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This is an MIT Sloan Management Review article. In their 1998 Sloan Management Review article "Preserving Employee Morale During Downsizing," the authors maintained that strong organizations need to develop resilience so they could take advantage of new opportunities that arise during periods of economic retrenchment. They detailed four stages of downsizing programs: deciding to downsize, planning the program, making the announcement and implementing the program. In this sequel, the authors argue that downsizing programs aren't just about "doing more with less."They also provide opportunities to build a sense of trust and empowerment between managers and employees, which can provide significant benefits going forward. In addition to examining the impacts downsizing has on surviving employees and how survivors can influence whether a program is successful, the article explores three new areas that the authors have come to recognize as important to the success of downsizing efforts: (1) how organizations must become more flexible, (2) how they must become more innovative and creative, and (3) how they must improve their communications with stakeholders who are increasingly skeptical of downsizing efforts.

This is an MIT Sloan Management Review article. As companies continue to downsize, they need to consider how to maintain their employees' morale to realize gains such as higher productivity and more flexibility. Those who survive layoffs and the managers who must implement those layoffs frequently exhibit reduced commitment. Their trust in the company may be destroyed and they may feel powerless in the wake of top management's actions. The authors propose a four-stage approach to downsizing, gleaned from interviews and surveys, that will retain workers' trust and sense of empowerment. First, consider downsizing only as a last resort. Also downsizing should be part of a clearly defined, long-term vision that fits into the company's overall strategic plan. Second, consider all stakeholders' needs--survivors, laid-off employees, the community, local and national press, and any affected government agencies. The company should form a cross-functional team to represent all stakeholders' interests. Third, at the announcement stage, senior managers should explain the necessity of the downsizing and how it helps the firm in the long term. The fourth stage, implementation, is the most important. Management should communicate frequently and be open and honest. The company should do its best to ensure that laid-off employees are employed elsewhere and offer them generous benefits packages. It should seek remaining employees' ideas about restructuring work processes and provide any necessary training.