March 2005

DOWNSIZING OR WRONGSIZING

By William Glenn

Boom-bust. Expand-contract. Hire-fire.

Stockbrokers and shareholders aren’t the only people who have had to roll with the inevitable highs and lows of the free-market business cycle. Recent health research into the effects of downsizing shows that employees have a lot more to lose than their jobs. And the recession that struck much of the industrialized world in the early 1990s provided the ideal conditions for studying the occupational health effects of what’s been labelled “organizational instability.”

The drive to downsize, rightsize, re-engineer or outsource can impose a stressful and disruptive burden on employees — both managers and line staff. Job insecurity and the threat of redundancy have been linked to anxiety, depression, sleep problems, burnout and heart disease. It was expected that if you survived the flurry of pink slips, those stresses would dissipate.

Apparently, that assumption was wrong.

A team from the Finnish Institute of Occupational Health has concluded that “survivors”of a major downsizing episode may suffer a significant increase in serious health problems. More disturbing, the incidence of heart attack fatalities can explode up to five-fold in the first four years following the cutbacks. Congratulations! Your job is safe — at least for a while. Now you can get busy working yourself sick.

The researchers tracked 22,430 municipal employees over seven and a half years, a span that encompassed Finland’s worst recession since World War I. Unemployment, 3.4 per cent in 1990, had mushroomed to nearly 19 per cent in 1993. Public-sector employees were particularly hard hit, as a shrinking tax base forced local governments to trim payrolls through layoffs, hiring freezes and offers of early retirement.

Data gleaned from employee absence records and a national mortality database showed that back pain and other musculoskeletal disorders were four to eight times more common following downsizing, while absences related to trauma increased two- to four- fold, says the 1997 study, “Effect of organization downsizing on the health of employees.” Hit hardest were those 44 years or older and workplaces with a high proportion of older employees. The greater the extent of the cutbacks, the greater the magnitude of the health effects.

“That’s not surprising,” says Gerry Smith, vice-president for organizational health at WarrenShepell, an employee assistance plan service-provider based in Toronto. “It’s not the people who leave you worry about. It’s the people who stay,” Smith says. An initial state of shock quickly leads to an emotional roller coaster, “from sadness at seeing friends go to extreme anger at management to disappointment and even clinical depression,” he says.

The stress of an ill-managed reorganization, Smith cautions, can last for months and months. “People are resilient and they will adjust, but it takes six to 12 months before the [reorganized office] becomes the new norm,” he says. “However, any subsequent change can open up the old wounds again.”

Finnish researchers in the 1997 study noted one seemingly paradoxical detail: While many surviving employees were getting sicker, they showed a reluctance, at least in the first six months, to take time off work. Women in clerical positions, blue-collar workers, non-unionized employees, part-time or contract staff — those most at risk of losing their jobs in the next round of layoffs — felt they couldn’t afford to be sick. Short periods of absence fell by 14 per cent, while long-term sick leave rose by 16 to 31 per cent. Overstressed and overburdened staff members got sicker and, ultimately, missed more work. The experts call the phenomenon “sickness presenteeism,” and it’s especially prevalent in health care and teaching, says an empirical study that appeared in the Journal of Epidemiology and Community Health in July, 2000.

“It is possible that ‘medically vulnerable’ employees in a downsizing situation feel that they have a reduced chance of finding a new job if they become unemployed. They would, therefore, be more likely… to abstain from using their right to stay away from work when they feel ill,” the authors note. This tendency, unfortunately, is particularly evident in individuals prone to cardiovascular disease.

But the negative impacts of downsizing on occupational health aren’t limited to Finland, the public sector or the recession of the 1990s. A paper in the American Journal of Community Psychology compares the health of “leavers” with “stayers” before and after downsizing at a large Swedish insurance company. Many who lost their jobs were already prone to illness. Those who stayed — in general, the healthiest ones — proceeded to get sick, and sick more often.

Closer to home, a recent analysis of electric power utilities in the United States shows a notable increase in injury rates among companies that cut their work force by at least 40 per cent between 2000 and 2002. A similar pattern was noted in a U.S. Department of Energy study. “We found that employees who survive downsizing are not satisfied to simply have a job,” the authors observe, “but instead react with anger, sadness, diminished trust and job satisfaction, and increased job strain.” And that strain can contribute to illness, absence and premature death.

Escalating levels of anxiety and depression have real economic consequences for employers. “Mental health is going to be the main focus of short- and long-term disability claims in the next 10 to 20 years,” predicts Lucie Fournier, director of disAbility & Health Management Solutions, an oh&s consulting firm in Barrie, Ontario. “By 2020, they are going to far surpass the total costs of physical-related claims.” Short-term productivity gains are only achieved by burning out trimmed-down staff. It’s hard to get employees to contribute when they are worried they might be the next to go, Fournier says.

Many employers ignore the warning signs before a worker “maxes out” and files a disability claim, she explains. Survivors may not be able to keep up the pace. There may be a shift in personality traits; they may develop a short fuse and can’t get along with anyone. They may become irritable, withdrawn, or quick to cry. Absenteeism and late arrivals start rising, formerly good employees become less interested in “putting out an effort,” and the frequency of workplace accidents begins to increase.

While an association between downsizing and worker health seems clear, there are still questions about the mechanism or mechanisms responsible. There are at least three possible explanations. First, downsizing usually alters working conditions. Employees face heavier demands while losing control over key areas of personal activity. As just another “cog in the organizational machine,” employees may be offered less discretion in how to best apply their skills, and fewer opportunities to show initiative or to influence the decisions being imposed upon them. Second, social relationships are strained; there is less time for family and personal relationships. Third, the surviving employees typically engage in behaviours that are less than healthy. They tend to drink more booze, smoke more cigarettes, and eat more junk food.

To determine the relative importance of these factors, researchers focused on 764 public- sector employees — from office managers, physicians and teachers to cleaners, maintenance workers and kitchen help — in a Finnish town. The same individuals were followed from 1990 to 1995 (before any rumour of downsizing) through the layoffs and after.

Again, absence rates more than doubled following cutbacks. Quantitatively, changes in job conditions were responsible for about two-thirds of the effect. The authors determined that increased physical demands — essentially, fewer people to clear the same amount of work — accounted for 28 per cent of the increased absences. Decreased participation in decision-making and a reduction in skill discretion were responsible for 19 per cent and 12 per cent of the increase, respectively. Heightened job insecurity, for its part, accounted for eight per cent.

Unfortunately, the situation doesn’t improve when the economy bounces back, says a Swedish research team that tracked a number of biomedical indicators of cardiovascular risk in a cohort of 3,804 white-collar employees working in the Stockholm area. The workers — aged 20 to 64 and split almost evenly between men and women — were employed in a variety of firms, both large and small, notes the study, which appeared in the European Journal of Public Health last year. Some worked for stable organizations; others for firms undergoing organizational upheaval, either rapid expansion or drastic downsizing.

While confirming the morbidity and mortality patterns uncovered in the earlier studies, researchers found that it’s not downsizing, per se, that disrupts occupational health stats. Any major corporate instability — either positive or negative — can increase stress and cause a significant shift in the biomedical markers.

Downsizing may make for a healthier business, but unless handled with sensitivity, will not make for a healthier work force. What you gain in productivity and effectiveness, you can lose in increased absences, accidents and other health costs.

Organizational change and instability is also, increasingly, a Canadian thing. A report published last summer by the WarrenShepell Research Group notes that government agencies are working to become more efficient and results-oriented. This is putting intense pressure on managers and employees to better manage and cope with change. As a direct result, “anger symptoms” have increased by an astounding 900 per cent in the last three years, while municipal employee depression rates have doubled.

Whether downsizing, supersizing or rightsizing, attention must be paid to the potentially hazardous effects on workload, work pace and work scheduling. Workers who are kept in the loop and up-to-date about the downsizing process suffer fewer headaches, backaches, colds and flus, and other medical symptoms. They are also less prone to that toxic mix of relief and guilt that is typical of “downsizing survivor syndrome.”

In the end, the way an organizational restructuring is planned, communicated and implemented will determine if the workplace continues to be a safe, productive and healthy one.

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