Downsizing the Ethics of Downsizing:

Downsizing

The Ethics of Downsizing: Organizational and Individual Implications

A variety of business practices and events over the past several decades have led to an increasing scrutiny of many different applications and incarnations of business ethics, from a variety of academic, philosophical, and pragmatic perspectives. The recent economic shrinkage did not only call major issues of fraud, security, and conflicts of interest into question, but also highlight certain social, financial, and psychological problems associated with firm downsizing and job loss. Significant amounts of research have been devoted to the ethicality of downsizing and how it can be enhanced, if indeed such enhancement is necessary or possible. The following pages present a synthesis and analysis of current research in the area, providing a discourse on current perspective on downsizing and business ethics.

Current Research

The research is fairly conclusive in at least one area of the effects on individuals of business decisions to downsize -- whatever these exact effects may be, they are not well-accounted for in the businesses' decision-making processes (Applebaum & Labib, 1993; Lamsa & Takala, 2000). This is true both of individuals that actually experience job loss as a result of downsizing and of "survivors" who remain with the company following downsizing, who are often left with inadequate and frustration- or fear-building understandings of how the downsizing decision and specific layoff decisions were made (Applebaum & Labib, 1993). Clear, appropriate, and well-publicized criteria for selection are a necessary element of making the downsizing decision an ethical one, according to this research (Applebaum & Labib, 1993).

The manner in which employees are told of the decision to downsize and of how these decisions are handled at the managerial level has also been cited as a major component of ethicality in downsizing decisions (Lamsa & Takala, 2000). Several different "roles" have been typified and defined by researchers to describe how managers tend to interact with employees in regards to downsizing decision, namely a rational and independent managerial role, a marionette role, and an emotional individual (Lamsa & Takala, 2000). None of these roles define a specific set of actions but rather a set of attitudes and approaches to the decisions that must be made in a larger downsizing decision, and how these managers interact with individuals immediately affected by downsizing decisions, i.e. employees (Lamsa & Takala, 2000). No specific role is singled out as more ethical, however increased empathy -- seen primarily in emotional individuals -- does seem to reduce the negative effects on individuals during downsizing and should be further researched (Lamsa & Takala, 2000).

An entirely theoretical or philosophical approach is selected by some researchers, and one unique conclusion in this regard is that any action a company takes must inherently be ethical, and in fact cannot rely on potential outcomes or pre-established ethical rules if it hopes to full accept moral responsibility for its actions (Clegg et al., 2007). This work draws on other modern philosophers such as Derrida, using arguments of undecidability to demonstrate that it is only be selecting based purely on the choices given that ethical action can and does occur (Clegg et al., 2007). How this informs empirical research will be discussed below.

Philosophical Implications of Practical Choices

The argument made by Clegg et al. (2007) is compelling, if initially distasteful to more compassionate human sentiments and desires. What these authors are essentially saying is that if a pre-determined set of ethical rules or practices is used to make downsizing decisions within organizations, and/or if projected (and necessarily uncertain) information about outcomes was used to inform and help make these decisions, the organization would easily if not automatically absolve itself of true moral responsibility (Clegg et al., 2007). This is because there would be an external system truly "making the decision," rather than the organization itself (or rather, the powers-that-be within the organization) engaging in critical examination of the specific scenario and options at hand, much like the "marionette" manager tries to remove any sense of ethical duty on his part by insisting that he or she is only acting as required by his or her bosses (Clegg et al., 2007; Lamsa & Tokala, 2000).

Seen in this light, empathy in the decision making process could be considered a necessary quality of ethicality, as suggested in some empirical research (Lamsa & Tokala, 2000). If it is really on the specific and un-generalizable details of the singular scenario and set of heterogeneous options that a company finds itself faced with that a decision regarding downsizing must be made, than a consideration of the human elements -- of the psychological, social, and economic costs to individuals within the organization -- must also be included (Clegg et al., 2007; Applebaum & Labib, 1993). This is the only way to approach a comprehensive assessment of the situation.