Study Shows Ombuds Mitigate Hidden Costs of Downsizing

Research by Charlie O. Trevor and Anthony J. Nyberg of the University of Wisconsin-Madison School of Business confirms that when companies layoff employees to boost productivity, voluntary turnover rates also increase significantly. Trevor and Nyberg then examined what sort of companies did not suffer from an unexpected surge in voluntary attrition after a downsizing program. They found that companies with Ombuds were better insulated from these unintended consequences.

There is at least some good news for downsizing companies, however, as the study also identifies human resource practices that can substantially buffer the downsizing effect on subsequent turnover. One way is through practices that foster job embeddedness, such as defined-benefits plans, sabbaticals, on-site childcare, hiring for organizational fit, and flextime. Another is through practices that convey a concern with procedural justice -- practices that provide employees with a means of addressing perceived injustices on the job, such as through an ombudsman or a confidential hotline or a formal grievance process. For example, a company that downsizes 2% of the workforce (the median rate of the downsizers) and has high levels of either type of HR practices would be expected to see turnover rate increases less than one fourth the size of the increases at low levels of the HR practices.

Apparently, employees at such companies were confident that the downsizing efforts had been fair and unavoidable. The research will be published in the next issue of the Academy of Management Journal. (Wisconsin School of Business News; Freek Vermeulen’s HBR Blog.)

Related posts: Ombuds Can Help Minimize Effects of Layoffs; Ninety Second Defense of an Ombuds Office.