Downsizing: Key considerations Mike Sweeney Steve Macaulay In today’s business climate, managing downsizing and plant closures is becoming a common and important issue. Now, in the studio today is Professor Mike Sweeney. Now, Mike has had a lot of firsthand experience of watching, observing and noting some of the key points about managing downsizing and operations closing down. Now, Mike, let’s have a look at this; what is your take on downsizing and closure? Mike Sweeney Well downsizing and closure are essential activities to restructure an organisation so they become more competitive, so we can expect a lot of this to continue. It is a natural progression in terms of the development of an organisation. Steve Macaulay One of the key things with your operational background is the idea of retaining corporate reputation and managing the operation smoothly – can you say a bit more about that? Mike Sweeney Yes, when a company makes an announcement to close or to downsize its operations, it has a big impact upon the local community and on the customer base and the supplier base. So essentially when an organisation decides to make such a decision it must manage the reasons, it must inform the reasons why such a decision is necessary. Steve Macaulay So don’t just pay attention to the people side, remind yourself about the operational side, remind yourself about the necessity for keeping your reputation strong? Mike Sweeney Absolutely, because closure or downsizing is a balancing act; we must protect the reputation and the legacy of the organisation and we must consider the impact of the decision upon those people who are employed within the organisation. Steve Macaulay You have developed a five stage model and that is number one on the list, make sure you understand the impact on the strategy of the business, on the reputation of the business. The next one, the stage two, was managing communications. Now, I can clearly see that is important. Mike Sweeney Yes, the communications consist of two forms – external and internal. External is to inform the outside world of what decision has been made and the reasons for that decision. Internal is to inform the employees and also the supply base of the reasons why the organisation is downsizing and why that particular plant has been chosen, which many organisations are not very good © Cranfield University www.cranfieldknowledgeinterchange.com 1 Mike Sweeney
at informing. Steve Macaulay In these days of Twitter and Facebook and so on, what are the implications of that in terms of communications? Mike Sweeney Well that technology provides an opportunity; you can either use it to better inform everybody inside the organisation about the decision and the reasons why the plant has been chosen for downsizing or closure. Or you can ignore that and it will be exploited by others – those people affected – and will be used for propagation of rumour and all sorts of negative reasons. Steve Macaulay And you have actually seen that happen, haven’t you? Mike Sweeney I have and the organisation where this has taken place is beginning to recover from the consequences of that. Steve Macaulay So, make sure you take advantage of the means of communication, otherwise other people will? Mike Sweeney Yes, absolutely. Steve Macaulay Now, the next one, which I guess is more predictable, you have got to manage the actual closure well. What does that entail? Mike Sweeney That is essentially a project management activity. It is very much operations; it is setting the vision for the closure, the timing, the run down of operations, the reduction of employees and informing employees of their role in the future. So it is creating a clear vision for everybody about the run down or the closure process. Steve Macaulay If we look at the people side of this, there is a stage that you have clearly identified that says, manage investment in employees – can you say a bit more about that? Mike Sweeney Yes; this is where the cost of closure or downsizing will have the greatest impact. If you don’t manage the employees properly, it will be a more costly process. Essentially it is about counselling them about what is happening and making sure that one understands the emotional changes that people go through on hearing such an announcement like a closure or downsizing or redundancy. Steve Macaulay Some people would say, that’s all very well, but we have got a business to run here, we haven’t got time to do that kind of thing. Mike Sweeney Well, if you don’t handle this properly the continuity of the business will be very stalled – really, stalled – and so attention to these sorts of details and understanding – in particular counselling and training people for displacement and determining the appropriate separation packages – is vital to the continuity of operations. © Cranfield University www.cranfieldknowledgeinterchange.com 2 Mike Sweeney
Steve Macaulay And you observed this at close hand at Luton when they closed the Vauxhall plant, didn’t you? Mike Sweeney I did. Steve Macaulay And one of the key things from an operational perspective is about managing continuity, can you say a bit more about that? Mike Sweeney Well the continuity there [at Vauxhall] was that they wished to continue to produce for another fifteen months and so they had to retain some people in a reduced operation, while at the same time managing the transfer of others to another plant. So it was a very complex process. The needs of those two people are different; the people that you are retaining, you have got to develop their skills so they can take on a greater number of roles; the people who are transferring, you have got to get them to settle in the new sister plant. So those are two different people management activities, both vital to the survival and performance of the business. And at the same time, of course, you still have to manage the performance of the company. Steve Macaulay So, if we were to sum up then about the dilemmas, the difficulties, the opportunities, how would you describe closure and downsizing? Mike Sweeney A balancing act; it is managing the legacy of the organisation, its reputation and its business performance. And it is managing the people who are either retained by the organisation or will separate from them. Steve Macaulay Mike, thank you very much indeed. Mike Sweeney A pleasure. © Cranfield University www.cranfieldknowledgeinterchange.com 3