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Journal of Management Research

Vol. 9, No. 1, April 2009, pp. 3-14

Training and Development in an Era of


Downsizing
Franco Gandolfi
Abstract

Downsizing as a restructuring strategy has been actively implemented for the last three decades. While
employee reductions were utilized mainly in response to crises prior to the mid-1980s, downsizing
developed into a fully-fledged managerial strategy for tens of thousands of companies in the mid- to
late-1980s. Since then, downsizing has transformed the international corporate landscape and affected
the lives of hundreds of millions of individuals around the world. While the overall effects of downsizing
have been widely reported, many misconceptions surrounding the concept of downsizing have remained.
This conceptual paper focuses on the role of training and development (T&D) during the downsizing
process. In particular, the research depicts the current body of literature associated with the function of
HR and its plans, programs, and policies that firms adopting downsizing must provide to their surviving
workforces. Finally, the paper offers concluding comments regarding effective downsizing practices that
have emerged in the literature.

Keywords: Downsizing, survivors, survivor syndrome, training and development

INTRODUCTION substantial body of literature showcasing that


downsizing has profound human consequences on
Back in the 1980s and in the early days of the
the workforce, the so-called ‘aftereffects’ of
1990s, downsizing was viewed as an indicator of
downsizing (Littler, Dunford, Bramble, and Hede,
organizational decline. Over the past decade or so,
1997). Downsizing survivors, those individuals that
however, downsizing has been able to shed that
remain with the firm, have become of particular
stigma and gained legitimacy as a reorganization
concern since they are faced with increased
strategy (Fisher and White, 2000). Despite
workloads and job responsibilities, on the one
considerable evidence showing that many
hand, and since they have shown to exhibit a
downsized firms have failed to achieve their
number of dysfunctional downsizing-related
economic and organizational goals, downsizing has
illnesses, such as the survivor syndrome, on the
continued to be adopted around the world – even
other hand (Gandolfi, 2006). Human Resource
in the best of economic conditions (Gandolfi,
(HR) practitioners and scholars assert that the
2007). Clearly, downsizing has been popular and
ignorance of the impact of downsizing on
enduring, but not always effective, productive, or
survivors is one of the key reasons for the failure
valuable (Macky, 2004). This is evidenced in a
of many downsizing activities and their ensuing
long-term problems (Cameron, 1994; Kinnie,
Franco Gandolfi Hutchinson and Purcell, 1998; Farrell and
Director MBA/EMBA Programs Mavondo, 2004).
Regent University This conceptual paper examines downsizing in the
School of Global Leadership & Enterpreneurship context of the management of a firm’s human
1000 Regent University Drive resources during downsizing. It presents the main
Virginia Beach, VA 23464-9800 theories, assertions, and empirical findings
regarding the role of the HR function, in general, adequate support plans for survivors to minimize
and training and development (T&D), more the negative effects of cutting back (Beylerian and
specifically. As such, the paper reviews the existing Kleiner, 2003). There is considerable empirical
body of literature associated with the HR plans, evidence suggesting that firms offer little support
programs, and policies that firms adopting for survivors (Amundson, Borgen, Jordan, and
downsizing must provide their surviving Erlebach, 2004), who are believed to be ignored
workforces. Finally, the paper presents a number of throughout the downsizing process. This
concluding comments regarding effective corroborates an earlier study postulating that
downsizing practices that have emerged in the British firms had neglected the needs of the
literature. remaining workforce revealing that less than 50%
had provided support for the survivors, while
DOWNSIZING AND THE HR nearly 80% of firms had provided professional
FUNCTION outplacement services for the downsized victims
(Doherty and Horsted, 1995).
The adoption of downsizing as a strategy produces
economic, organizational, and human Clearly, the blatant ignorance of the impact of
consequences. Empirical and anecdotal evidence downsizing on survivors is one of the major
suggest strongly that highly anticipated economic reasons for the failure of many downsizing efforts
and organizational gains have not materialized and their ensuing long-term problems (Devine et
(Sahdev, 2003; Zyglidopoulos, 2003). Moreover, the al., 2003). The decline of firms during downsizing
occurrence of various sicknesses experienced by is largely attributable to the neglect of the human
the surviving workforces has drawn a great deal of capital (Hitt, Hoskisson, Harrison and Summers,
attention (Devine, Reay, Stainton and Collins- 1994). During periods of downsizing, top
Nakai, 2003). The perceived breach and violation management is preoccupied with short-term
of the old psychological contract is likely to have operational decisions and long-term commitments
contributed to and magnified the failure of many are thus postponed or neglected. The key to
downsizing efforts (Gandolfi, 2006). Interestingly, successful downsizing is to focus on people (Allen,
HR practitioners and scholars believe that the 1997) which is consistent with the notion that
prevalence of the survivor syndrome and other survivors were kept because they are the cream of
related symptoms constitute a barrier to the crop (Allen, 1997) and the linchpins of future
productivity (Maki, Moore, Grunberg and profitability (Appelbaum, Delage, Labibb and
Greenberg, 2005). Given the absence of financial Gault, 1997). While it has been noted that
successes following downsizing coupled with the organizations generally prepare well for the victims,
finding that downsizing firms are frequently left they certainly do not anticipate or prepare for the
with a narrow-minded, self-absorbed, risk averse, survivors (Appelbaum et al., 1997). Thus, it can be
and depressed workforce (Campbell-Jamison, alleged that most downsizing efforts have not been
Worrall and Cooper, 2001; Sahdev, 2003), it planned, managed, and implemented effectively
remains of significance to provide a theoretical (Cameron, 1994) causing a great deal of
explanation as to why downsizing has failed to resentment among survivors (Amundson et al.,
produce positive outcomes. 2004).

There is substantial evidence supporting the notion There is some understanding that the root cause of
that firms are poorly prepared for downsizing. An the survivor illnesses is a profound shift in the
American Management Association (AMA) report psychological employment contract between the
showed that more than 70% of surveyed firms had employee and the firm. Under the old employment
downsized with no downsizing-related HR plans, contract, employees viewed their jobs as a lifetime
policies, and programs in place and more than half entitlement and offered loyalty, longevity, and
of the downsized firms had failed to provide commitment to their companies. In return, firms

4 Journal of Management Research


provided great benefits, security, training, career • Firms must amend their HR policies and
progression, and lifetime employment. Under the practices during and after downsizing
new employment contract, however, loyalty to a recommending that four components to be
firm has been replaced with loyalty to an rigorously incorporated: integrating
employee’s work (Amundson et al., 2004). This information, communication, and
suggests that lifetime employment and reciprocal transparency; providing support for survivors
loyalty are obsolete and that the traditional career and victims; adjusting the performance
is therefore dead (James, 1999). Another shift is the management system, and providing training
move away from the concept of “employment” and development (Kettley, 1995).
towards “employability” (Doherty and Horsted,
1995), whereby the individual embraces personal • Effective HR policy during downsizing must
career ownership, owns his or her own skills and encompass the following four elements:
experience, and aspires to attain skills that are professional advice; support; counseling; and
transferable, thereby, attempting to remain training. Such an approach enables survivors
marketable and flexible (Lawes, 1996). Also, firms to cope with downsizing more successfully in
used to view their employees as long-term assets that the four HR aspects potentially mitigate
that had to be nurtured, developed, and cultivated, or neutralize the debilitating effects of the
while there is now a tendency to consider survivor syndrome (Doherty and Horsted,
employees as short-term costs to be reduced and a 1995).
variable in the production equation that can be • Firms need to pursue a strong,
discarded at any time. Therefore, since most communication-based approach in times of
current survivors were employed under the old major change providing an environment of
employment contract, where loyalty and effective change and a meaningful strategy to
commitment prevailed, the announcement and cure survivor sicknesses. HR plans must
implementation of downsizing signifies a perceived include open, two-way communication
breach and violation of the covenant between the channels; a shared vision; participative
firm and its employees. The paradigm shift from decision-making; the conduct of perpetual
the old to the new covenant and the one-sided job redesign; and the provision of training
breach of the psychological contract is believed to (Allen, 1997).
be the root of survivor-related illnesses (Allen,
1997; Zyglidopoulos, 2003). • Firms need to focus on employee
empowerment as a remedy to the emergence
As HR is primarily concerned with advising firms of the survivor syndrome. The way the firm
on the effective allocation and management of its interacts with its employees plays a vital role
people, what is the role of HR during downsizing? in the successful implementation of change
What does research suggest? Cameron (1994), in that communication is the glue that binds
drawing upon a systematic four-year study of a firm together. Thus, effective HR practice
downsizing, found that certain strategies were more must comprise frequent, frank, and consistent
likely to succeed than others concluding that the communication; information about the
most critical factor for downsizing success was the effective process and progress of downsizing; the
management of the HR system. This raises the articulation of a clear vision; employee
fundamental issue as to what constitutes effective participation; and training (Appelbaum, Close
HR practice? Over the many years of inquiry and and Klasa, 1999).
study of downsizing, a number of studies have
been carried out asserting the specific role of HR • Survivors frequently experience a post-
during the downsizing process. Some of the downsizing drop in morale. The results of a
following findings that have emerged are of Canadian study show that although there was
normative, prescriptive nature: not a single best approach, some successful

Volume 9, Number 1 • April 2009 5


practices have the following components: and adverse impact on work productivity.
advance planning; open and honest Thus, recommended personal development
communication; training; information; and interventions are: counseling; training; and
communication about the company’s new transition management workshops (Sahdev,
vision (Dolan, Belout, and Balkin, 2000). 2003).
• Downsizing has created a phenomenon titled • Firms must introduce downsizing-related HR
“the cycle of failure” involving a chain of programs that foster employee empowerment;
consequences beginning with employee build recommitment to the firm; and
dissatisfaction and ending with organizational encourage greater employability. Specific
inefficiency and decreased profitability. Thus, survivor programs need to align survivors
there must be a strong focus on training for with the firm’s new vision, mission, and
survivors in that training enables survivors to strategic objectives; incorporate coaching and
cope with the new responsibilities and tasks mentoring programs; and encourage ongoing
(Makawatsakul and Kleiner, 2003). skills development and training opportunities.
A strong emphasis must be placed on T&D
• Downsizing yields dysfunctional human assuming that the pursuit of an
effects, including decreased levels of morale, organizational learning ethic can create a
motivation, and trust. Likewise, the strategic competitive advantage (Farrell and
emergence of survivor sicknesses has a direct Mavondo, 2004).

Table 1: HR Components for Successful Downsizing

Kettley Doherty & Allen Appelbaum Dolan Makawatsakul Sahdev Farrell &
(1995) Horsted (1997) et al. et al. & Kleiner (2003) Mavondo
(1995) (1999) (2000) (2003) (2004)

Advance
planning

Information, Communication Communication, Communication,


communication, information information
transparency

Vision Vision Vision Vision, mission,


and strategic
objectives

Support for Counseling, Counseling Coaching and


victims and support, and Transition mentoring
survivors professional management programs
advice workshops

Performance Job redesign


management
system

Respect for the


seniority rights and
depersonalizing
of layoffs

Participative Participation
decision-making & involvement

Training & Training Training Training Training Training Training Training & skills
Development development
(T&D)

Source: Developed for this research

6 Journal of Management Research


Table 1 presents a non-exhaustive overview of monetary reasons, instituting programs for the
some of the main studies conducted and their survivors would require additional financial
respective findings in regards to HR components resources that firms were not willing to spare.
for successful downsizing. Firms were also so concerned about their financial
resources that they often overlooked the adverse
Interestingly, while Table 1 depicts an incomplete impact of second-order (i.e., human) consequences
picture of the theoretical constructs leading to (Beylerian and Kleiner, 2003).
successful downsizing, all proposed elements
correspond with Cameron’s (1994) original list of
critical factors leading to successful downsizing, DOWNSIZING AND T&D
including employee involvement; teamwork; Why should there be a continuation of downsizing
sharing of communication and information; research? Apart from the presented research gaps,
provision of rewards; conduct of performance there are clear developments justifying the pursuit
appraisals; articulation of a vision; administering of academic inquiry, including:
of downsizing in a trustworthy and fair manner;
and training. Notably, training is the HR • the ongoing popularity of downsizing since
component advocated by all scholars and the late 1980s,
professionals included in this review. • the frequency and magnitude of reported
Unfortunately, the academic work to date has downsizing failures,
remained at an abstract, theoretical level and there
is limited empirical research published asserting the • the occurrence of survivor-related sicknesses,
relationship between HR components and
downsizing success. Nonetheless, two main studies • the assertion that the adoption of downsizing
are of significance: will continue, and

Gandolfi (2001) carried out case study research • the plea of experts for the development and
examining the role of T&D in the context of introduction of proactive HR programs.
downsizing. He found that Australia’s largest banks Examining and asserting the role and relevance of
were ill-prepared for downsizing and had failed to HR during downsizing is of great importance with
implement T&D in an effective manner. Study the following questions at the heart of future
cases pursued reactive rather than proactive T&D academic inquiry:
approaches. Gandolfi (2001) concluded that T&D
must play a significant role during downsizing and 1. What is the specific role and relevance of
recommended that firms must engage in proactive T&D during downsizing?
T&D, embrace an eclectic T&D approach
2. Can T&D positively influence the outcomes
combining generic with firm-specific training, and
of downsizing?
provide personal development preceding
downsizing. 3. Does T&D constitute an underpinning of the
survivor syndrome remedy?
Right Associates carried out a major US survey
reporting that while survivors were informed about While the previous section presented
the likely effects of downsizing, very little was recommended HR components for successful
done to introduce new HR programs to promote downsizing, more work needs to be carried out on
survivors’ re-engagement with the firm. The study the role of survivor programs. For example, there
showed that 88% of firms had failed to implement is a shortage of evidence demonstrating the
programs to help improve the survivors’ effectiveness and efficacy of survivor programs for
performance and confidence levels. Firms forfeited survivors. Correspondingly, a lack of evidence on
such programs since they felt that they were caught the role of T&D during downsizing is also
in a dilemma. While firms downsize for primarily

Volume 9, Number 1 • April 2009 7


Table 2: Empirical Findings of T&D Elements in the Context of Downsizing

Empirical Finding Researcher

Most firms do not attempt to establish a social environment conducive to the Zemke (1990)
development of the workforce, and, ultimately, to the company’s prosperity in a
period of organizational change.

Most surveyed firms have implemented downsizing without any HR policies or Lee (1992)
programs in place.

Most firms fail to anticipate the human consequences of downsizing. Cascio (1993)

Firms that downsized most effectively had changes in the HR system that Cameron (1994)
preceded and followed the implementation of downsizing.

The decline of downsized firms is attributable to the neglect of human capital. Hitt et al. (1994)

HR departments are often the primary target of cost-cutting efforts. Clark & Koonce
(1995)

Downsizing fails to achieve its alleged benefits due to the fact that companies lose Evans, Gunz,
core competencies by cutting muscle instead of fat. & Jallad (1996)

Survivors are largely ignored before, during, and after downsizing. Appelbaum et al.
(1997)

Firms do not ensure T&D before, during, and after the downsizing. Appelbaum et al.
(1997)

The adverse impact on survivors is one of the major reasons for long-term Kinnie et al. (1998)
problems of firms associated with downsizing.

Firms will continue to downsize well into the next century. Either way, whether Mitchell (1998)
downsizing or rehiring, companies must train their people.

Surveyed firms were ill-prepared for downsizing and failed to implement T&D in Gandolfi (2001)
an effective manner.

Survivors are driven to work harder after downsizing. Firms frequently fail to provide Makawatsakul &
training to survivors. Kleiner (2003)

Downsizing does not produce superior organizational performance in the long term Zyglidopoulos
and surviving employees frequently do not receive the necessary training. (2003)

Downsized firms frequently neglect the surviving workforce. Hareli & Tzafrir
(2006)

Surveyed firms were ill-prepared for downsizing and survivor syndrome. Gandolfi (2007)
Survivors were ignored and left to their own devices.

Source: Developed for this research

8 Journal of Management Research


apparent. These aspects constitute research gaps • How are survivors able to successfully cope
and merit further academic study. with the new circumstances following
downsizing?
Evidently, T&D must play a critical role in the
successful planning and execution of downsizing. • How are survivors able to perform the new
This assertion corroborates Cameron’s (1994) job responsibilities in the absence of
finding of a US firm that had successfully adequate training?
introduced and upgraded training policies for all
employees one year prior to the announcement of • How does an ill-experienced and inadequately
downsizing (Cameron, 1994). It is clear that a trained workforce excel in the long run?
decidedly proactive approach to HR, in general, These issues will need to be considered and
and T&D, in particular, represents a key factor. empirically studied in future research. Finally, the
While the role of HR in association with following paradox has emerged: A seemingly
downsizing remains under-researched (Hareli and indifferent management attitude towards
Tzafrir, 2006; Gandolfi, 2007), some empirical downsizing survivors needs to be reconciled with
findings of T&D elements in the context of the much-publicized and eloquent mission
downsizing have nonetheless been published. Table statements portraying the workforce as the most
2 presents a non-exhaustive overview. important aspect of a firm. For example, back in
Having reviewed the body of literature, the the 1990s, a firm’s workforce was portrayed as the
following can thus far be concluded: most important capital (Sofo, 1999), the most
valuable resource (Harrington, 1998), the most
• Downsized firms have implemented important asset (Sunoo, 1998), the most valuable
downsizing without adequate HR systems in asset (Darling and Nurmi, 1996), and a national
place (Lee, 1992; Cascio, 1993; Appelbaum et resource (McMorrow, 1999). Have managers
al., 1997; Gandolfi, 2007) decided that the workforce, which was seen as so
critical in the 1990s, is now a liability rather than
• Downsized firms have ignored survivors an asset? Do employees constitute an expense and
before, during, and after downsizing a cost that is readily expendable? More work will
(Appelbaum et al., 1997; Hareli and Tzafrir, need to be carried out to reconcile the paradox.
2006; Gandolfi, 2007)
• Downsized firms have failed to ensure T&D The Benefits of T&D
before, during, and after downsizing
Why then should firms invest in T&D? What are
(Appelbaum et al., 1997; Gandolfi, 2006).
the alleged benefits? A brief review of the T&D
• The decline and ill-performance of literature research depicts the benefits of T&D to
downsized firms is attributable to the neglect be manifold. Table 3 presents an incomplete
of survivors (Hitt et al., 1994; Hareli and historical overview of some of the published
Tzafrir, 2006; Gandolfi, 2006) findings.
• Survivors are forced to take on new job As Table 3 depicts, the alleged benefits of T&D
responsibilities from departing employees and for both the firm and the individual employees are
faced with increased overall workloads distinct, manifold, and diverse. For instance, T&D
(Zemke, 1990; Allen, 1997; Mitchell, 1998; is at the core of a firm’s organizational success
Dolan et al., 2000; Makawatsakul and (Mitchell, 1998) and an absolute necessity (Clarke
Kleiner, 2003; Gandolfi, 2006). and Koonce, 1997) for a firm’s long-term survival.
Sadly, empirical evidence also indicates that not
This rather dire situation poses a number of every firm recognizes the value of using T&D for
questions. For example: strategic ends (Berry, 1990) and as a means of

Volume 9, Number 1 • April 2009 9


Table 3: The Benefits of T&D

Source Findings

Poulter (1982) • Benefits for the individuals are the opportunity for promotion and self-
improvement, improved job satisfaction through increased job performance,
the chance to learn new things, and adaptability (i.e., the ability to adapt to
and cope with change).
• Possible benefits for the firm are increased levels of productivity, profitability,
efficiency, and effectiveness, as well as reduced rates of absenteeism, labor
turnover, accidents, and errors.
• T&D constitutes an “insurance policy” (p 7) for an organization.
Commerce Clearing House • Employees are more likely to successfully cope with major change, crises,
(1985) and critical incidents.
Rabey (1990) • T&D has two main purposes. First, it ensures that work meets required
standards of quality, quantity, cost, and time. Ideally, this translates into higher
levels of productivity, effectiveness of operations, and a safer and more
harmonious work environment. Second, the development of employees meets
the foreseeable needs of the firm and seeks to realize the potential of each
individual.
Ocholla (1995) • T&D leads to a competitive advantage.
Davidson (1996) • T&D has the capacity to increase overall profitability.
Kramar, McGraw, & • Positive correlation between T&D and organizational performance in that T&D
Schuler (1997) has the capacity to improve a firm’s performance in at least three key areas:
labor productivity, overall quality of output, and the firm’s ability to adapt to
and cope with change.
Sofo (1999) • T&D enhances employee performance, productivity, and efficiency, and
improves the quality, structure, and processes of firms.
• T&D is positively associated with empowerment, participation, and recognition.
Clarke & Koonce (1997) • Positive correlation between T&D and improved organizational performance
indicators and individual growth.
Berge et al. (2002) • T&D leads to higher levels of competitiveness.
• T&D leads to sustainable competitive advantages.
Farrell & Mavondo (2004) • T&D results in potential source of a competitive advantage.
Gomez, Lorente, & • T&D is one of the most significant processes within the strategic management
Cabrera, (2004) of human resources.
• Critical role of training in maintaining and developing individual and
organizational capabilities.
• Capacity of training to substantially contribute towards the process of
organizational change.
• T&D is a strategic capability.
Stone (2005) • T&D is a significant source of competitive advantage.
Saks & Belcourt (2006) • T&D leads to higher levels of employee productivity.
Marshall (2007) • Positive correlation between T&D and organizational performance.
• T&D leads to improved ability to cope with change.

Source: Developed for this research

10 Journal of Management Research


gaining a competitive advantage (Farrell and 1994; Makawatsakul and Kleiner, 2003).
Mavondo, 2004), thus ensuring its future (Marshall,
2007). Most importantly, Table 3 shows that 2. Executives need to develop a change-
scholars have recognized the possible correlation management plan with a clear vision of the
between T&D and employees’ ability to adjust to future organizational identity and specific
and cope with major change (Poulter, 1982; steps to conduct and oversee the transition
Kramar, McGraw and Schuler, 1997; Gomez, (Macky, 2004).
Lorente and Cabrera, 2004; Marshall, 2007). This 3. Management needs to pay special attention to
particular finding has at least three implications: the survivors through training, counseling,
1. T&D has the potential to prepare an regular information, and two-way
organizational system and its employees for communication (Allen, 1997), while victims
downsizing in a proactive, strategic fashion; generally receive outplacement, severance pay,
and counseling services (Gandolfi, 2001).
2. T&D has the potential to enable the
survivors to cope with altered job tasks and 4. Firms need to identify redundancies, excess
responsibilities and increased workloads costs, and inefficiencies. This can be achieved
effectively; and through internal data gathering and
monitoring (Makawatsakul and Kleiner, 2003;
3. T&D has the potential to enable the Schraeder, Self and Lindsay, 2006).
survivors to cope with survivor syndrome
and other downsizing-related illnesses. 5. Leaders should facilitate downsizing by
preparing for a high level of activity,
Surprisingly, the study of the role and relevance of including rallying people with a vision of a
T&D during the downsizing process has received better firm, offering transition management
little academic attention to date. In one of the few training, acknowledging uncertainties and
empirical studies conducted on the subject, it was concerns, communicating plans and actions,
concluded that T&D had the potential to positively telling the truth, involving people in
impact downsizing outcomes and that T&D also managing the transition, and establishing a
had a positive impact on survivors and survivor- safety net for transition victims
related illnesses (Gandolfi, 2001). Significantly (Makawatsakul and Kleiner, 2003).
more work needs to be conducted to verify the
findings and to extend the study. Finally, survivors frequently experience feelings of
anger, resentment, stress, and apathy, which lead to
decreased levels of morale, motivation, and
Effective HR-related Practice During productivity. HR leaders have the opportunity to
Downsizing add value to the downsizing process by taking an
Finally, is there a ‘best’ HR practice during early leadership role before, during, and after
downsizing? Are there HR-related elements that downsizing to address the healing of the survivors.
have shown to impact downsizing positively? A potent, effective downsizing plan must include
Downsizing scholars have come up with lists of strategies for all six fundamental HR areas,
effective HR practice during downsizing. including employee involvement, communication,
Accordingly, successful downsizing practices may support programs, selection processes, HR
have some of the following HR characteristics: management tools, and T&D (Weakland, 2001;
Gandolfi, 2006). The latter component, in
1. Downsizing needs to be implemented from particular, is considered to be of primary
the top with recommendations from lower- importance and in line with the findings and claims
level employees and based upon job and task of this current paper.
analyses of how work is organized (Cameron,

Volume 9, Number 1 • April 2009 11


CONCLUSION of the HR function in general and T&D, more
specifically. The paper reviewed and analyzed the
This conceptual paper examined downsizing in the
existing literature in relations to HR plans,
context of the management of a firm’s human
programs, and policies that downsized firms had
resources. It presented the main theories,
provided to the survivors.
assertions, and empirical findings regarding the role

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