There are essentially three organisational strategies to achieve downsizing (Cameron et al, 1991, 1993). These are:
- Workforce Reduction Strategy
- Organisation Redesign Strategy
- Systematic Change strategy
To evaluate how changes were made at BT, it is important to understand what the strategy for change was. The evidence presented in the case study suggests the presence of all three strategies. Each strategy will now be looked at.
3.1 Workforce Reduction
This strategy focuses simply on reducing the organisations headcount. BT certainly engaged in workforce reduction, decreasing its workforce by over 100,000. This was achieved in several stages starting with Project Sovereign in 1990. The period from 1991 to 1995 witnessed significant workforce reduction through voluntary redundancies and other methods such as natural wastage. BT’s experience of Release ‘92 led it to modify its approach in subsequent programmes.
Although it would appear that BT managed and implemented its workforce reduction policy well, it must be pointed out that the exclusive use of this method can lead to diminution rather than an improvement in organisational performance. In a study by Mishra and Mishra (1994) It was found that organisational performance was adversely effected in relation to both cost and quality where this strategy was heavily used. As it will be shown in sections 3.2 and 3.3, BT did use other strategies for downsizing but it would appear that the workforce reduction method was at the forefront of the downsizing strategy.
3.2 Organisation Redesign
This involves elements of delayering, eliminating areas of work and job redesign, so that the amount of work is reduced. In the case study there is evidence of the use of such organisation redesign strategy. Project Sovereign for example was designed to promote a more customer focused culture through significant restructuring and de-layering. In 1991 27 geographical, each with up to 12 management layers, were restructured to 3 divisions accompanied by flatter organisations.
But did such structural change bring about the desired customer focused culture? Or did it simply follow the broader strategy of reducing headcount? Certainly it would appear that considerable effort was made to reduce the impact of downsizing through cultural and structural change. The effectiveness of such programmes will be looked at later in this report.
3.3 Systematic Change
Systematic change strategy as its name would suggest, is a longer-term approach intended to promote a more fundamental change that effects the culture of the organisation through promotion of employee involvement and adherence to a continuous improvement strategy. The case study shows that BT sought to introduce long term changes to the way work was conducted through the use of new technology, culture change programmes, etc.
It can also be seen that downsizing was proactively planned. BT staged its downsizing over several years, which allowed for a process of incremental learning and policy modifications. Release ‘93 for example, did not permit volunteers from everywhere in the organisation. In addition, the leaving period was extended to two years to minimise the impact of downsizing. Such decisions were as a result of lessons learnt from Release ‘92. Stakeholders such as the trade unions were also involved in strategy formulation. However, even with this level of proaction on the part of BT, problems still arose. For example, release’92 led to some reactive behavior given the unexpectedly large number of volunteers.
In the following sections the process of change will be looked at in more detail.
- Positive Actions of Senior Management
There is no doubt that through downsizing, BT managed to reduce cost and improve productivity. In order to understand how senior management achieved this it is important to first look at various models associated with implementing change. One model is the 3-Stage Model of Change by Kurt Lewin (1951). Lewin identified 3 stages that any organisation has to go through for any level of change. These are:
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Unfreezing. This is the recognition that there is a need to make change. Unfreezing involves advising employees about the change, planning it, organising it, scheduling it, arranging training.
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Moving. This is the implementation stage, where the success and flexibility of the planning, organising etc will be tested.
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Refreezing. This is the follow-up stage, making sure the change which has occurred, is recognised and is now a normal part of the functioning of the organisation.
Examining the case study would suggest that these stages were present and were implemented by management. Management had clearly planned the downsizing programmes and communicated the need to change to its employees. Project Sovereign in 1990, Release ’92 and Release ’93 were highly planned affairs and although not trouble free they did seem to be well drawn out. Moreover, in trying to unfreeze the organisation, a range of redundancy terms were offered which were generous and early leavers attracted additional payments. Line managers played a central role in promoting the release schemes and received training to be able to cope with this event. Throughout the moving stage services such as outplacement, retraining, financial advice etc were offered. In trying to refreeze the organisation new structures and working practices were developed.
Another model which can be used here is that of Christopher Mabey. The 3 stages of change which Mabey describes are shown in the diagram 1 below:
Figure 1. Implementing Strategic Change
This system suggests that the transition phase of the change process requires detailed consideration and planning. It is better to have a second rate strategy and a first rate implementation that the other way round. Once again BT seem to have followed this recommendation. 3 important issues were dealt with by senior management. These were resistance to change, need for control and to build power. As described earlier, resistance to change was tacked by a number of ways. Clear communication and reward systems for leavers generated good motivation for change. So much so that the level of applicants for voluntary redundancy was much higher than expected for Release ’92. Management also maintained a level of control by using feedback mechanisms to continuously monitoring the change process and modify and restructure the downsizing process.
Thus it can be seen that in order to achieve their targets, management at BT paid particular attention to the process of downsizing. This process was well planned and executed. However it can be argued that the strategy driving the process was not well formulated. This meant that in the Lewin model for example problems occurred during the refreezing stages. Long term problems were exhibited when “rebuilding power” in the Mabey model. The following section will investigate this issue further.
5. Management Shortcomings
Throughout the downsizing programme BT experienced many negative reactions. This section will discuss some of these issues as raised in the case study and will show what could have been done to alleviate or lessen such reactions.
Fundamentally, effective implementation of change is best carried out through 3 key elements. It is best to examine BTs’ approach within this framework . These elements are namely Commitment, Co-ordination and Competencies.
5.1 Commitment
Commitment can be achieved through the joint diagnosis of business problems and the development of a shared vision of how to achieve success. At BT there seemed to be little commitment towards long term strategies for success. Most of the effort was towards what is now regarded as short term reduction of costs. Key strategic areas such as the retention of valuable employees with specialist skills were only considered much later in the downsizing process. This in itself led to complex survivor reactions which will be talked about later. Another area of high strategic importance was the level of customer service. Evidence suggests that customer service deteriorated quite rapidly. This is because when achieving the vision for success little effort was made to explain and investigate how commitment to customers can be obtained alongside the downsizing programme. The realisation that key staff and structures which could support the requirements of the customers were missing, caught management by surprise. Even though early on in the programme there seemed to be the understanding that the organisation must to be more customer focus, there is no suggestion of any plan as how to achieve this.
Thus it can be seen that a lack of effective strategic HRM planning from the start, led to difficulties later on. By the time management reacted to rectify this considerable damage was done to the structure and working practices for those who remained. Survivor reactions plays an important part in the level of commitment given by the individuals. Many felt that they were asked to perform the job of several former colleagues. If management had designed more effective working structures for those which remained, such feelings would have been much less thus positively effecting employee commitment.
5.2 Co-ordination
Co-ordination of resources is required to enable the new vision and move it along. Given the size of BT this element of implementing effective change is of great importance. The case study shows that considerable effort was made to co-ordinate and move forward the process of cost cutting through downsizing. Reduction of headcount was well organised and executed. However earlier in the programme there was little thought given to retaining useful employees. BT used the method of voluntary redundancy to achieve its target of reduced costs and improved productivity. The outcome was a lack of control, which resulted in a mismatch between actual and required human resource profiles with BT. Key skills and competencies were lost. The voluntary nature of the downsizing undoubtedly helped to remove many potential issues which theories point out as resistance to change. However it can still be seen that this led to some complex reactions from the staff which remained. In particular, the exercise of selection criteria in relation to Release ’92 created feelings of negative inequity with some survivors feeling angry that they were not being released. So what should BT have done? Paradoxly, perhaps senior management should have exercised more control through targeting leavers directly to reduce the possibility of this incidence of inequity since expectations would not have been raised about the possibility of leaving. Thus, the voluntary nature of the redundancies did two important things:
- Lost key employees with key competencies.
- Created complex negative survivor reactions.
It can be argued that the above led to the impairment of intended long term objectives of increased productivity and reduced costs. Now, it becomes clear that senior management should have approached downsizing with a more ‘bottom-up’ programme. In other words management should have considered the process from the perspective of the individuals and more importantly the workgroups involved. This, for example, would have enabled management to realise the lack of resources to deal with customer service much earlier. Which in turn would have provided more time to deal with this and other potential problems.
5.2 Competencies
The use of the workforce reduction strategy, which seemed to be the dominant strategy at BT, did to a degree lead to the loss of certain organisational competencies. There is no evidence to suggest BT recognised this weakness in its strategy or that it had plans to recover or develop new skills and knowledge to operate the new system. Incredibly, BT trained those who left, and those who were going to implement change (line managers) but not those who remained. Once again this points to a commitment to the job at hand, downsizing, and not to enabling the organisation to operate the new system effectively. At the very least there should have been some form of training for surviving staff to enable them to cope with the changes and adapt to the new structure and work practices.
6. Conclusion
Given the changing environment BT was operating on, change through downsizing was a necessary choice. But as with any change, downsizing can always be done better or worst. This report reviewed evidence about what was done right and what could have been done better. It appears that in managing: Resistance, Control and Power (see section 4), they dealt with resistance the best but when dealing with control and power the level of effectiveness became worse.
One of the best dealt issues in the transition process was the way management handled resistance to change. Appendix A outlines some core reasons why individuals resist change. Such resistance can often be a major barrier for implementing effective change. But in the BT case study there was little evidence of any such resistance to change. This is undoubtedly due to effective practices of the management team. The control issue or the management of the transition was dealt with fairly well, but the unforeseen effects of change were not realised until later on in the transition. This created problems as outlined in Section 5.
So what was the level of effectiveness of implementing change? It has been suggested that organisational change is effectively managed if:
- The organisation has moved from one current state to the future state. In the case of BT, new structure and culture was clearly implemented. Thus from this point of view at least, change was effective.
- The functioning of the organisation in the new state meets expectations. Well, the case study offers little discussion regarding future productivity levels. But common knowledge from BTs performance in months which followed the downsizing, suggests that these expectations were not met.
- The transition is accomplished without undue cost to the organisation. Once again the case study offers little talk regarding cost of downsizing in monetary terms. But whilst it is clear that BT put tremendous amount of resources into this downsizing program, there is no evidence to suggest it was undue.
- The transition is accomplished without undue cost to the individual organisational member. Here if negative survivor reaction can be thought of as undue cost then BT certainly endured and absorbed considerable costs.
BT managed to implement a large scale downsizing program. And given the complexity of this change for such a large organisation it can be concluded that the programme was handled quite well. The process was not trouble free and if BT were to turn back time and relive the changes, the new knowledge gained from its experiences will allow a much smoother transition this time round. An interview with one of BTs corporate personnel practitioners in the mid 1990s illustrated that the company had achieved a significant amount of organisational learning and that it was probably one of the most sophisticated downsizing companies in the country.
Bibliography
Books:
1) Mullins L Management and Organisational Behavior 5th Edition
Pitman Publishing (1999)
2) Burnes B Managing Change 3rd Edition
Prentice Hall (2000)
3) Thornhill/Lewis/ Managing Change, an HRM Strategy Approach
Millmore/Saunders Prentice Hall (2000)
4) Torington/Hull Human Resource Management
Prentice Hall (2000)
Papers:
- Downsizing And Organizational Culture
Thomas A. Hickok Bussiness.com
2) Managing After Downsizing
John Shepler Bussiness.com
Appendix A
Resistance to Change
People can resist organisational change for a number of reasons:
Self-Interest
Where someone has achieved status, privilege or self-esteem through effective use of an old system, they will often see your plan as a threat. Where the plan threatens paid overtime, people will naturally fear the impact on their bank balance!
Fear of the Unknown
People may be uncertain of their abilities to learn new skills, their aptitude with new systems, or their ability to take on new roles.
Conscientious Objection or Differing Perceptions
People may sincerely believe that you are wrong. They may view the situation form a different viewpoint, or may have aspirations for themselves or the organisation that are fundamentally opposed to yours. It is worth trying to understand their position, however once you have done so and formed an opinion, do what you think is right. Remember that different people in different jobs will have different perceptions of a situation: a sales manager will almost inevitably have a different view of the right level of commission payments to salesmen from the view of a finance director!
Suspicion
People may not trust you.
Conservatism
Organisations or people may simply be opposed to change. This can result from a feeling that everything is OK, from loss of touch with customers, from lack of exposure to better ways of doing things, or from slowness of decision making, etc.
