What Ethical Obligations Does an Organization Have When Downsizing?

Downsizing is a common strategic human resources maneuver where an organization lays off multiple workers at once. Small businesses don't often have as much propensity to downsize given their smaller workforce, but it does happen. When you do lay off workers, it is important to keep in mind ethical expectations of employees, local communities and customers.

A common expectation of employees and communities is that an organization explores other strategic moves before turning to downsizing. Cutting costs, reorganize the business and seeking additional financing are possible financial options in lieu of downsizing. At some point, however, a decision to downsize may be the ethical move because it protects the business and the remaining employees from failure.

Consider ethical factors in the way you communicate a downsizing decision. First, respect the individual privacy of the employees being laid off and talk with each in private. A personal approach, especially in a small business, is also more respectful than bringing in an outside consultant or layoff expert. Explaining the honest motives of the layoff and conveying general appreciation to the employee may help soften the blow.

In some states, companies are legally required to offer a few weeks of severance during massive layoffs. Check with your state department of labor to find out. Regardless, communities and employees often feel you have an ethical obligation to provide some compensation and ongoing benefits coverage to help an employee after a layoff. Some companies also pay for employment services, such as resume and cover letter development and headhunter support.

Recognize the ethical importance with regard to the needs of remaining employees. Many may feel concern that their own jobs are in jeopardy. Downsizing can also project that the situation for the organization is desperate. A meeting to explain the layoff and to address rumors or uncertainty can help put employees at ease, and prevent those you want to keep from seeking a more stable situation elsewhere.