Business Ethics in Healthcare: Beyond Compliance

Nine: Ethics and Downsizing

The announcement informing employees that layoffs will occur is one of the most dif¤cult memos the CEO can write. The news that layoffs will occur is among the most dispiriting pieces of news that employees can hear. Downsizing is an extremely dif¤cult situation for all involved. The way in which downsizing-related issues are handled has an impact on the workplace that lasts for years. When an organization is faced with a need to cut costs, a knowledge of and commitment to fairness and sensitivity to employees is fundamental to ethical leadership. Ethical Issues in Downsizing There are a variety of ethical issues related to downsizing, all of which require careful consideration and preparation. The questions of whether and how to downsize arise in stressful times, usually when the organization is facing a serious ¤nancial condition. The temptation may be to get the necessary hard decisions made as quickly as possible to reduce costs immediately and to avoid extending the time during which employees wait, wonder, and talk about what is going to happen. Getting the downsizing decisions over quickly is not nearly as important as attending to all aspects and rami¤cations well. Nine Ethics and Downsizing Perhaps the greatest obstacle to empowerment today is downsizing . . . . downsizing strikes fear into the hearts of all workers because it reminds them of the fundamental way in which they are totally powerless over their lives when business leaders act as if they are powerless to do anything but downsize. It would seem virtually impossible to empower people in organizations that do not make a strong commitment to keeping their workers employed through good times and bad.1 Much of a person’s identity and sense of contribution and accomplishment are related to the work that she or he does. . . . Losing a job is a threat to one’s sense of identity and self-worth, as well as to ¤nancial well being and security.2 The ethics of the decisions surrounding the downsizing implementation strategy are the new paradigm. They become the model. They tell all employees what the new rules are. These decisions set the standard for the ethics of future decisions.3 There are great costs associated with downsizing. Even when it is handled well, some persons get hurt, and there are likely to be signi¤cant negative impacts on the organization’s climate. Frequently it is not handled well. Then those who lose their jobs are doubly hurt because of a sense that they have been treated unfairly, and morale among those who remain suffers even more. Distrust of management grows. As noted in the third quote above, how downsizing is done sends a message to employees about what management really thinks about them, despite what mission-related words they mouth. Case 9.1. A Task Force has been appointed by the hospital CEO to make recommendations regarding a reduction in the workforce. They are asked to make recommendations in regard to the criteria to be used in deciding which positions should be eliminated, which employees should be let go, and how best to implement the decisions. One member of the Task Force is a senior-level manager who sees the whole question of downsizing as¤lled with ethical issues. He convinces the other members of the Task Force to ask a business ethicist to meet with them at the very ¤rst working meeting to assist in identifying the key fairness issues to which the organization needs to be particularly sensitive. This Task Force member identi¤es one issue of particular concern. Should employees who have been selected for layoff be asked to depart immediately (after being informed of the decision), or should there be a week or two of advance notice of the effective date of separation? The manager who sees downsizing as ¤lled with ethical signi¤cance is right on target. In addition to the speci¤c (and important) issue that he has identi¤ed, there are a variety of other issues that need careful attention if all employees are to be treated with fairness and respect during the whole downsizing process. A good ethicist would, I think, suggest that there are four major components of downsizing that might bene¤t from explicit attention to ethical considerations: 1. The decision to downsize 2. Selection criteria 3. The process of letting employees go 4. Rebuilding morale among remaining employees It does not require a high level of ethics education to understand what should be done in these...