College Quarterly
Winter 1996 - Volume 4 Number 2

Leadership: Transforming a Downsizing Organization Into a Learning Organization Part 1.

by Erin Jones


Takeovers, marketplace pressure, changing technology and regulatory actions are causing many private and public organizations to re-examine their structures and make significant changes, often resulting in corporate downsizings which have a negative impact on both these organizations an the individuals who serve them. To survive and thrive in the long term, it is essential that organizations adapt, learn and change. While commonly viewed as destructive, downsizings provide opportunity for the corporate entity to transform itself into a viable learning organization, in a process which benefits both individuals and the organization itself.

This paper asks "what type of leadership is necessary to transform a downsizing organization into a learning organization?" and addresses this question through reviewing relevant literature and reporting interviews with individuals demonstrating leadership within downsizing organizations in the public sector.

Relevant Literature

Downsizing has become a business trend in North America over the last decade, directly and/or indirectly impacting virtually all public and private sector organizations. These organizations are seeking ways to effectively reposition themselves and gain competitive advantage within a rapidly changing economic and technological environment.

As to whether downsizing a company is an effective strategy for improving profitability and efficiency, that is debatable. Some studies indicate that staffing cutbacks affect not only employee confidence and productivity but also product higher quality, customer satisfaction, and sales (Smudde, 1993). But a survey of the success of recent downsizing efforts found that 40% of businesses failed to improve profits as originally planned, and furthermore, 83% ended up rehiring to replace 10% of employees cut during the restructuring (Cooper, 1996).

The financial advantages of downsizing may be negated by the demoralizing the remaining workforce, and those employees are said to be more likely to feel anger, apprehension, resentment, mistrust and depression, all which can effect job performance (Bridges, 1988). Others have viewed downsizing as a "positive strategic planning tool" in preparing organizations to deal with the challenges the next two decades have to offer (Smith, 1986), and an opportunity to revitalize the organization (Appelbaum, Simpson and Shapiro, 1987).

A review of select literature on leadership in a downsizing organization uncovered a variety of strategies. One case study examined the unsuccessful efforts to downsize a University. An undefined vision of quality, a strategy ill-suited to the institution's culture, and failure to encourage faculty involvement were pointed out as the main causes of this initiative failing to gain support (Kelly, 1993).

Effron and Concannon (1995) have described a strategy they used to restructure the Cincinnati Public Schools 1991-2 to achieve a 50% staff reduction. Setting clear goals, redefining organizational roles and responsibilities, and offering incentive packages and support programs to manage job change and redundancy are key steps they suggest to achieve successful downsizing. But while they recognize that a new culture will evolve after these steps have been implemented, they do not address how to support this transitional period, or how to facilitate its positive development into a learning environment.

Recommended elements in downsizing in a College environment include: maintaining academic quality, protecting job security, deciding what to cut, and determining student/faculty ratio (Smith, 1986). Appelbaum, Simpson and Shapiro (1987) offer similar strategies which include formal planning, defining the future organization, pinpointing the affected groups, keeping communication open, creating placement opportunities, and providing staff recognition and help with career planning in conjunction with staff terminations. They also argue the necessity for follow-up counselling with surviving employees, to reinforce their perceptions of value to the organization, clarify their expectations and help manage their adaptation to changed roles.

Peter Senge (1994) describes a "learning organization" as one which motivates key teams of individuals to embrace a constant state of change, based on potential rewards and opportunities rather than threats and punishments. In this environment people constantly strive to develop their capabiities, patterns of thinking and working are continuously challenged and modified, and learning is a clear and organizationally-validated objective. Senge says that an organization with this kind of culture can achieve a competitive edge through the discovery and innovation it encourages.

The majority of studies focus on intervention strategies during a downsizing but few look beyond cleaning up problems to create a longer term vision. To identify strategies to lead the transformation of a downsizing organization into a learning organization, the following three cases were looked at through a number of interviews.

Case Study One:

The Ontario Ministry Of Consumer And Commercial Relations

The Ontario Ministry of Consumer and Commercial Relations faced the task of identifying ways to provide service at lower cost. During the period between 1990 and 1995, the Ministry was downsized. The budget was cut by a third, and revenues by one half. Glenna Carr was a long-time (since 1974) public service manager with a track record of managing turnaround situations when in 1989, she became Deputy Minister, the senior civil service position in the Ministry. She found that only a few people were involved in the Ministry's long-term planning, and a formal strategic plan was only "in progress." Carr began by directing all organizational levels to become more involved in looking at the future of the Ministry, and steering committees were founded to report on the organization. She says that "It was quite an eye-opener for a lot of people. Over 1,000 people and 44 offices became involved. When we developed the strategic plan, most people felt ownership and contribution. Some worked on immediate gains and some on longer term goals."

Along the way there were the a number of cynics and external changes which presented new challenges. As Carr indicates, "Half-way through we went from the Liberals to the NDP. We shared our progress with the new government and they were quite excited by it. It touched our clients and employees. We showed we believed in it and the new government stood by it. It stood the test of time." Carr described some of the Ministry's needs and strategies taken, "We were working on bringing private sector expertise to the automated land registry system. We needed capital and formed a private consortium to carry it through and instead of a fifteen-year time frame, we took only seven years. People felt it was a real achievement."

When it was seen that this strategic direction would endure with the election of a new Ontario government which had promised to downsize its bureaucracies, that removed much of the Ministry staff's initial cynicism and helped foster the recognition that this was a significant opportunity to better the performance of the organization. To meet the transitional challenges, the Ministry training, on-the-job training opportunities, secondments, and mentoring were provided as support and development mechanisms. Employees had a variety of options to choose from. Carr focused on giving people a sense of enpowerment and an opportunity for multi-skilling.

Carr stresses communication as an essential factor, "People wanted certainty. There were opportunities for people but we could not say for sure what people would be doing, so we made long term commitments to train people and provide opportunities. But we said that there would be less positions." She also emphasizes the importance of using a variety of communications - newsletters, e-mail to learn about changes and give feedback, and face-to-face meetings. And, Carr says, managers were required to meet with employees for such transition discussions, and these communications were maintained for more than 2 years."The signal was we would look after you. Carr says that a lot of Ministry offices were moving locations and we were active in finding them [staff] jobs in other ministries. There was a lot of passion and commitment. It was because people were so involved in developing the vision."

In addition to active placement services, there were a number of services made available to staff in transition: counselling, career placement advice, job interview workshops, retraining and tuition assistance. Carr notes that "We looked at required skill sets and got other Ministries to change or adopt credentials so employees would fit. We had a very active 'brokerage' system. People got on the phone and advocated it. It built a sense of an organization that cares about people. A lot of positive reinforcement was created when people got placed early, and we celebrated it in our newsletters".

Over a period of time the commitment, energy and motivation developed across the organization to meet the downsizing challenge became a way of 'doing business' at the Ministry, but Carr is careful to point out that it was not a quick fix. Her advice is that people need to be involved and get the sense that they can influence things. In addition, they need to see that the organization is committed to their welfare. As Carr says, "Just remember it could happen to you. Behave in a way that you would like to be treated and make it equitable. People are not expendable, if you give people a change to learn and adapt, they will. It helps to plan ahead and not try to do things instantly. Do things in steps and provide that information to people so they can climatize. If you can anticipate, it minimizes shell-shock."

Judith Wolfson, a lawyer with 10 years experience in the senior levels of government and Deputy Minister at the Ontario Ministry of Consumer and Commercial Relations from 1991 to 1995, provided additional insight into the Ministry's downsizing experience. "The goal was not to keep staff. My goal was to treat staff well and help them understand that change was being thrust upon them, but not to put their heads in the sand. We were in the forefront of the changing environment and created a climate to help them embrace it and not hide it. I believe that a victim mentality does not help anybody."

Wolfson confirmed the importance of talking to staff about the new organizational reality. "I am a firm believer that I should not have knowledge about someone else's life that they do not have. My first step is to bring folks along to understand what is required and how we are going to do it, so they feel empowered regarding their own lives, the next step was to get the staff involved in looking at a better way of providing service - smarter, better, faster, cheaper. They needed tremendous coaching to get them to this point of group problem-solving."

Team learning experiences created a learning organization allowing people at all levels to participate and come up with solutions. Both Carr and Wolfson point out this team approach became a way of doing business. Wolfson goes further to say that modelling this behaviour is important to a leader's credibility. "It shows that the leader is committed instead of posting flavours of the month. We created teams to allow people to participate and had no difficulty getting participants. We encouraged union participation and that really made a difference. I challenged them to come up with solutions, and I had credibility. "

Carr and Wolfson talk of the positive results of open communication and group involvement, focusing on: technology, education and training, recognition, and communication. Proactive ideas were developed by staff to bring in revenue or reduce costs. Recognition programs were put in place to reward these ideas. A learning fund was created, anyone could apply for a project on learning, and criteria were set for team learning and skill sets. "Learning became - as opposed to training - a priority. We had a team that kept the direction and priorities" says Judith Wolfson.

While downsizing created new opportunities and innovations, the reality is that many Ministry employees were declared redundant and many had difficulty coping, even while voluntary early retirement packages and incentives were used to provide support and minimize the need to terminate staff. Despite these measures, "Even though the majority got an enormous amount out of it," Wolfson says, "lots of folks had problems. We were changing the contract - there was no longer a contract for life." However, Carr and Wolfson both maintain that the result of the process was that the Ministry's efforts became more cost-effective and better service was achieved. Partnerships were created with the private sector, profits went up approximately 30%, and costs went down 30%.

The principles Wolfson feels are necessary to lead a downsizing organization toward a culture which places a priority on learning, include openness, setting high demands for excellence, awareness and communication of the reality of the marketplace. She says that "Leadership must be visible. You must lead from the top, walk the talk, do not be seen as a flavour of the month, measure the results and hold everyone accountable for their work." And she adds, "Public servants should be able to ask themselves if they are doing something they could fairly bill for. Integrity is above and beyond everything else."

While Wolfson is proud of the Ministry's results and cultural transition, she cautions others not to think that the strategies used in this experience could be used elsewhere. "I was pleased with the work that was done; however, this would not be successful in all environments. In another situation, I would adopt the same principles, but I could not have had the same flexibility. We were very lucky: I was in the forefront of doing this, and I had more flexibility in placing people in employment opportunities and getting people into the private sector. In the present circumstances, I could not do it the same way - opportunities are different now."

Click here for Part 2 of this tripartute article.

Click here for the References which is at the end of the Part 3.

Erin Jones, B.Sc.

Erin Jones is a Training and Development Consultant with the Independent Order of Foresters in Don Mills, Ontario.


• The views expressed by the authors are those of the authors and do not necessarily reflect those of The College Quarterly or of Seneca College.
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