Reducing Staff

In today’s economy, “downsizing” has become a feared term within the workplace. Just a mention of the word within earshot of staff is enough to trigger panic through the office grapevine. It is an aspect of business that every organization would like to avoid, but the truth is that more organizations, even those who thought they would never have too, are downsizing.

There is the notion that the healthcare industry is secure, or “downsizing” safe. People will always need medical services, thus the demand for healthcare will not suffer even in a bad economy. Unfortunately this is not the case because of a variety of factors.

One being that the demand for healthcare services IS actually affected by economic conditions. Because of financial constraints, many people have dropped their medical insurance plans, or have incurred higher cost sharing responsibilities from their insurance plans. This has caused many to avoid seeking medical services when needed, only to finally seek services when the condition has worsened, and at most times at an urgent care setting. Situations like this exemplify the decrease in demand that usually existed for primary care providers or other outpatient specialties, which ultimately leads to a decrease in utilization and revenue for such practices.

Another factor is that medical organizations are being forced to pay more with less.

As a result of other negative economic factors, third party payers, including Medicare, have been forced to cut their reimbursement rates for services provided by medical providers.

There is also inflation expected within the healthcare industry, especially within pharmaceuticals. Thus, organizations must face a double edged sword in that they must find a way to pay higher costs with less revenue.

One of the ways to do this is to lower fixed costs, such as salary expenses.

When Making the Decision to Downsize

The decision for an organization to downsize is obviously a tough one. It creates a period of unrest throughout the organization and has a significant effect on staff morale.

The prospect of downsizing should be kept very quiet amongst leadership. If staff suspects, or is reassured, that downsizing is on the horizon, the organization will be overcome with fear and anxiety when it is not yet necessary, or before there is even a true plan on what is going to take place. Even if an organization is thinking about downsizing, if they were to lead onto the staff of such thoughts, then the staff would continuously think to themselves, “what if”, even when it is decided NOT to downsize.

When the decision has been made to downsize, leadership must layout a clear and concise plan of how to proceed. The plan must address the following:

- How many positions are to be cut

- Which specific employees are to be cut

- When/how/where the cuts will be executed

- How to address the employees who are being cut

When leadership has decided who to cut, careful thought should be given to when/how/and where they will notify the employees.

It is a matter of opinion whether staff should even be told that downsizing will occur, before the actual downsizing takes place.

One perspective implies that it should not be a surprise to employee, who is being laid-off, that the company is downsizing. This would help alleviate the shock as the employees are somewhat prepared for what the organization will be experiencing.

However, through another perspective, if staff is officially made aware of upcoming reductions, this will simply cause unnecessary anxiety across the organization, and if staff is unaware who is being let go, then it will be just as surprising and shocking as if they were unaware that reductions were going to take place. One can even argue that this method would strip the employees of their dignity, as with everyone being aware of a reduction, it would put a spotlight on those directly affected when they are notified.

Advising an employee that they are being laid off due to a staff reduction is most likely a difficult situation for both sides, as management must terminate good workers due to reasons other than unacceptable behavior or poor performance. The feelings of the employee should be considered and prioritized during the entire process. The employee should be notified in a private setting away from other employees, and preferably at a time such as the beginning of the day or at the end of the day, but certainly NOT during busy operational hours when the employee has to be sequestered away from their work area amongst their peers, especially if it is known that reductions will be taking place.

When notifying an employee that their position is being eliminated, the employer should have options ready to discuss with the employee and should be ready to answer any of the employee’s questions, such as those regarding insurance benefits, how much longer they can work, etc.

Organizations should research employment law carefully during this process to avoid any sort of liability.

If possible, a company should offer a severance package, including severance pay and extended benefits. However, in today’s rough economic times, this may be hard for organizations to afford to employees.

For larger healthcare systems, employees should be given the option to pursue other openings within the organization outside of the downsizing practice.

The organization should also provide the employee with a date of when their last day will be. This affords the employee time to seek other employment while still having work. However, how long an employee can keep working depends on the financial conditions of an organization.

ALL Staff is Affected by Downsizing

Not only should significant attention be given to the staff that is being reduced, but too ALL staff that is not, as EVERYONE will be affected by such a reduction.

Workers will see their fellow co-workers, and friends, be laid off. This will certainly have a negative effect on staff morale for even those not directly affected. Thus after the reduction, leadership should do all they can to ensure staff that the reduction was for the best of business and operations.

Staff will also be affected as they will have to somehow pick up the duties that were previously covered by the positions that were eliminated.

Keeping the Staff Engaged

Downsizing ultimately leads to a significant change of culture. To remain efficient with less staff, organizations will likely have to rearrange their processes and resources.

Any kind of change, especially change that carries such weight as downsizing, is difficult to sell onto the staff. Thus, leadership must have a plan of how to “unfreeze” the staff from their current culture and how to implement a new one.