When you downsize a company, you are decreasing an enterprise’s generational knowledge, creativity, workplace culture, trust, and in turn, production, performance, and profitability.

Often implemented as a fast response to the potential for or the presence of short-term failures, downsizing seems to be a go-to strategy for increasing profit and performance. However, reality demonstrates a concrete divider between the perceived results and those that exist. Referring to the planned elimination of positions or jobs, most commonly in the form of layoffs, the process is typically expected to create economic and organizational benefits. Economic benefits include an “increase in value for their stakeholders” (i.e., the company’s stock). In contrast, organizational benefits involve “lower overhead, less bureaucracy, faster decision making, smoother communications, greater entrepreneurship, and increased productivity” (Cascio, 1993). Interestingly enough, however, despite these grand hopes and elaborate strides to react to short-term losses, the lack of communication and consideration in downsizing ventures often results in adverse outcomes for participating enterprises. In responding to this apparent deficit in our workplace and societal structure, we might be able to capture the important notion that companies who push off layoffs as long as possible do best, or in other words, companies who take long consideration into planning, who communicate openly, and who demonstrate their value in their employees in all company practices finish on top of the rest.

More specifically, research demonstrates that firms that could, in fact, “absorb more pain and delay downsizing employees and assets did much better two years later” (Cascio et al., 2020). It is recommended that firms avoid downsizing as a “quick fix for profitability” (Cascio, 1993). A particular study captured “an adverse association with 9 of the 12 work conditions and all 16 employee outcomes” (Frone & Blais, 2020). Other research revealed that layoffs result in the smallest payoff and that only 46 percent of surveyed companies described that their preformed cutbacks reduced their expenses enough. The most common reason for this would be that 4 out of 5 times, managers who were previously dismissed are rehired.

Additionally, companies end up paying the costs of having to hire consultants to replace the staff functions that were removed. Companies also must engage with retraining programs for their employees who remain at the company but now must take on a more significant or different role (Cascio, 1993). Enterprises often forget to account for these costs when creating their downsizing plans, and more so, they often “ignore the importance of establishing policies to deal with cutbacks and therefore experience negative results of cutting back” (Cascio, 1993).

Downsizing significantly impacts company culture. Studies show that employee productivity either stayed the same or deteriorated after the layoffs, reporting that upon downsizing, “surviving employees become narrow-minded, self-absorbed, and risk-averse,” which work counterproductively to an entrepreneurial mindset that is looking to increase company wealth or even stay afloat (Cascio, 1993). Typically after layoffs, employees often describe declined commitment and performance, which has been tied to survivor syndrome, which is the concept that downsizing causes lower identification with the employer, which in turn relates to lower performance of employees” (van Dick et al., 2016). The culture of Corporate America, specifically, has ignored the possibility of a downside of downsizing. Companies demand department heads to decide on “long-term research and development expenditures, capital investments, or workforce training when they are paid to attend to short-term profit or production” (Cascio, 1993).

In more greatly comprehending the reasons why anticipated cost savings do not necessarily take shape as planned, we might turn our attention to the fact that focusing only on short-term numbers is not a strategy for the breeding of short nor long-term success. Dr. Cascio of the University of Colorado described in his review, “Downsizing: What Do We Know? What Have We Learned?”:

“Effective downsizing often involves contradictions — that is, processes that are thought to be opposite and incompatible. Organizations that downsized effectively generally tried to maintain consistency, harmony, and fit in their downsizing approach. The key seems to be to adopt a “both/and” approach to downsizing, even though this is not consistent with traditional techniques to change” (Cascio, 1993).

Downsizing negates the empowering and enabling culture that looks for the opportunity in challenge. If leadership demonstrates to their employees that they must respond to crises and losses by placing blame on specific individuals and then removing them, they are both directly and indirectly, creating a culture of unease for employees. Additionally, a culture of blame, which identifies the removal of specific individuals as the method for improving company outcomes, does not represent an equitable nor empathetic company culture. Downsizing also constructs a poor environment that has been shown to cause negative psychological effects that equate to poor health outcomes (another outcome of survivor syndrome) (Moore et al., 1996). It will be the firms that implement the principles of HumEnt that will understand that employee health is the vital and non-negotiable foundation upon which an enterprise can operate.

Therefore, these outcomes are not to demonstrate that strategic downsizing is not possible nor should be avoided, but instead, that downsizing typically initiates more cycles of downsizing. So, if downsizing is to be successfully executed, enterprises need to instate effective planning measures before, during, and long after the downsizing occurs (Davis, 2003). Looking at specific studies in the realm of healthcare management, Davis et al. wrote that:

“This must be included in the strategic management plan of all organizations, regardless of whether they plan to downsize or not. By including such a plan, the organization will be better prepared to begin the staff-reduction process should it be forced to do so in response to environmental changes. Finally, providing ample support and protection for staff is key to the organization’s recovery and growth” (Davis, 2003).

If one must downsize, the recommendation is for the company to not only execute layoffs but also look to downsize assets when faced with deteriorating results (Cascio, 1993). This strategy is more demanding and comprehensive, which would demonstrate the seriousness with which the company is taking its downsizing ventures. This, combined with open and clear communication as well as care for the current and old employees, could grant a profitable downsizing venture for a company. Successful downsizing also, unsurprisingly, involves top-level communication with managers who can provide a narrative to their numbers. When there is open and clear communication throughout the process of downsizing, companies can more than not avoid the common trend of eventually replacing between 10 and 20 percent of those that had been previously dismissed (Cascio, 1993).

Better yet, companies that can “resist downsizing benefit from retaining key employees and attracting new talent, which, in turn, enhances profitability” (Cascio, 1993) — returning us to the well-backed notion that the people are a firm’s greatest asset. When you downsize a company, you are decreasing an enterprise’s generational knowledge, creativity, workplace culture, trust, and in turn, production, performance, and profitability. As Humane Entrepreneurs, we must spread the mission of human-centered business ventures, execution, and maintenance. Downsizing must no longer be seen as a one-time, quick-fix solution to enhance competitiveness. Instead, by creating a real and authentic company culture that centers around the human, viewing hiring and firing as a way to ensure that employees are both benefitting and benefiting from their position, downsizing can be seen as part of a process of continuous improvement. In searching for guidance through the lens of Humane Entrepreneurship, we will be able to decide more purposely ways in which we can create healthy and whole work environments that endure profitably regardless of the circumstances.

Article by:

Dr. Ayman El Tarabishy
President & CEO, ICSB
Deputy Chair, Department of Management, GW School of Business
Editor in Chief of the Journal of Small Business Management (JSBM)

References

Cascio, W. F. (1993). Downsizing: What do we know? What have we learned? Academy of Management Perspectives,7(1), 95–104. doi:10.5465/ame.1993.9409142062

Cascio, W. F., Chatrath, A., & Christie-David, R. A. (2020). Antecedents and Consequences of Employment and Asset Restructuring. Academy of Management Journal. doi:10.5465/amj.2018.1013

Davis, J. A., Savage, G., & Stewart, R. T. (2003). Organizational downsizing: a review of literature for planning and research. Journal of healthcare management / American College of Healthcare Executives, 48(3), 181–201.

Frone, M. R., & Blais, A. R. (2020). Organizational Downsizing, Work Conditions, and Employee Outcomes: Identifying Targets for Workplace Intervention among Survivors. International Journal of environmental research and public health, 17(3), 719. https://doi.org/10.3390/ijerph17030719

Moore, S., Kuhrik, M., Kuhrik, N., & Katz, B. (1996). Coping with downsizing: stress, self-esteem, and social intimacy. Nursing Management, 27(3), 28–30.

Van Dick, R., Drzensky, F., & Heinz, M. (2016). Goodbye or Identity: Detrimental Effects of Downsizing on Identification and Survivor Performance. Frontiers in psychology, 7, 771.
https://doi.org/10.3389/fpsyg.2016.00771

In guiding our actions towards Humane Entrepreneurship, we can be an organization that does not only preach about Humane Entrepreneurship but one that also practices it.

Following our reflection last week discussing the “End of the Status Quo,” we think it is time that we seriously share and discuss the steps that ICSB has and will continue to take as we endlessly strive towards a more humane-centered way of acting entrepreneurially in this world. Over the past couple of months, we have reflected upon the theory and practice of Humane Entrepreneurship. Now, it is time to move beyond thinking and imagining; now is the time to model Humane Entrepreneurship.

As promoters and upholders of Humane Entrepreneurship, what an excellent opportunity we have to exemplify the practice ourselves! Given the perspective-altering moments of the past couple months, ICSB has been able to genuinely narrow in on what is important to us as an organization, including our values, the organization’s sustainable practices, and our collective community. Flowing from this reflection, ICSB has worked to center all of our programmings around the interests of our members as well as new and pressing topics that we see as crucial to the formation of our community. We are centered around the human, being empathetically oriented to the whole person and not just the sliver of our members’ lives, which pertains to ICSB. We have attempted to curate an empowering environment, working consciously to open up opportunities to women and younger entrepreneurs. Enablement has and continues to develop as we formalize programs, bolster the ICSB Gazette, and continuously try to discover new and enticing opportunities for our members. ICSB models the equitable work of Humane Entrepreneurship as we provide discounts for members from developing nations, ensuring that all voices are brought to the table, and work to promote MSMEs for the achievement of the United Nations Sustainable Development Goals.

As we are continually attempting to show up as our best selves for this community, we recognize that we have a way to go to reach the peak of the Ideal orientation for our Humane Entrepreneurship categorization. Reaching for this Ideal status, at ICSB, we are focusing on ways that we can formalize our desire to promote a human-focused conscious while creating sustainable patterns of growth. It is from this place of discovery; we have created the ICSB Resiliency program.

This program focuses on supporting the individual. It combines ICSB’s top-level programs into one calendar and cost so that you can fully engage with the learning available to you. Finishing with an ICSB diploma and a heightened understanding of your entrepreneurial interests, this formal connection to ICSB offers and opens clear pathways of communication with ICSB leadership, which will be ever more critical as you become be a vital role in leading the ICSB community as well as the local community to the 2021 ICSB World Congress in Paris.

Being the first of its kind, the ICBS World Congress will bring Humane Entrepreneurship to “l’Exposition Universelle,” so that entrepreneurship and SMEs can take the lead in ushering the world into peace, prosperity, and happiness. This event works innovatively and creatively to bring together all voices throughout the field of entrepreneurship so that we can pull down the unnecessary walls that keep communication and support at a distance from the people that need it the most. In moving into Humane Entrepreneurship, we are building a resilient community that can succeed no matter the circumstances.

We look forward to you joining us on this journey to and with Humane Entrepreneurship. ICSB recognizes the necessity to both offer and realizes a humane-entrepreneurial orientation (H-EO), meaning that we are concurrently advocating and partaking in the widespread adoption of HumEnt. In knowing that “large-scale organizational performance effects are more likely to occur as a result of shared cultural values and beliefs that are accepted by organization members,” we must work individually for the greater collective. In guiding our actions towards HumEnt, we can be an organization that does not only preach about Humane Entrepreneurship but one that also practices it.

References:

Kim, K., A. El Tarabishy, Z. Bae (2018). “Humane Entrepreneurship: How Focusing on People Can Drive a New Era of Wealth and Quality Job Creation in a Sustainable World,” Journal of Small Business Management 56(S1), 10–29.

Article by:

Dr. Ayman El Tarabishy
President & CEO, ICSB
Deputy Chair, Department of Management, GW School of Business

In creating sustainable and continuous cycles of growth, our enterprises must see themselves as part of a greater whole.

As transparency increases and the global population stands firmly and united in their demands to promote a just and green economy.

In December of 2019, ICSB provided a message to its entrepreneurship community, indicating the foreseeable “End of the Status Quo.” ICSB was expecting the need for a great upheaval of our past societal structure to meet the needs of an advancing world. With the growing demand for employment opportunities, attention to global health trends, and humanitarian justice, we can no longer ignore how our status quo has failed us. At the turn of the decade, we understood a need for change, and, now, almost 9 months into this Decade of Action (United Nations), it seems complicated to imagine how we managed to exist within that ancient platform.

Welcoming in this new paradigm, brought on by the need for change and subsequent crises that forced that change, we might find it challenging to articulate precisely where we are. Luckily, as always, with entrepreneurship, we can choose with which perspective we wish to engage in. Without ignoring the struggles and challenges presented by the current status of our global community, ICSB would like to participate with the new and exciting changes, unearthed by the recent crises, which can no longer be ignored. From significant alterations in education systems and the digitization of the entire world to discussions around a universal basic income, we can choose to capture the opportunities from these events. In thinking about the dramatic changes in the political world, the rise of the gig economy, and constant changes in national and international relations, ICSB has spent time reflecting on the major themes emerging from this moment.

Over the past couple of months, we have pressed ourselves to create a weekly reflection on Humane Entrepreneurship. During the struggle of the COVID-19 induced lock-down and border closures, we were uncertain of any resemblance of the present and the future. However, we felt that it was essential to build a presence that embodied our aspired future. Therefore, we have spent months creating content about the theory of Humane Entrepreneurship as we were sure that, regardless of our future, we wanted it to involve the guiding principles of care and protection for the human person as well as for our shared environment. This theory bridges the current entrepreneurial ecosystem and the ideal and future one by providing guidelines through which we might categorize enterprises. These reflection pieces have been incredible in helping shape our understanding of who we are, as an ICSB community, and where more effort and impact is needed.

The status quo is no longer enough, and in building our world anew, we might consider that we do not wish to create a new status quo, but rather that we can, instead, define our current situation through the trends it exhibits. ICSB considers four guiding themes that will push us forward into the future. The themes, being forgiveness, frugal innovation, Humane Entrepreneurship, and resiliency, represent the important topics with which we, as a community, must engage to step freely and gracefully into our future world.

In creating sustainable and continuous cycles of growth, our enterprises must see themselves as part of a greater whole. Enterprises who start to view their ventures through the perspective of frugal innovation will consequently create solutions for more people without utilizing additional resources. The businesses who are willing to honestly admit their missteps regarding employment policies, working conditions, and environmental exploitation will be able to incorporate an application of forgiveness and subsequently transition towards more virtuous practices. This execution will be part and practice of focusing on the human-specific theory of Human Entrepreneurship (HumEnt). HumEnt will ultimately leverage a firm’s, an organization’s, or a nation’s ability to create quality employment opportunities and therefore sustainably increase their wealth, which will generate patterns of resilience in the face of crisis.

As transparency increases and the global population stands firmly and united in their demands to promote a just and green economy, ICSB sees the smaller entrepreneurial units as key players in these transitions. When we begin to see the positive effects of putting an end to our past status quo, we will no longer stand for the same injustices. Micro, small, and medium-sized enterprises (MSMEs) have an incredible capacity to incorporate these strategies and themes into their structural DNA to promote an equitable future for all more greatly.

Please follow with us as we expand our reflection series to include all players in the “End of the Status Quo.”

Article by:

Dr. Ayman El Tarabishy
President & CEO, ICSB
Deputy Chair, Department of Management, GW School of Business

We must think about if our output is wealth for wealth’s sake, where does that leave our world, our human community, our humanitarian systems, and the ecosystem?

Altering Perspectives with Humane Entrepreneurship

In the introduction to our paper, “Humane Entrepreneurship: How Focusing on People Can Drive a New Era of Wealth and Quality Job Creation in a Sustainable World,” Dr. Ki-Chan Kim, Dr. Song-Tae Bae and I posed the question, “Where — exactly — is the wealth of nations?” We lead from this specific question because it demands that we alter our perspective before even engaging with a theory of Humane Entrepreneurship (HumEnt). This purposeful act of expansion and openness allows readers to set aside their preconceived ideas and judgments that may prevent them from fully connecting with and receiving the ideas of HumEnt.

Returning to the idea of wealth, we must discuss how this expansion and change take place and what these might resemble. Going back to the basics, we will return to the World Bank definition published over 10 years ago describing wealth as “a complementary indicator to gross domestic product (GDP) for monitoring sustainable development in a country.” This definition demonstrated to the masses that wealth is not solely about specific amounts, a surplus of financial or physical resources, nor richness. Wealth now has grown to include the management of “a broad portfolio of assets,” including those that are “produced, human, and natural resources.”

As we know today, it is not just about the outcome of doing business, achieving performance outcomes, or leading a nation. Still, rather global trends tell us that it is more about how we carry out these activities. The recent and ever-evolving health and humanitarian crises have very much illuminated that if we do not make this necessary shift to achieving a virtuous and continuous ‘how,’ our world will not be able to continue caring for and housing the same amount of inhabitants that it does currently. Therefore, in other words, we must think about if our output is wealth for wealth’s sake, where does that leave our world, our human community, our humanitarian systems, and the ecosystem?

That is why we first must push for wealth to include the effort and resulting outcomes of the pursuit of sustainable development, as the World Bank indicated, as well as to initiate a conversation about protecting what we already have.

We have fallen so quickly and so easily to the charm of agile development that we have forgotten the value of the resources that we have. Luckily, Humane Entrepreneurship calls for heightened importance in the person and the community, so that with HumEnt we can begin to practice frugal innovation, which demands us to look at what we have, admit that it is enough, and use that to strive to provide equitable products and services for those who our system has systematically excluded.

Neither the evolution of our definition of wealth nor the complete acceptance and transition towards HumEnt will come first. These are two noble goals that we can think of as working collectively. Their combination will help us reframe and repurpose our business pursuits so that they have higher outcomes that involve sustainable and equitable change for all.

Let’s get started.

Article by:

Dr. Ayman El Tarabishy
President & CEO, ICSB
Deputy Chair, Department of Management, GW School of Business

We as human leaders, employees, businesses, etc. must, in fact, change ourselves and our attention in order for the SDGs to work.

Being the Change, You Wish to See

The United Nations Sustainable Development Goals seem to be the most united and comprehensive guide in which our global community might simultaneously survive and heal its inequalities that have been plaguing our world. Resulting from historical injustices, the world is far from equal. As mentioned earlier in this series, the concept of Humane Entrepreneurship (HumEnt), regarded on a large scale, poses our only survival mechanism to enable the achievement of the United Nations Sustainable Development Goals (SDGs). However, one grand mistake that we are collectively recreating in regards to sustainable change and promotion of the SDGs is that we forget that we as human leaders, employees, businesses, etc. must change ourselves for the SDGs to work.

More clearly, the achievement of the SDGs is not solely a means to create a more just world; however, more so, they are the end, the results of our ability to highlight and focus our attention on the humane, or to care for our fellow humans. Currently, many, but certainly not all, enterprises are focusing on profit. They forget the power of benefit, meaning the potential benefit an enterprise could have on its community, its customers, and the environment. That is why I pose that the SDGs’ success will be determined by our ability to instill, or at least introduce, the principles of Humane Entrepreneurship to our students, mentees, and future leaders in their formative years.

By nurturing future and current entrepreneurs, and in so doing, exhibiting the principles of HumEnt ourselves, we might be able to demonstrate a tangible image of how the Sustainable Development Goals will be achieved. Teaching the Sustainable Development Goals is much more than sharing the 17 goals and understanding how they work interconnectedly with each other; it is about helping learners understand how they both affect and are affected by the Sustainable Development Goals. It is in seeing how we are part of the same system for which the SDGs were created that will ultimately allow us to move beyond accepting the current injustices of the world as just “how it is” and understanding how, by refocusing our values, we might create the world anew.

It is for this reason that ICSB has concurrently launched the SDG certificate program and the ICSB Educator 300. These two programs are dependent on each other. In building the Educator 300, ICSB is committing to gathering a group of educators who are ready to evolve so that entrepreneurship education can adapt to societal changes. However, to prepare educators for the future ahead, training in the study and practice of HumEnt is essential. The SDG certificate program complements this new educator platform as it both helps to provide educators with the necessary knowledge of today while introducing the results of including HumEnt in program design and instruction.

Humane Entrepreneurship is not only for the boardroom. It is a lifestyle choice. To center empathy, equity, enablement, and empowerment in our teaching and leading is a decision that we must make for ourselves. The future is bending towards HumEnt, and we, at ICSB, want to prepare all our members for this mighty change. These changes are right at our fingertips, let’s decide to welcome these future changes, and in turn, be the changes we are so accustomed to studying. The future begins with us. 

Let’s get started.

Article by:

Dr. Ayman El Tarabishy
President & CEO, ICSB
Deputy Chair, Department of Management, GW School of Business