Restructuring can leave retained staff feeling insecure

If humans struggle with one thing above all else, it is change. We may live in a world in which nothing stays the same for long, but that doesn’t mean we have to like it.

While change can be positive or negative, many of us struggle to see it as anything other than a threat. And while most of us quickly adapt to it when it occurs, the idea of change can lead to stress and anxiety.

Given we spend so much time at work, it’s not too surprising to discover that changes in the workplace can be difficult to deal with. Many of us still define ourselves through our work and so anything that affects this can be devastating.

A new comprehensive study shows just how devastating it can be. The study, which involves researchers from the University of East Anglia's Norwich Business School in England, and the Netherlands Organisation for Applied Scientific Research, shows that restructuring in organisations has a largely negative effect on the welfare of employees, regardless of whether there are job losses.

Published in the journal Work and Stress, it reviewed 39 studies on restructuring published over 12 years and involving organisations in both the public and the private sector. Both the short- and longer-term impact of different types of restructuring, including downsizing, closure, mergers, change in ownership or privatisation, or a combination of more than one type, were examined.

The review concludes that restructuring tends to have a detrimental effect on employee wellbeing, although it notes that the extent of this can vary across organisations depending on the type of restructuring undertaken and the way it was managed. Indeed, a few studies even found that restructuring could lead to positive changes both at an individual and structural level over time.

However, almost all the studies reviewed showed negative changes both during the restructuring and in the post-restructuring period. It identified non-manual workers and permanent employees as groups likely to be particularly affected by structural change, with those on low income and with lower qualifications also vulnerable.

"The most important insights that organisations need to be aware of is that, even without layoffs, restructuring has a mainly negative impact on employee wellbeing," study co-author Karina Nielsen, a professor of work and organisational psychology at Norwich Business School told The Irish Times.

Negative impact

“Traditionally, people staying in organisations after layoffs were labelled ‘survivors’, but our review of the literature shows that restructuring also has a negative impact on those who stay,” she added.

While organisations typically rush to provide support for those being made redundant, Nielsen and her co-authors also called for this to be extended to those left behind and for more training to be given to those involved in restructurings.

Nielsen said restructuring is a significant characteristic of working life, with a large part of the working population likely to face at least one, but probably more such episodes, during their career. Given this, she believes that understanding its effects can help the process be better managed.

“Our review does not point to any particular type of restructuring creating more damage than others but there is some research that points to the individual’s perceptions of the process and its outcomes.

“Where employees feel that the change has led to a positive outcome for them they report better wellbeing after the event. What can make them feel that it is positive is if they have had the opportunity to influence the process and feel that management, and in particular senior management, have also supported it,” said Nielsen.

“The characteristics of the restructuring process, such as fairness of procedures, communication and change management in general have been found to have an impact on worker wellbeing. Some groups of workers react less negatively, for example if they have more chance of influencing the process. The key point is how you manage the change,” she said.

Sarah-Jane Cullinane, assistant professor in human resources management and organisational behaviour at Trinity College Dublin isn’t surprised by the study findings.

“Previous research tells us that all forms of organisational change, whether it involves downsizing or even expansion, can be considered a threat by employees. How severe the impact is on their health depends to a greater extent on how the process is managed than the type of change itself,” she said.

“The key features of any change that can cause stress or impaired health for employees are increased job insecurity and perceived loss of control, which can occur even when there are no plans to shed jobs.”

While much of the focus on restructuring is often centred on negative aspects such as downsizing, Cullinane notes that what can be seen as a gain for an organisation may also be perceived as threatening to staff members.

“Even during expansion, existing employees can feel threatened by their new colleagues and disturbances to the balance of power they’re used to,” she said.

“An extensive study of the Danish workforce published in recent years found that changes implemented by organisations to increase co-ordination and co-operation across the firm were especially harmful for employees in terms of stress over other forms of change,” Cullinane noted.

“The reason for this were that such changes impact employees at all levels and are seen to lead to new sources of authority, to changes in the number of people employees need to communicate and co-ordinate with and the nature of this co-ordination,” she added.

According to Keith McCarthy, director at Mazars Ireland human resources consulting division, communication and poor management are among the factors that impact whether restructuring goes well or not. For him, communication in particular is key.

“There’s a small group of people in any organisation who are involved in planning a restructuring and they get a good chance to think their way through it all and to come up with a rationale as to why it is happening.

“But while these individuals are given an opportunity to process the change that is coming, others often aren’t.

“This means that the reasons why the restructuring is happening don’t necessarily translate down to those who will be most impacted by it so they can end up feeling that none of it makes any sense,” he said.

“There are a lot of positives that can emerge out of a restructuring and it’s also worth remembering that a lot of things change but there is plenty that stays the same and organisations need to be able to ensure that employees are aware of this,” McCarthy said.

Workers ignored

Part of the problem, as he sees it, is that typically when a restructuring takes place, the focus tends to be on the financial and legal aspects rather than on the impact on workers.

“From the outside looking in, it can look as though a restructuring has gone well but internally there can be a lot of legacy issues connected to it. The ability of a leadership team to think beyond the practical aspects and at how a big change will affect staff is critical,” he said.

In recent years and partly as a result of the global economic crisis, many organisations have engaged in restructurings. With many experts expecting them to continue to be a feature of the modern workplace, more attention needs to be focused on how they impact on employees.

The good news, if there is any, is that studies have shown that Irish employers have generally performed well in terms of ensuring that staff are kept in the loop when a restructuring is taking place.

“Research which looked at managers in Ireland during the global financial crisis found that most tried to strike the balance between addressing short-term cost pressures by reducing payroll and the importance of maintaining employee commitment and loyalty through intensified communication and management efforts,” said Ms Cullinane. Employees will be hoping that, no matter what the state of the economy, organisations will continue to do so in the years ahead.