With the spectre of recession looming on both sides of the Atlantic, cost-cutting and layoffs are becoming an ever-more common part of the business landscape.
Yet, after more than a decade of growth, executives who decide their only option is to swing the axe often forget the importance of keeping those workers left behind happy, committed and engaged, a failing that can have serious repercussions.
A study by U.S management consultancy Katzenbach Partners has found that most cost-cutting layoffs fail because executives forget a key factor: motivation of those left behind.
Even when laying people off, leaders need to remember to motivate their remaining employees, it argued, as failing to do so can make or break such cost-cutting efforts.
"In hard times, it's even more important to have a motivated workforce. Motivated employees will deliver real cost savings, and carry out a cost reduction program over the long term," said Jon Katzenbach, founder and senior partner at Katzenbach Partners.
"Executives need to work with, not against, the organisation's culture," he added.
The study echoes research from Finland published at the start of this year that suggested staff who survived a round of corporate downsizing ran a significantly increased risk of suffering mental health problems because of the increase workload they face once colleagues have left.
Similarly, another Finnish study published in 2004, this time in the British Medical Journal, argued that cutting staff can cause serious – even fatal – health problems for the employees who are left behind.
The latter piece of research looked at 22,430 local government personnel who retained their jobs during a recession between 1991 and 1993 and found the risk of staff dying from cardiovascular disease doubled in those departments that had suffered major cuts.
In the latest study, Katzenbach argued that, even in the face of downturns and layoffs, employees can be persuaded to join in to help save the organisation. The trick is to engage employees emotionally and make thrift a part of the culture, he suggested.
"Too many executives think that firmness, discipline and savings are the key to cost reduction," agreed Katzenback principal Paul Bromfield.
But this top-down approach simply created fearful employees who focused on protecting themselves, not on moving the organisation through difficult times.
In every organisation there were "pride builders" – frontline managers who were sometimes unconventional but who got the most out of their teams. Executives needed to identify and enlist them as leaders in their cost-cutting efforts, he stressed.
"While it's true that you can't motivate your way out of a recession, an organisation will have a better shot if it can get employees to make a positive emotional commitment to the challenge," said Bromfield.
"If you motivate people, you will get out sooner, and the benefits will be longer lasting," he added.