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This topic talks about downsizing. We will be talking about the concept of downsizing and the various techniques and methods used in downsizing. The key areas that will be covered are positive and negative effects of downsizing, workplace violence during downsizing and how workplace violence can take place and how can we avoid workplace violence. We will also be covering the alternative methods to downsizing which is contingent employment and flexible work arrangements.
We will also be covering on what are the measures to adapt in ensuring the success of the downsizing exercise, how the employees are going to face this downsizing and the methods used to maintain the motivational level of the survivors of this downsizing exercise. For this assignment, I have done a research on numerous journals and articles that are related to downsizing and also workplace environments. These articles have really helped me in understanding the terms and also seeing downsizing in many perspectives. I have also done some research on how the human resource department plays it role in downsizing.
In the conclusion, we can see how companies can gain and make sure that the downsizing activity does not end up being a failure. INTRODUCTION Downsizing refers to layoffs initiated by a company in order to cut labour costs by reducing the size of the company. Downsizing can occur at any time, but becomes epidemic in difficult economic times. Downsizing is a reduction in the number of employees, and sometimes in the number of operating units. Downsizing can also be classified as reducing operations though not necessarily the composition of the firm, usually cutting the size of the workforce.
This may result from technological advancements, economic conditions or reduced demand and is frequently cost-driven. In a business enterprise, downsizing is reducing the number of employees on the operating payroll. Some users distinguish downsizing from a layoff, with downsizing intended to be a permanent downscaling and a layoff intended to be a temporary downscaling in which employees may later be rehired. A lot of companies have been retrenching their workers lately and this is part of their downsizing exercise.
Businesses use several techniques in downsizing, including providing incentives to take early retirement and transfer to subsidiary companies, but the most common technique is to simply terminate the employment of a certain number of people. Rightsizing is downsizing in the belief that an enterprise really should operate with fewer people. All the techniques and methods used in downsizing is to reduce the number of workforce and therefore reduce costs. But organizations need to also look into other elements of downsizing and must also know what are the negative aspects and also about the employees reaction.
QUESTION 1 1. 1 – Downsizing Techniques and Increasing Use of Downsizing Downsizing is undertaken to reduce labour costs and to streamline organizational operations. Downsizing is also a result from mergers and acquisitions in which the resulting company is plagued with redundant functions. Downsizing became a tool to reduce costs, improve productivity and increase profitability. Downsizing has been increasing lately and there are many reasons for this. Companies claim that worldwide economic slowdown during the late 1990s had forced them to downsize, cut costs, and optimize resources.
Many companies such as ABC, and XYZ downsized to increase productivity and efficiency. Most companies not only reduced their workforce, they also redesigned their organizations and implemented quality improvement programs. Recently, ABC retrenched about 2000 managers worldwide in a move to downsize and cut costs. They have eliminated the non profitable departments and many employees were given the option to either move to a different department within the organization or leave the company. Many companies opted for downsizing in the late 1990’s and early 2000’s even though there was no need for it.
Many companies did not take into considerations on the negative effects of downsizing. One company which suffered greatly was XXX because they ended up losing many skilled workers. 1. 2 – Positive and Negative Effects of Downsizing Downsizing Advantages The main advantages of downsizing are to reduce costs and increase profitability. That is the main reason where many companies downsize. Listed below are some of the other advantages of downsizing: • employee reductions • reductions in the number of high-grade positions • increase in the ratio of supervisors to employees decrease in headquarters positions • personnel loss due to attrition versus personnel loss due to incentive programs • demographics of buyout recipients • use of buyouts in front-line versus overhead employees • decrease in personnel, budget, acquisition, and auditor positions • impact on diversity goals • ability to meet budgetary limits • ability to continue to accomplish legal and regulatory mandated programs • percentage of employees finding new positions • financial indicators, such as the payback period on incentive programs • reduction in total cost of wages and salaries
Downsizing Disadvantages Downsizing resulted in vast cultural changes in the organization instead of an increase in costs savings or productivity. The negative effects of downsizing include depression, anxiety, frustration, anger, and bitterness in the downsized employees. The survivors of the downsizing process were also affected. They experienced low morale and high stress and had to cope with an increase in workload. They were also concerned about possible job loss, relations with new superiors, revised performance expectations and uncertainties regarding career advancements.
Downsizing also ends up in losing skilled and experienced workers. 1. 3 – Workplace Violence Workplace violence is becoming a very serious issue in many organizations nowadays. Many organizations are giving a lot of priority on curbing workplace violence. Workplace violence includes threats, verbal abuse, harassment, physical attacks and homicide. The below are examples of indicators towards workplace violence: • blaming of others for personal problems • sudden change in behaviour • sexually harassing • alcohol or drug abuse • financial problems • deterioration in job performance Workplace Violence during Downsizing
Workplace violence tends to occur a lot during downsizing because employees do not feel secure about their jobs. Workplace violence can take place before the downsizing exercise and also after the downsizing exercise. The workplace violence that occurs before the downsizing activity is due to the feeling of being laid off or retrenched. Many employees will feel insecure and they will be frustrated and this can lead to violence. The violence after the downsizing period is due to not feeling secure about their job. These employees may feel that they might be the next in line to be laid off. How to Avoid Workplace Violence
The first priority in developing a workplace violence prevention policy is to establish a system for documenting violent incidents in the workplace. Such data are essential for assessing the nature and magnitude of workplace violence in a given workplace and quantifying risk. These data can be used to assess the need for action to reduce or mitigate the risks for workplace violence and implement a reasonable intervention strategy. An existing intervention strategy may be identified within an industry or in similar industries, or new and unique strategies may be needed to address the risks in a given workplace or setting.
Implementation of the reporting system, a workplace violence prevention policy, and specific prevention strategies should be publicized company-wide, and appropriate training sessions should be scheduled. The demonstrated commitment of management is crucial to the success of the program. The success and appropriateness of intervention strategies can be monitored and adjusted with OW&MHR, 8 continued data collection. The organization can also implement a workplace violence prevention program and policy. Much discussion has also centered on the role of stress in workplace violence.
The most important thing to remember is that stress can be both a cause and an effect of workplace violence. That is, high levels of stress may lead to violence in the workplace, but a violent incident in the workplace will most certainly lead to stress, perhaps even to post-traumatic stress disorder. Employers should be sensitive to the effects of workplace violence and provide an environment that promotes open communication; they should also have in place an established procedure for reporting and responding to violence. QUESTION 2 . 1 – Flexible Work Arrangements and Contingent Employment In the early 21st Century, many companies began offering flexible work arrangements to their employees in an attempt to avoid the negative impact of downsizing. A flexible working arrangement resulted in increased morale and productivity, decreased absenteeism and employee turnover, reduced stress on employees, increased ability to recruit and retain superior quality employees, improved service to clients in various time zones, and better use of office equipment and space.
This flexible work arrangement also gave employees more time for them to spend for themselves. Contingent employment is defined as any employment relationship that, within a limited period, can be terminated by the organization without costs. Contingent employment includes, agency workers, workers with limited duration contracts, on call workers, and self employed that are hired by the organization. Contingent employees were those who had no explicit or implicit contract and expected their jobs to last no more than one year.
Companies did not have to pay unemployment taxes, retirement or health benefits for contingent employees. In many cases, the salaries paid to contingent employees were less than those given to regular employees performing similar jobs. These employees do not have long term commitments and organizations can downsize them without much difficulty or guilt. Many human resources managers opted for contingent employees as they offered the least resistance when downsized. However, contingent employment has its disadvantages in the long run.
In initial stages, when contingent employment was introduced, such employees were asked to perform non-critical jobs that had no relations to an organization’s core business. But later on, contingent employees were employed in core areas of the organizations. This resulted in increased costs as they had to be framed for the job. The fact that contingent employees were not very loyal to the organization also led to problems. Contingent employees reportedly failed to develop a sense of loyalty towards the organization.
The increasing number of contingent employees in an organization was found to have a negative effect on the morale of regular employees. Their presence made the company’s regular employees apprehensive about their job security. In many cases, regular employees were afraid to ask for a raise or other benefits as they feared they might lose their jobs. The above can be an alternative to downsizing. By employing contract workers the organization is not obliged to the employee. But as we can see above there are many disadvantages as well.
The permanent employees will not feel secure of their jobs as the organization may opt for more contract workers. As for the contract workers, their employee welfare is not fully taken car of. They are not eligible for health, retirement or overtime benefits. These flexible work arrangements may seem suitable for a short period of time, but in the long run it might not be successful. This is because organizations cannot expect the loyalty and determination shown by the permanent employees and the contract employees as the same. QUESTION 3 3. – Measures to Adopt in Ensuring the Success of Downsizing Involvement by Human Resource Managers Effective and successful downsizing is not that simple. In fact, the process can be quite complex and multifaceted and human resource managers play an integral part in its success. There are a few questions that must be answered to ensure a smooth downsizing: • How will attrition be managed? • How is the workforce distributed in the target organization? • What are the skills needed for the new or targeted organization? • Does the current workforce have those skills and competencies? Can the current workforce be trained to acquire those skills? • Is some recruitment necessary to acquire future skills that are needed? The precision with which an organization can answer these questions most, of which fall within the realm of responsibility of the human resource manager largely depends on the clarity of the organization’s strategic vision and the quality and quantity of information it possesses about its current workforce. It also heavily depends on the organization’s human resource information systems. Involvement by Managers at All Levels
Involvement by managers at all levels are essential because a face-to-face contact with employees is important to ensure that downsizing is done humanely and therefore, is ultimately successful. The managers must be able to communicate effectively with the employees. Involvement is needed throughout the organization. Overcoming Organizational Tradition One of the greatest obstacles for senior leaders, as the managers of change during downsizing, is to overcome organizational tradition that is to challenge the way things have always been done.
It is very difficult for employees to understand why their jobs are being eliminated or their work processes changed dramatically when they are doing as good a job if not better than they have always done. This can be especially true in public sector downsizings caused by budgetary reductions or a change in the political climate. Senior leadership should demonstrate commitment to change and more importantly remain consistent in its communications during downsizing. This will help overcome any employee denial of reality and combat traditional attitudes toward organizational change.
Communication Should Be Two-Way The importance of listening to employees and actively seeking out their ideas during the downsizing process is a good way to prepare for downsizing. Such two-way communication helps ensure that employee concerns are aired and those employee suggestions are heard. Employee input is an important factor in the success of the downsizing actions. Employees frequently contribute ideas on how the organization should be restructured and how to increase productivity as well as ideas on what assistance should be provided to employees seeking new jobs.
Provisions should be made for employee ideas to be submitted both confidentially and in open forum meetings where they could be discussed by employees and management. Employee suggestions can benefit an organization and empower the employees. Employees can challenge any of the practices, policies, and procedures of the organization and recommend changes. These employees can then be rewarded if the changes are successful and benefits the company. 3. 2 – How Employees are Going to Prepare for Downsizing Downsizing is becoming a very common thing in organizations nowadays.
Employees need to be always alert and know what is going on in the organization to ensure that they are well prepared if there is a downsizing occurring soon. In order to survive the trauma of downsizing employees need to plan well ahead on prevention matters if they were to be involved in the downsizing exercise. A very good way of planning ahead is by communicating with the senior management on the possibilities of downsizing. By doing this, the employee will be prepared to face the downsizing activity and can probably start looking for alternatives. Most of the traumas are usually caused by not anticipating the downsizing process.
On the employer’s part, they have the responsibility of informing the employees if they are forecasting any downsizing activities. 3. 3 – Methods to Maintain the Motivational Level of Survivors of the Downsizing Surviving a downsizing activity can be a very big battle. Even if the employees have survived the downsizing, they will still have the feeling that their work is not secured. The senior managers play a very important role in ensuring that the employees gain back their confidence in the organization. The employees must be as motivated as ever in order to ensure the smooth flow of the organization.
There are a few ways to maintain the motivational level of survivors: • Management must stress clear communication of the reason for the downsizing to survivors. In attempting to rebuild the emotional commitment to the organization, management must also assure survivors of continued employment. • Senior managers must attend group sessions to help the employees understand the nature and extent of the downsizing. • Survivors must be provided with personal career counselling to help them evaluate the impact of upcoming changes on future career options. Survivors must be individually counselled on the types of assistance available to them. • Survivors must be informed of the support services provided to their laid-off colleagues. • Survivors must be given the opportunity to discuss their feelings about the layoffs and the future of the organization. • Managers must increase their informal contacts with survivors. • Human resource managers must increase their counselling of survivors. • Employee assistance programs outside the organization must be made available to survivors who need them on an anonymous basis.
CONCLUSION As a conclusion we can say that downsizing has its advantages and disadvantages. Downsizing can help reduce the organizations costs and therefore increase their profits. But there are also drawbacks to downsizing which an organization must take into consideration. When carrying out a downsizing, the organization has to take into considerations whether the downsizing is really necessary at this point of time. This is because if precautionary measures are not taken into consideration, the downsizing process can be a failure.
The organization needs to see which part that they want to downsize and they must also see whether they can cope with the downsizing. Downsizing can result in employees being upset and this can bring down their motivational level. When the employee’s motivational level is low, they would not be able to focus in their job completely. This can result in the productivity of the organization. This is why organizations needs to list down all the benefits and also the drawbacks that they might face due to downsizing. When this is done they can see whether this activity is benefiting the organization or not.
Downsizing may seem good in the beginning but in the long run they might see impact especially if they are out of skilled and experienced workers. REFERENCES BLS [1994d]. Work injuries and illnesses by selected characteristics, 1992. Washington, DC: U. S. Department of Labor, Bureau of Labor Statistics. BLS [1995]. National census of fatal occupational injuries, 1994. Washington, DC: U. S. Department of Labor, BLS News, USDL–95–288. Pontusson, Jonas “Welfare-State Retrenchment Revisited: Entitlement Cuts, Public Sector Restructuring, and Inegalitarian Trends in Advanced Capitalist Societies” World Politics – Volume 51, Number 1, October 1998
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