 11h, 12c, 13b, 14b, 14j, 15h

Positive impact for the organisation: 1c, 1h, 2c

(34)

5.1. ANALYSIS OF THE CENTRAL LABELS

The analysis of the interviews was followed by the allocation of sentences and phrases to the central labels. Subsequently, the central labels would be analysed and the relation between the central labels was discussed. Eventually, this would lead to a series of conclusions and recommendations.

5.1.1. COMPETITIVENESS

The competitiveness label has two additional dimensions. The first dimension focuses on the general aspects of competitiveness. It seeks to answer the questions why Schuitema N.V. is going through a reorganisation, what the objective is and how this goal is to be achieved. What stands out is that the interviewees are aware that there is something wrong with the organisation. There is a mismatch with the current situation and the desirable situation. In order to move from the current to the desirable situation a reorganisation is needed to make the operation as efficient and as effective as possible. A reduction of costs was mentioned most often. However, most interviewees stressed the fact that the desirable situation is not necessarily achieved through cost reduction only. Nevertheless, they felt that this time Schuitema N.V. needed to change rigorously if the organisation wishes to remain competitive.

Apart from the cost reduction the interviewees pointed out that centralisation of certain departments and functions is part of Schuitema N.V. (short-term) strategy to reduce the costs, streamline the organisation, and supply chain. By shortening the communication lines, the flexibility of the organisation increases and it allows Schuitema N.V. to react quicker to changes in the market. By centralising certain functions, Schuitema can reduce the hierarchical structure and limit the bureaucracy. As a result, cost reduction and increased flexibility are realized.

(35)

5.1.2. DOWNSIZING

This label focuses on the implementation of the downsizing. The label is divided into three dimensions. The first dimension discusses the organisational change and the implementation of the intervention. The interviews pointed out that all the interviewees were informed about the reorganisation either en masse - through a presentation given by the local site manager and a senior manager from head quarters - or individually, by their line manager. In these sessions, the employees were informed about the plans to centralize and to downsize certain functions and departments, as well as the number of people that would become redundant and when. However, due to delays and changes in the project the exact date that people would become redundant changed. Without any information what would follow. These actions created a lot of uncertainty. The change projects needed to be developed and adapted along the way. It only included a small group of (line) managers and did not involve employees. Based on the literature, a detailed change plan and involvement of employees is recommended.

The second dimension focuses on those areas that were correctly implemented. Most interviewees understand why this reorganisation is needed. With the disentanglement of Schuitema N.V. from Ahold changes were and are needed to keep Schuitema N.V. competitive. Furthermore, the aftermath of the price war in the food-retail sector is still affecting Schuitema N.V. The employees that were interviewed pointed out that they understood the urgency of the organisational change. They know that with the separation from Ahold various opportunities presented itself for Schuitema N.V. As one employee said: the acceptance for change is great. The goal is clear and therefore the necessity for this change. Overall, the interviewees understood why the organisational change and downsizing intervention are necessary.

(36)

5.1.3. POSITIVE IMPACT FOR THE ORGANISATION

This central label is discussed because it is an element of the conceptual model. However, this label has no influence on the survivor syndrome and for that matter cannot contribute to answering the research question. It completes the conceptual model. The benefits of downsizing are extensively discussed in the theoretical chapter.

5.1.4. SURVIVOR SYNDROME

This label focuses on survivor syndrome. The literature review points out that a defectively implemented downsizing intervention may lead to negative perceptions of the employees affected by the intervention. When analysing the central label we can see the consequences it has on the survivors.

The first dimension discusses the commitment of the workforce. What stands out is that reduced commitment is not an issue according to the interviewees. Most employees mention that they do experience other negative emotions related to the downsizing announcement. However, a steep reduction in commitment is not the case. Most employees tend to be very committed to the organisation and are dedicated to work hard and to put their best foot forward. The team effort is an important motivational driver. People do not want to let down their colleagues; the work needs to be completed. Reduced motivation is the second dimension. Most employees that do mention a reduction in motivation describe feelings like dejection, stress, distraction, tension, unanswered questions and fear for the future. These emotions are in line with the symptoms described in the survivor syndrome theory. Most interviewees argue that ambiguity and insecurity for the future triggers most of the negative feelings. Employees are waiting for changes to happen. Whether it is positive or negative does not necessarily matter. Because, at least they had some form of certainty.

The third dimension is described as a tiresome situation. Most interviewees do portray symptoms that can be identified as elements of the survivor syndrome. However, many of them do not feel that they are suffering from the syndrome in a way that it is seriously interfering with their work. Most of them acknowledge that they have negative perceptions and feelings because of the organisation changes and downsizing.

(37)

5.1.5. POTENTIAL NEGATIVE IMPACT FOR SURVIVORS

The theoretical framework shows that survivors can suffer from a series of negative feelings towards the organisation, their managers and their own job. The employees that were interviewed mentioned that uncertainty is the emotion that they experienced the most. All employees were aware that their respective departments were about to change, they knew whether they would become survivors. However, due to the uncertainty concerning the planning and unclear communication employees were unaware when the changes take effect. From the interviews, it becomes clear that any other emotion is a result from the uncertainty, an interviewee responded: uncertainty, what now? and most employees are insecure about their situation because they know their department is about to change. However when this is about to happen is unknown as well, double uncertainty

For a few employees the feelings of uncertainty can lead to other additional forms of negative emotions. A couple of interviewees mention a lower job satisfaction and lower commitment towards the organisation.

These pessimistic perceptions and feelings have a negative impact on the survivors. The survivors are the selected people with whom the organisation wants to continue. It is therefore important to keep these survivors as pleased and comfortable as possible. The line in the conceptual model that flows from the potential negative impact for survivors-label to the competitiveness-label, represents the negative influence unhappy survivors can have on the competitiveness that management hoped to achieve with the change. Currently, it is impossible to measure the outcome of the survivor syndrome on the competitiveness. The downsizing is ongoing. There is yet no data available regarding the competitiveness. However, the interviewees have answered questions about areas of improvement and regarding the execution of the downsizing and change project.

5.1.6. SURVIVORS STRATEGY MODEL

(38)

The first dimension relates to the clarity of the future direction. Only two interviewees perceived that the future goals of Schuitema N.V. were unclear. Overall, employees mention that the presentations about the reorganisation and downsizing were clear. The picture portraying the future of Schuitema N.V. was clear. The two employees that did have reservations commented largely about the procedure on how to approach this future vision.

The second dimension focuses on senior management. Eight interviewees commented on the role of senior management. They expect that senior management will do everything in their power to steer the organisation in the right direction. Senior management should lead, be open and honest about their operations. Furthermore, senior management needs to show their faces more often. The workforce wants to get the feeling that senior management is committed to this organisation and is engaged to see the organisational change through to the end. Currently, the interviewees miss this feeling of commitment from higher management. One interviewee compared higher management with the coach of a soccer team. They are not committed to the team for the long term. They just want to make some quick wins to be able to advance to a better playing and higher paying team. According to the interviewees, senior management is too distant.

(39)

The fourth dimension is line management. The interviews pointed out that line manager should be the person who informs the subordinates about the consequences of the changes. This person should provide transparency, take away obscurity and pay attention to the well-being of the employees. The interviewees were contented with the performance of their managers. Most of them understood that the managers were unable to answer questions. This however did not take away or reduced their discontent with the situation.

The final dimension is on the subject of planning. According to the interviewees, the planning is far from transparent. It is a black box. It is not clear what is about to happen or when things are about to happen. This makes it impossible to look ahead and prepare for the future. for us [the survivors] the planning is not transparent. We still have many unanswered questions, what is happening now is far from clear and that is exactly what is needed, since Schuitema N.V. is shifting course. The insecurity the employees experience is again something that contributes to the negative perception of the survivors. Employees would like a more concrete planning: a planning that is worked out to include all details and implement everything in one go. Not the phased approach which is applied now.

5.1.7. PERCEIVED FAIRNESS

(40)

interviewees. All interviewees find it important to know that their employer is committed to deal correctly with the redundant employees. All are aware that Schuitema N.V. offers guidance and assistance to the redundant employees. Although, only a small group actually knows what is included in the social plan.

5.1.8. LEARNING

(41)

6. CONCLUSIONS & RECOMMENDATIONS

This final chapter seeks to answer the central research question. To find to a comprehensive conclusion to the research it is important to answer the sub-research questions. These questions will assist in answering the central question. Besides finding answers to the research questions, this chapter will provide recommendations aimed at reducing the negative consequences related to survivor syndrome and downsizing. Furthermore, this chapter will include a critical review of the research and research design, the limitations and possibilities for future research.

6.1. RESEARCH QUESTIONS

The objective of this thesis is to answer the following research objective:

To what extent can Schuitema N.V. become more competitive by effectively managing the negative consequences (Survivor Syndrome) of downsizing?

In order to formulate an answer to this question a number of other questions needed to be answered first. The first question:

What criteria will be used to assess the influence of Survivor Syndrome on the relation between downsizing and competitiveness?

This question is answered with the construction of the conceptual model. The literature review provided numerous theories and examples that proved the intervening effects of survivor syndrome on downsizing and as a result on the level of competitiveness of an organisation.

The second question:

How will management and (surviving) employees be assessed and approached in view of the established criteria?

(42)

The third question:

To what extent is the survivor syndrome affecting the employees at Schuitema N.V.? Chapter five discusses the outcomes of the interviews. The results of the interviews that were designed to test the conceptual model are discussed in chapter five.

The fourth question:

In relation to the established criteria, how should Schuitema N.V. best approach surviving employees on motivational matters?

The final question discusses the recommendations. These address the following areas: communication, planning, higher-management and awareness for the social plan. The preliminary research and the literature review provided insights regarding the challenges associated with downsizing. Historical research has analysed the weak spots and disadvantages of downsizing. These include communication, planning and management (Thornhill et al., 1997). Furthermore, the survivors pointed out areas of improvement. They have firsthand experience and are a valuable source of information in analysing a change situation. Therefore, their input is studied through an analysis of in-depth interviews. This pointed out that perceived fairness has a significant influence in accepting a downsizing. Besides that, communication was a reoccurring element in the interviews. Therefore, these four areas of improvement were selected.

1. Communication

(43)

The research conducted in this thesis has shown that the communication towards the survivors is an area which requires improvement at Schuitema N.V. An increase of the frequency of communication is desirable. Simultaneously, improvement in communication shall have a positive impact on the behaviour of the survivors. There are numerous ways and methods to increase the frequency and content of communication within the organisation. In order to effectively increase the communication a combination of methods is recommended. By using several techniques, employees receive input and information regarding the organisational change in different ways, time and formats. Employees can then decide for themselves which method of communication appeals most to them. Based on the observations and experiences of the researcher, effectively using the intranet can make a difference. The intranet provides a number of advantages. For example: items can be stored and re-read, it makes it possible to reach a large group of people at the same time and it is an easy way to distribute up to date information. Additionally, sender and receiver do not need to be present at the same location or time and head quarters can reach multiple locations.

In sum, it is recommended to increase the frequency communication and send out crystal clear and consistent messages. Survivors should not get the opportunity to speculate about their situation, this will lead to increased levels of uncertainty.

2. Commitment Higher-Management

Many of the interviewees perceive a large distance between higher-management and themselves and this distance was not perceived as pleasant. The survivors want higher-management to acknowledge that they are in a difficult situation and personal appreciation should be expressed towards the survivors that are coping with the downsizing situation.

(44)

can express their commitment in person. Moreover, it provides an opportunity to answer questions that survivors might have and discuss their uncertainties. All this contributes to a smoother downsizing intervention and results in higher levels of competitiveness.

Apart from the above-mentioned appreciation and engagement, higher-management should convey another form of commitment as well. In the interviews have shown that the survivors are searching for some assurance that higher-management is personally committed to a long-term investment in Schuitema N.V. Currently, the visible commitment from higher-management is insufficient. Many of the survivors met a director just once, during the presentation of the changes. From that point on, higher-management did not appear anymore. Survivors would have appreciated at least some form of contact. Especially at the distribution centres, where there is a large physical distance between the headquarters and them. Increased commitment - which is made explicit by physical presence - and access to higher-management will eventually lead to a greater acceptance of the downsizing situation.

3. Everything in one go

The initial kick-off for the change from wholesaler to retailer was on February 28, 2008. Shortly, after the launch the different departments and teams were informed that they would be downsized. However, due to delays, changes in the planning, late decisions and unforeseen interruptions projects were put on hold or did not start in time. The time span between notification and the actual moment of change increased, up to the moment that the actual deadline passed and it became unknown when the changes would occur. The long time span, unclear planning and uncertainty contribute to the creation of a tiresome situation. This is a symptom of the survivor syndrome and could result in negative consequences for the survivors, and thus for the organisation.

Therefore, it is recommended to limit the tiresome feeling. Creating a transparent (downsizing) planning, which is up to date, understandable and widely available reduces the feeling.. Furthermore the organisation should keep stressing the advantages of the new situation; survivors will remain motivated if they are continuously informed about the new vision and the advantages (Sahdev, 2004).

Downsizing: Effectively Managing Survivors

Downsizing: Effectively Managing Survivors

Downsizing: Effectively Managing Survivors

PREFACE

ABSTRACT

TABLE OF CONTENTS

1.

INTRODUCTION

2.

RESEARCH DESIGN

3.

CONCEPTUAL MODEL

4.

METHODOLOGY

5.

RESULTS

6.

CONCLUSIONS & RECOMMENDATIONS