Productivity rises when companies are facing closure

“Innovative forces are released. They don’t have to lead to radical changes, but many minor changes can boost productivity. In several cases I studied it was also apparent that individuals who had no formal responsibility or authority took on greater responsibility and became informal leaders.”

“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.”

The explanation for this difference, according to Magnus Hansson, is that a decision to shut down eventually leads to a situation where employees know what is going to happen, whereas employee downsizing creates uncertainty and conflicts.

Magnus Hansson’s research is based on the factories’ own production statistics, but to see what lies behind the figures, he also studied three companies in depth.

Interviews with plant managers, union representatives, and employees were complemented by his own observations, including what employees talked about during coffee breaks, what views they had of management and their work. Here he discovered several key factors that largely explain the increase in productivity:

“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.”

The ten companies covered by Magnus Hansson’s dissertation are:

Korsnäs Marmaverken in Söderhamn
SSAB in Luleå
PLM (Hammars Glasbruk) in Hammar (moved to Limared)
Fundia Steel, Wire Rod, in Smedjebacken
Lovene Dörr in Lidköping
Gusab Stainless in Mjölby
Gislaved tire factory, tire production in Gislaved
Gislaved tire factory, studding division in Gislaved
BHP Billiton in Newcastle, Australia
Boston Scientific in Seattle, USA