It is better to do your calculations thoroughly and then retrench in one fell swoop, than make multiple cuts as things worsen, says Dr Stewart Black, executive director of the Insead business school's Centre for Human Resources in Asia.
'By the second cut, remaining employees will wonder if they will survive the third or fourth round. The impact is counter-intuitive. Instead of working harder to keep their jobs, they get anxious and lose concentration.'
Because misery loves company, they will spend all their time commiserating in the hallways. Productivity, he warns, will plunge further.
2 BEWARE THE SURVIVOR EFFECT
'Employees are human beings first, economic animals second. If you didn't get cut, but your friend does, it's your friendship heart that kicks in first,' he says.
According to research done on car companies where many were let go in the 1980s, for companies where job cuts were perceived to be fair, productivity did not go down or up. At best, there was a neutral effect.
But where people felt their dearly departed were unfairly targeted or treated, they slowed down their work to 'exact revenge'. He says: 'Even though it was not in their own economic interest to do that, people's hearts obviously won over their heads.'
As such, the 'why' and 'how' of retrenchment becomes paramount. 'Was it because the person was of lower seniority or belonged to a poor performing unit? Was there prior consultation or did they just come in one morning and get escorted out by security?'
If a company is seen to be reasonable, even if not generous, productivity goes back to neutral. 'Quite frankly, neutral is good. In a slowdown, the last thing you can afford is any further drop in productivity.'
3 RALLY THE REMAINING TROOPS
'Like a sports team, you need to inspire the survivors to fight on. When you are losing, many players feel like mentally and emotionally giving up. Once they do, the game is over,' he says.
'However, the rally cry must be based on reality. If you are down by 50 points in basketball with one minute to play, promising the players they can win the game if they try just doesn't ring true.'
In some business cases, the goals need to be more realistic.
'For example, General Motors recently announced that for it, winning would be surviving the next two years. For many companies, winning could be just surviving. In other cases, you can help employees see that the actions being taken now can help the company emerge from the recession even stronger.'
This article was first published in The Straits Times on November 26, 2008.
