SWEDEN: Inspire workers - make them redundant

A doctoral dissertation submitted to the Swedish Business School at Örebro University has revealed that failing companies could offer the secret of success for businesses yet to face dire straits. Strangely, productivity rises when companies are facing closure.

Business economist and assistant professor at the central Sweden university, Magnus Hansson, has found that during the phase-out period when management is busy dealing with matters other than daily operations, employees shoulder a greater responsibility for their work and this results in enhanced efficiency.

The findings are based on Hansson's research from the closure of 10 manufacturing companies, two of them outside Sweden, between 2002 and 2007. In each case, the death rattle of a business sparked a surprising burst of productivity.

He said that initially, when the closure was announced, there was a drop in productivity because of the negative emotions involved but when negotiations were over and employees knew what their future conditions would be, there was a positive spike. Also, with workplace controls being eased by management, employees became more spontaneous and independent at work, discovering improved leadership abilities.

"This is just the opposite of what happens when a company downsizes its employees. Even though the aim is to increase productivity, paradoxically it hampers production," said Hansson.

The explanation for this difference, he believes, is that a decision to shut down a company eventually leads to a situation where employees know what their future holds, whereas employee downsizing creates uncertainty and conflicts.

The message he draws from these studies is that company closures could actually be drawn out, creating benefits for employees and the company. Also, he concluded that pumping in more investment is not necessarily the best way to get more productivity from workers.

"It's about people and what motivates them. It's surprising to see the commitment and efforts of employees in such an extreme situation as when they are losing their jobs," Hansson said.

monica.dobie@uw-news.com