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Everything changes and nothing stands still

Karina Nielsen, professor of work and organisational psychology at the Norwich Business School, University of East Anglia, looks at how public sector bodies can restructure their workforce without damaging the health and wellbeing of employees.

Most employees will experience at least one type of restructuring during their lives, and while management often focus on the strategic parts of the change and the achievement of the goals that have been set, it is also important to consider the health and wellbeing of the employees who are affected by restructuring. 

It has been argued that as much as 95% of restructuring initiatives do not reach their goals, and one of the explanations is likely to be that management fail to take into account the attitudes and reactions of employees who are expected to embrace restructuring and change their behaviours and attitudes.  

The way the process of restructuring is carried out is important to its success. The key challenge is how organisations and HR departments can make sure that employees remain motivated to work, and will feel well at the same time as the primary goals of restructuring are achieved. 

What is meant by restructuring? 

Restructuring can be defined as an organisational change that is much more significant than a commonplace change and one that involves an entire company or sector. The day-to-day work should be accomplished at the same time that the restructuring is implemented. 

Different types of restructuring are, for example: 

• Relocation: The activity stays within the same company, but it is relocated to another location within the same country
• Offshoring/delocalisation: The activity is relocated or outsourced outside the country’s borders
• Outsourcing: The activity is subcontracted to another company within the same country
• Bankruptcy/closure: An industrial site is closed or a company goes bankrupt for economic reasons not directly connected to relocation or outsourcing
• Merger/acquisition: Two companies merge or a company undertakes acquisitions which then involve an internal restructuring programme
• Internal restructuring: The company undertakes a job-cutting plan or other forms of restructuring that are not linked to a specific type of restructuring defined above
• Business expansion: A company extends its business activities, hiring new workforce 

Effects of restructuring on employee wellbeing 

Restructuring often has an impact on employees’ health and wellbeing, and the effect is most often negative. In the early years of restructuring research, the focus was on the wellbeing of those who were laid off. Those remaining in the organisation were often described as ‘survivors’. 

However, later research has found that survivors found it hard to survive; negative effects on the health of those that kept their jobs was also reported. In the remainder of this piece we focus on those who have to find a way to survive in the organisation after restructuring has taken place. 

Job satisfaction and job involvement decrease during restructuring. But also effects in terms of poor mental health, increased sickness absenteeism, and poor physical health can be observed. Effects on quality of life include poor quality of sleep and poor health behaviours (increased smoking and drinking and unhealthy eating patterns). 

A recently published review revealed that the explanations for why employees report poor health and wellbeing are, among others, that physical and emotional demands increase as a result of restructuring. Employees also feel that they become less involved in decision-making and have less autonomy in their job. 

Other explanations include that people feel they have a higher workload in cases of downsizing, because there are fewer hands to do the same amount of work. Employees also feel less supported by their supervisors. 

Furthermore, if the organisational processes are not perceived to be fair, employees also report poor health and wellbeing. Finally, and most importantly, the employees’ appraisals of the threat of losing their job is one of the most common explanations for poor health.  

The review also identified groups of employees who are particularly vulnerable during times of change. The most negative effects of restructuring have been observed among low-income employees and those with few formal qualifications. 

Interestingly, those who are responsible for managing change also tend to suffer more, as do employees on permanent contracts. Two studies exploring the effects of a hospital merger revealed that the poor wellbeing was stronger for nurses in the acquiring hospital and transferred nurses. 

Is it all bad? 

Despite the negative effects of restructuring on employees’ health and wellbeing, it is not all bad. A few studies have found that employees’ appraisals or perceptions of change are important. These studies indicate that when employees perceive that the restructuring has resulted in them having a better position in the organisation post-change, then they report better health and wellbeing. 

Another recent study explored the factors that influence employees’ perceptions of the change process. It was found that two factors may result in a positive appraisal of the restructuring. First, a senior management that clearly communicates the goals of change, provides regular updates about progress that ensures a fair process, takes action to solve problems as they arise during the process, and that listens to employees’ points of views and concerns can have a positive impact on employees’ appraisals. 

Second, it is important that employees perceive they can play an active role in making changes happen. 

What can management and HR do? 

A large European study carried out in Denmark, Finland, the Netherlands and Poland found that three factors are essential for ensuring employee health and wellbeing during restructuring. 

First, communication and information is crucial. Managers at all levels and HR should develop a plan for communication. The communication plan should include information about the content and process of restructuring: What are the aims and objectives? And what changes will take place, when and why? 

The study also found that honesty is important. To avoid rumours spreading it is better to admit that not everything is set in stone and that there are unknowns that will have to be dealt with along the way. It is important to avoid a situation where employees feel that managers are withholding important information. 

Second, it is important that employees have the opportunity to be involved in the planning and implementation of restructuring. Employees are experts in how to do their jobs, and they know what changes are realistic. They also know which changes can be implemented when. When employees are involved in the process they are more likely to feel ownership and work proactively to make changes happen. 

Finally, support is crucial. Senior management should ensure that decisions are made in a fair and equal manner. Employees should be supported in how to implement changes, but also in how to do their jobs. 

If employees have to take on other tasks and work with colleagues they are not familiar with, it can be useful to regard them as newly employed. They may need training to perform new tasks and team-building activities may be needed to make colleagues who are not familiar with each other work well together.

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