term paper of hrm down sizing 48

8/7/2019 term paper of hrm down sizing 48

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SUBMITTED TO: SUBMITTED BY:

Miss.Marylyn Kaul Vipul Garg (B48)

LPU Phagwara Regd No: 10907174

Section : RR1903


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INDEX

Acknowledgement

Emergence of the topic

Downsizing strategies

Review of Literature

Issues after downsizing

Smart alternatives to downsizing

How companied can downsize legally

Strategies used by companies to control issues

Summary and findings

Bibliography


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ACKNOWLEDGEMENTS

I take immense pleasure in thanking our beloved HOD Gagandeep

Kaur for having permitted me to carry out this project work (Term

Paper).

I wish to express my deep sense of gratitude to my Internal Guide ,

Miss Marylyn kaul, lecturer of Human resource Management in LovelyProfessional University, for her able guidance and useful suggestions,

which helped me in completing the term paper in time.

Finally, yet importantly, I would like to express my heartfelt thanks to

my beloved parents for their blessings, my friends/classmates for their

help and wishes for the successful completion of this term paper.


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EMERGENCE OF THE TOPIC

DOWNSIZING is a commonly used euphemism which refers to reducing the overall size and

operating cost of a company, most directly through a reduction in the total number of employees.

When the market is tight, downsizing is extremely common, as companies fight to survive in a

hostile climate while competing with other companies in the same sector. For employees,

downsizing can be very unnerving and upsetting. So downsizing is reducing the number of

employees on the operating payroll.

There are several reasons to engage in downsizing. The primary reason is to make the daily

operations of a business more efficient. For example, a company may be able to replace

assembly line employees with machines which will be quicker and less prone to error. In

addition, downsizing increases profits by reducing the overall overhead of a business. In other

instances, a company may decide to shut down an entire division; a car company, for example,

might decide to stop making sedans altogether, thus cutting an entire department.

In some cases, it becomes apparent that a business has too many employees. This may be

because there has been a decline in demand for the company's services, or because a company is

running more smoothly and efficiently than it once was. Many offices are heavily bloated with

support staff and redundant departments, and these businesses may refer to downsizing as

trimming the fat.

A company downsizing: employees may be terminated, fired, laid off, made redundant, or

released. A business may be optimized, right sized, or experiencing a reduction in workforce.

Some of these terms have different legal meanings depending on where one is in the world; a

layoff, for example, may refer to a mass temporary release of employees who will brought back

in once business picks up, while a redundant employee is one who is asked to leave permanently.

Numerous consulting firms offer assistance with downsizing, often with the use of specialists

who visit a business to evaluate it. Since profit is an important bottom line for companies,

downsizing measures should be expected by employees, especially when they observe a troubledmarket or they are working for a struggling company. For employees, the process can be

stressful, because they may feel uncertain about whether or not they will continue to employed.

Sometimes, downsizing is very abrupt, with a huge batch of employees being released from

employment on the same day, while in other cases it may be a more drawn out and nerve-

wracking process in which employees are slowly let go. Employers should remember that


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downsizing is very upsetting and stressful, and they should take steps to make it run smoothly

while assuring valued employees that their jobs are secure

DOWNSIZING STRATEGIES

Downsizing strategies have become common and popular practices for firms and they are also

deemed as natural processes within an organization's life cycle. However, the relationship

between downsizing strategies and firm performance still remains mysterious. That is why the

consequences of downsizing strategies to firm performance have not been materialized over

these years. The comprehensive downsizing strategies which would improve both organizations

performance and employees' welfare, and also reduce the social tensions caused by downsizing.In the following, we have summarized the significant types of downsizing strategies from the

literature review.

Hierarchy of workforce reduction strategies

Greenhalgh et al.(1988) proposed a model of downsizing strategy's decisive factors. It was atool to analyze downsizing strategies. They proposed that firms would select strategies from

different levels i.e. strict to lenient, taking into account the characteristics of redundancy and the background factors. The levels of strategies included natural attribution strategy, induced

redeployment strategy, involuntary redeployment strategy, layoff strategies with outplacement

assistance, and layoff without outplacement assistance. Hence, downsizing research often uses

the above strategies as the basis when exploring various downsizing strategies.

Three strategies of downsizing based on organizations' degree of change

Downsizing not be misused to represent negative actions when facing an organizations' decline

or environmental difficulties. Most importantly, the effectiveness of the downsizing process, and

the situations of organizational change should be emphasized. Two kinds of downsizing strategy,

convergence and reorientation strategy is there and further divided the strategies into three

categories based on the degree of change caused by the downsizing actions. The workforce

reduction strategy, work redesign strategy, and systematic strategy which eventually changed the

organization to the largest extent.


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Social institutional downsizing strategy

The institutional theory of downsizing has shown that due to social factors, many firms approve

of downsizing as an effective management method. Gradually, managers adopted similar

downsizing strategies, such as providing job-seeking consultation, notification to the laid-off

prior to the release of the downsizing decision. From the perspective of the institutional theory of

downsizing, the institutional factors not only affected the inner motivations of actions, but also

the external behaviors. Conclusively, firms operated under the structure of social norms, values,

appropriate structure and economic behaviors. The entire range of business practices, such as

human resource management practices, would develop based on the reality of the social structure

and would eventually gain legitimacy. The legitimacy of different behaviors, the increase in

resources and survival capabilities would help organizations to survive and succeed.

Alternative strategy

An alternative strategy of downsizing could be more appropriate than downsizing and laying-off

directly. The strategy was more humane and included the terms such as reduction of promotional

opportunities, demotions of supervisory positions to non-supervisory ones, salary freeze,

curtailed working hours, two shared one job, no paid leave, early retirement with preference

packages, etc. An alternative strategy used to reduce costs other than downsizing, and eventually

was able to keep valuable intellectual employees.

Comprehensive downsizing strategy

A successful downsizing should take every aspect into account, e.g. approaches, preparations,

employees' participations, leadership, taking good care of employees; reduce costs, performance

measurements and the process of implementation.

The organizations' downsizing strategies included both behavioral and ideational aspects and

continual innovation and fostering the capability to change business models, and paying

attention to business strategies, markets, the rapid changes of customers and economicenvironments. Firms had to formulate various downsizing strategies according to their external

business environment, internal and external resources and strategies, rather than just following

institutional downsizing strategies.


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REVIEW OF LITREITURE

1Downsizing and the changing role of HR

In this literature we examine the changing role of HR in the specific context of downsizing. It

highlights the key dilemmas facing HR professionals - on the one hand, the contribution of HRM

to the achievement of business results has come under increasing scrutiny and, on the other hand,

most of the challenges of downsizing are people-related issues that require sophisticated HR

interventions. The paper reports the key findings of a pilot study conducted in sixty

organizations in the UK that downsized in the last three years. The key conclusion of the study is

that the role of HR has become wide ranging, covering the strategic as well as implementation

aspects. The clear message from the study suggests that, unless there is alignment between the

two aspects, the envisaged benefits of downsizing are unlikely take place. Key challenges facing

HR professionals are managing middle managers, managing careers and managing employeeexpectations. There are indications to suggest that the process role of HR is likely to become

more important in the medium and longer terms.

2 Downsizing leads to an organizational change.

In this literature HICKOK argues that, ultimately, the most prominent effects of downsizing

will be in relation to culture change, not in relation to saved costs or short-term productivity

gains. In particular, the author notes three observations in relation to the impact of downsizing

on organizational culture. First, it clearly appears that power has shifted away from rank-and-file

employees in the direction of top management/ownership. Accompanying this change is a shift

in emphasis away from the well-being of individuals in the direction of the pre-eminence and

predominance of the organization as a whole. Second, it appears working relationships have

changed away from being "familial" in the direction of being more competitive. Third, the

employer-employee relationship has moved away from long-term and stable in the direction of

short-term and contingent.


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The author suggests five simple question areas that organizational leaders who are interested in

probing the moral and spiritual dimensions of downsizing might usefully consider. These include

ensuring the fundamental decency of the approach being considered, engaging in appropriate

dialogue, thinking through the consequences for those who may be adversely affected, having

ready explanations for multiple constituencies, and offering a realistic opportunity for a better

future for the organization and the organizations stakeholders.

3.Downsizing as a Strategic Intervention.

Cummings and Worleys(2001) studied the effects of downsizing as a strategic intervention

typically stem from organizations seeking to reduce the number of employees through layoffs,

attrition, redeployment, early retirement and reorganization. The authors have examined the

application and implementation of downsizing as a strategic intervention. Incorporating

downsizing in the strategic management plan can increase organizational efficiency by

maintaining a focus on core competencies that promote competitive advantage and potentially

increase market share.

There are five application stages for downsizing as a strategic intervention was applied in the

areas of financial performance, reputation for corporate social performance and managerial

commitment to strategic change. Management should be aware that large-scale downsizing may

produce significant levels of under-performance. In contrast, smaller-scaled, repetitive

downsizing interventions have less of an impact on financial performance, although the

relationship between frequency of downsizing intervention and financial performance are less

significant. There should also be a managerial acknowledgment that psychological contracts

between the organization and employees must be maintained and that downsizing must be

implemented as a rational and legitimate business strategy in response to the environment.

Management must recognize and fully address the potential consequences of reputation for

corporate social performance. A firm's reputation in the midst of a downsizing effort can result

in dire consequences from which an organization may be unable to recover. Despite years of

building a strong corporate reputation, a single damaging event can quickly unravel the threads

that hold the organization to its stakeholders. When a corporation utilizes downsizing as astrategic intervention specifically infused within its strategic plan, the process is generally

granted legitimate business practice status. There is a clear correlation between reputation for

corporate social responsibility and financial performance.

Downsizing as a strategic intervention has an undeniable impact on managerial commitment to

strategic change. This report reveals that middle and upper-level managers' intent to separate


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from an organization might be attributable to one's level of confidence or an erosion of corporate

commitment and that commitment is influenced by three shared components: acceptance of the

organizational values, willingness to exert effort on behalf of the organization and a desire to

remain an employee of the organization. A diminishing managerial commitment to the

downsizing intervention effort will result in an irrefutable negative influence directly affecting

financial performance and reputation for corporate social performance.

Finally, prior to the implementation of downsizing as a strategic intervention, organizations

should identify alternative methods that will direct the organization toward the achievement of

its organizational goals. If a decision is made to implement downsizing, the implication of the

strategic decision to downsize should be fully explored.

4. Downsizing - intellectual capital performance anorexia or enhancement?

The objective of this paper is to investigate if downsizing contributes to, or impedes, a firm's

intellectual capital performance (ICE) based on a longitudinal analysis of 56 United States

publicly listed companies that significantly downsized their workforce during the mid-1990s.

Empirical analysis indicates that for the majority of firms, ICE consistently declined annually for

the first 3 years, following downsizing with a moderate increase in the fourth year. Findings

provide several interesting insights and conclusions. Most importantly, downsizing appears to

have a negative impact on a firm's ICE following the reduction in workforce number. The impact

of downsizing appears to be more significant amongst IC resource rather than traditional based

firms. It is recommended that corporate directors and managers seek alternative strategies to

address poor performance and competitive results than immediately downsizing their workforce

as such action affects ICE. Based on empirical findings, it is recommended that it may not be inthe long-term interests of a firm to significantly reduce its absolute labour workforce if the

objective is to improve short-term financial gains. However, downsizing is likely to significantly

impede IC potential, thereby threatening future long-term survival and value will be reduced.

Management, therefore, cannot continue to consider human capital actors as objects. Rather, a

firm's human resource capital actors form the inner sanctuary of a series of networks extending

outwards. It is through these networks that a firm's IC potential is developed. Employees

establish the key formal and informal relationships, both internally and externally, essential to

the firm's survivability. By reducing the firm's workforce substantially, management also

destroys connections between employees, departments, customers and other key stakeholders.

Loss of this social infrastructure can effect other aspects of a firm's IC, such as its image capital.

In summary, downsizing not only decreases the effectiveness of this key component of IC, but

also destroys other components such as relationships, organizational culture and image. The

overall affect is a reduction in ICE for a sustained period.

This study expands the IC and downsizing literatures providing a number of important

insights. Nonetheless, findings indicate a variety of alternative avenues of future investigation.


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For example, findings suggest that a significant reduction in a firm's absolute workforce leads to

a decline in ICE. Not all firms included in the survey sample follow this trend. Future research

should analyze the respective implementation policies of each firm that downsize. This

investigation may help to determine if a particular strategy (or strategies) for implementing

workforce reductions impede or improve ICE. Another avenue of investigation could involve

analysis of relationships between ICE and significant increases in a workforce numbers. This

investigation can indicate if upwards changes have a dual directional relationship with ICE.

5. The perceptions of human resource managers of the shifting importance of

managerial roles in downsizing organizations.

Shimon Dolan and Adnane Belout studied the middle managers are often called upon to

exercise completely new skills that may well be the opposite of those they had exercised

successfully before organizational downsizing. These same managers are suddenly expected to

become vastly more valuable in their current roles. In this research, we have set out to survey the perceptions of human resource (HR) managers across industries regarding the shifting

importance of managerial roles before and after downsizing and whether existing or planned HR

systems are well enough designed to handle the training and development needs of surviving

middle managers. Overall, 85% of the HR managers in our sample agreed that, after downsizing,

transformational roles are more important than transactional roles for the functioning of middle

managers. Across the board, HR managers reported that tasks and responsibilities underlying

transactional and transformational managerial roles shifted significantly after downsizing. About

47% of the HR managers believed that more could have been done to ease the adjustment and

increase the success of the transition of middle managers into a changing organizational

environment, but their suggestions differed little from activities provided before or during the

transition. It is proposed: that the transformation of middle managers should be followed by a

parallel transformation of the HR function; and that redressing the long term unsustainable

effects of hyper effective managerial behavior lies in the ability of HR executives and

professionals to design competency and educational programmes that help restore the confidence

of surviving middle managers, while also supporting their developmental needs.

6. Human resources holistic approach to healing downsizing survivors.

This study is did by Niccolo Machiavelli. Downsizing is a way of life in organizations today.

Yet these performance improvement initiatives create feelings of anger, apathy, resentment and

stress in the surviving workforce which leads to low productivity. This low productivity often

works against the gains the leaders often anticipate. Human resource leaders know the

importance and value of employees; therefore, HR leaders are presented with an opportunity to

add value by taking an early leadership role before, during and after downsizing initiatives to

address the healing of the surviving workforce. Even though studies have shown that downsizing


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initiatives rarely achieve long-term benefits of what they set out to do, downsizing is a way of

life in short-sighted corporate America. The financial numbers may look better, but anger,

resentment, depression and stress among the workforce can very well negate the intended results.

To decrease the level of the survivor syndrome in organizations after downsizing.

It is important to adequately and effectively address the people issues throughout the process.

As human resource leaders, take a strategic leadership role in downsizing initiatives.

Involve employees from the onset of downsizing to build commitment.

Maintain constant, candid and two-way communication at all times during the

downsizing process.

Establish support programs to help separating and surviving employees adapt to the

change.

Develop and incorporate appropriate, clear and fair criteria for selection processes during

downsizing.

Align human resource programs, systems and policies with the vision of the new

organization.

Invest in the training and development of the surviving workforce.

Human resource leaders know the importance and value of employees. Therefore, HR leaders

must take an early leadership role in downsizing initiatives to address the healing of thesurviving workforce. This healing begins with a holistic approach in establishing and

implementing strategies that will increase the likelihood of a healthier, productive employee

after the downsizing. Human resource leaders need to ensure that downsizing plans include

strategies that focus on six major HR areas:

Employee involvement,

communication,

support programs,

selection processes, human resource management tools and systems alignment and

training and development

These are fundamental HR issues and, therefore, it must be the undertaking of HR to achieve

organizational excellence after downsizing.


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7. The Emotional Tightrope of Downsizing: Hidden Challenges for Leaders

and their Organizations.

This article presents a case study of a fictional Fortune 500 organization, Apparel Inc. Apparels's

efforts to treat employees with compassion, respect and fairness during downsizing met thestandards of best practice. The company offered a generous severance package and outplacement

support, by all accounts above industry standards. The company also spent a good deal of time

and effort to prepare the line managers and human resource professionals who would conduct

the layoffs, including rehearsing a layoff script and anticipating the employees' potential

reactions. By treating departing employees with dignity, the company knew it could reduce the

likelihood of theft, vandalism, and wrongful termination lawsuits, while preserving morale and

productivity among employees who survived the downsizing. Despite these efforts, the

organization overlooked one critical element: the emotions of the managers who were called

upon to perform the layoffs. By not preparing its managers to handle the emotional challenges of

downsizing conversations, Apparel Inc. inadvertently undermined its managers' ability to delivercompassionate and respectful treatment. This paper also explains how some managers at Apparel

Inc., despite receiving no training in emotion management, were able to cope with their emotions

and treat layoff victims with dignity and respect. Three concrete recommendations for how

leaders can enhance their organizations' preparations for the emotional challenges of downsizing

are presented.

8. Survivors of downsizing: A study of the extent to which downsized

organizations engage in work redesign.

Hack man and Oldham examined whether organizations follow a planned approach to work

redesign to improve the productivity of survivors of downsizing, thus contributing to solving the

problem of poor financial performance. This study was a single site study the data for which

were gathered primarily by interviewing New England financial services organization

employees. This organization, with employees country-wide, has experienced many

downsizings.

The framework for this study was the Hack man and Oldham Work Design Model. According to

this model, three conditions, or psychological states, are necessary for internally generated levels

of strong and sustained productivity. First, the employee must perceive the work as being

meaningful and worthwhile. Second, the employee must be responsible for the results of thework. Third, the employee must have knowledge of the results of the work. There are five core

job characteristics which elicit these three psychological states: skill variety, task identity, task

significance, autonomy and feedback. If present, these core job characteristics have a higher

potential for internally motivating people who do those jobs.

The three research questions of this study were:


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How, if at all, was the work redesign process planned and implemented in organizations

concurrent with, or subsequent to, downsizing in those organizations?

In what, if any, ways were any or all of the five core job characteristics (skill variety, task

identity, task significance, autonomy and feedback) included as part of the redesign of

the new jobs?

When downsizing and/or when redesign occurred in what, if any, ways were the skills,

knowledge and competencies of surviving employees taken into consideration and

matched with the redesigned jobs?

The findings based on the research questions were: Work redesign-related planning was not part

of the downsizing activities. After downsizing where changes had taken place in jobs, these

changes were driven more by organizational structure change rather than by work design. After

downsizing, the matching of people and jobs was not done successfully in all cases.

Overall, this study highlighted the need for organizations considering or implementingdownsizing to approach survivors proactively by planning and designing their work to improve

organizational productivity and improved financial performance which triggered the downsizing

effort in the first place.

9. Downsizing failures: an examination of convergence/reorientation and

antecedents - processes outcomes

Appelbaum and Donia, 2001, examines varied empirical studies on downsizing which have

revealed that, as a result of its aftermath, high percentages of companies have judged these

efforts as unsuccessful. Corporate restructuring encompasses multiple forms of change, which

are classified into three distinct categories: portfolio, financial and organizational. The literature

has raised some interesting points. First, that there are normative periods of convergence and

reorientation and that restructuring efforts will be significantly different during either of these

periods. Fundamentally, this means that the strategy employed in downsizing must be relatively

consistent with the constraints of the period and of the existing corporate culture as seen in the

KDHE case study. However, critical to note is that once a company begins restructuring, by the

very nature of this process, the corporation may weaken its strategy and, as such, creates an

irrefutable paradox.

Most researchers are in agreement as to the impact that downsizing has on survivors and on the

continued survival of an organization. However, expansion of this notion showed a strong

human resources strategy had a significant impact on the financial performance of the firm.

Finally, studies of financial performance showed that although most downsized firms showed

initial gains, long-term effects were not as optimistic, shaking the grounds of some widely held

assumptions that downsizing will eventually lead to profit.


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Inherently, change is resisted by most individuals. Further, reorganization, whether done during

periods of reorientation or convergence, must take into account corporate culture in order not to

initiate changes that are in conflict with ingrained beliefs. Further, restructuring done as a

reactive measure to prolonged poor performance does not work. The evidence is irrefutable.

Johnson discusses areas for future research which highlight the basic problem. Most of the

research models are univariate and, therefore, cannot detect more complicated relationships.

Further, most of the research is done on cross-sectional data whereas a more pervasive study

should be longitudinal as it would go further to determine causality. It is clear that more research

on the effects of governance as well as more less-biased research would be instrumental for

managers coping with a constantly changing marketplace. However, some action-driven

prescriptions are reviewed to actualize this enigmatic process. The following recommendations

presents 30 strategies intended to actualize the raison d'etre of downsized organizations and their

key decision-making managers.

10. Downsizing without downgrading: learning how firms manage their

survivors.

Ghoshal and Bartlett provides a literature synthesis on the impact of downsizing on the

survivors and examines the experiences of three large Indian companies. It represents a strategy

implemented by managers that affects the size of the firm's workforce, its costs, and the work

processes. A strategy of downsizing does not always mean using layoffs as the appropriate

approach for improving organizational efficiency and productivity although layoffs are selected

in most instances because they can produce immediate savings of labor costs. Some observers ofdownsizing have concluded that it has not always been viewed positively, even by the firms

carrying it out. The reasons likely to lead to downsizing are the result of ineffective management

decision-making, such as poor decisions that impact growth of the firm rather than the traditional

cause of increased market competition. However, the results of the productivity gains that

immediately follow a downsizing are mixed. Results confirm trends that are generally reported

in the literature regarding the negative aspects of downsizing. It suggests that where the

company had a clear strategy to implement the downsizing, which included scheduling and a

well-specified operational plan, the impact on those dismissed as well as the survivors was

buffered. The use of a downsizing plan also mitigated the negative responses on behalf of the

remaining personnel. On the other hand, when the company adopts a reactive approach towards

the downsizing process, numerous problems associated with the survivors are reported. The firm

that applied seniority to layoff decisions received more favorable responses than firms that used

criteria other than seniority. There is convincing evidence that when involuntary separations are

required, seniority is viewed as the fairest criterion to apply for selecting employees for

separation.


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11 Motivating Downsizing Survivors in Small Businesses.

Atwook et al., 1995; Huber & Glick, 1993, Burke & Cooper, 2000 , studies on the effects of

downsizing have generally revealed mixed results depending on several variables including the

nature and extent of downsizing, degree of planning undertaken, extent of Human Resource

involvement, and effectiveness of the organization's communication climate. One problem that

arises from downsizing is instability resulting from uncertainty. The instability evidenced in the

surveys can be attributed in large part to downsizing. What this suggests is that downsizing

needs to be conceived and implemented as a part of the overall human resource management

(HRM) strategy of the organization designed to improve the ability of the company to compete

more effectively. Workers should be persuaded that they too have a stake in the competitiveness

of the organization. To achieve this goal, it is important for the company to create a strategic role

for HRM, especially if downsizing is a credible part of the company's competing strategy. Based

on the findings, the authors can conclude that participants did not see downsizing as a part of thecompany's overall competitive strategy.

12. Parting company: The social and organizational process of downsizing

This article shows how organizations manage downsizing so that downsizing has become a

routine activity of human resource management. Using fieldwork data from firms undergoing a

downsizing event, The micro-level organizational and social processes involved in the

management of large-scale employee terminations. The process of uncoupling workers from jobs

relied on assistance from external consultants and involved reconsideration about organizationalcommitment to employees. This research contributes to the organizational literature that has

focused on the effects and rationales of downsizing absent an understanding of how these events

are experienced by management and workers.


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HR ISSUES AFTER DOWNSIZING

Downsizing causes stress for those who leave the company and those employees that remain.

Keeping up the morale of these survivors is important. This article discusses a few ways to

address issues and keep the company on track. Downsizing and layoffs create stress not only for

those directly affected but also for the managers and employees that were not let go.

Problem arising after downsizing:

Productivity is negatively affected and employee may get distracted and not be efficient

and creative minded as they had been before downsizing.

Due to the downsizing occurring in the company again and again employees starts

leaving the organizations. This leads to security issues.

Companys reputation go down when there is downsizing.

Managing employees after downsizing

Management should tell their employees why downsizing happen in the organization.

Call the meeting to ensure employees about the company issues and in future security of

their jobs.

Give a chance to every employee to clear their doubts regarding anything. Let them

speak and address them in right direction.


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A proper communication should be there during this time.

Wait for every employee during the time of meeting and after that tell them why

management took this type of decision and what will be the future plans.

Managing the management after downsizing

This is very important to address the management after downsizing because every employee deal

with stress related to downsizing even managers also.

Just as massage conveyed to employees it should also communicate to the mangers also

with the proper explanation like why its happen.

It should be communicate properly to them if possible a separate meeting should be there

.

It is necessary because after downsizing so many plan come into existence , company set

their new plans for work . managers should aware of this as they have to manage all thesethings in future

Monitoring the effect of the layoffs

Often an indicator of how the employees are dealing the downsizing is through retention rate

and absenteeism. There are certain issues which are necessary to solve even there is a

increase in the turnover.

A feedback should be asked from managers and a proper report should be prepared

by them including all the issues they have.

An action should be taken on the common or individual issues they have.

Everything should be done through proper communication

SMART ALTERNATIVES TO DOWNSIZING

Since 1980, US companies have cut more than 43 million jobs through downsizing. That

represents layoffs affecting nearly 3/4 of all US households. There is little evidence that

downsizing is highly effective in boosting profits and productivity despite the number of layoffs

in the 1990s. Dumb sizing may be a more appropriate name because of its impact on spirit de

corps. In support of evidence that downsizing in itself does not result in sustained improvement

in financial performance, management should seek alternatives to layoffs. Instead of downsizing,

there may be other ways to enhance competitiveness by cutting costs elsewhere, introducing new


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products, or entering new markets. Increasing labor productivity is often an effective alternative

to downsizing.

DOWNSIZING ALTERNATIVES: ADDRESS STAFFING AND COST REDUCTION

Downsizing or employ termination may not always be the best solution for increasing revenue.

Organizations explore more than a dozen option to reduce costs, while keeping employee morale

and productivity high.

Research shows that the practice of downsizing is a risky gamble, with less than half of

organizations improving productivity or revenue. Many companies find they need to rehire staff

within a year. Morale and productivity often plummet. Given these results, companies should

explore alternatives to downsizing. Thirteen alternatives are listed that either address long-term

staffing needs or provide short-term expense reduction. The alternatives are based on the

premises that they share the pain and on strong human resources initiatives. The alternatives are:

1. hiring linked to vision

2. cross training

3. succession planning

4. redeployment within the organization

5. creating value-added and revenue-enhancing opportunities

6. a comprehensive model

7. reduced hours

8. reduced wages

9. attrition

10. alternative placement11. leave of absence

12. employee buy-outs, and

13. shared ownership

HOW COMPANIES CAN DOWNSIZE LEGALLY

To many downsizing is the starting point of the restructuring of an organization. To others, it is

the end result of management's attempt to keep an entity alive. The responsibility for ensuring

that the downsizing is orchestrated in a legal fashion falls on many shoulders, from the CEO'soffice to the part-time worker. It is in the best interest of a firm to continually have their legal

department and the Human Resources department review manuals, handbooks, policies and

procedures to keep them current with the ever changing laws. There are many federal and state

laws that must be adhered to in a downsizing. With a labyrinth of legal issues to be run in a

downsizing, the Human Resource department commonly constructs what has been loosely


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termed an assessment table. Prior to any downsizing activity, this popular tool is set up to ensure

that no one group is adversely impacted. Some laws

National Labour Relations Act (NLRA) and Labour Management Relations Act (LMRA)

Worker Adjustment and Retraining Notification Act (WARN)

Worker Adjustment and Retraining Notification Act (WARN) Employee Retirement Income Security Act (ERISA)

Firms can only do their best and be ready and willing to adapt to changes in the legal

arena. The best defence is to constantly update and revise employee handbooks and

policy manuals and to consistently analyse the ever changing body of law that pertains to

the laying off of workers and the laws that protect them, both as individuals and as

members of a group.

HR STRATEGIES THAT CAN TAKE THE STING OUT OF

DOWNSIZING-RELATED LAYOFFS

Downsizing has been a pervasive managerial practice for the past three decades. Over the years,

a firm's standard response to finding itself in financial difficulty was to reduce its workforce.While there is ample evidence suggesting that downsizing activities rarely return the widely

anticipated benefits, there is also a sobering understanding that downsized firms are forced to

deal with the human, social, and societal aftereffects of downsizing, also known as secondary

consequences. The purpose of this article is to present a methodology that enables firms to

minimize, defer, or even avoid the adoption of downsizing-related layoffs. In order to do this, the

research presents and discusses the framework of cost-reduction stages of a firm coupled with

creative modern-day human resource (HR) practices that firms typically adopt.

Cost-reduction stages

The framework depicted in Figure 1 comprises three timeframe-related phases. Each commandsseveral internal cost adjustments that have produced a variety of stage-related HR practices:

Stage one: Short-range cost adjustments

HR practices for short-range cost adjustments


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There are several HR practices that firms can adopt in an effort to engage in preliminary cost

reductions. Some of the more popular approaches that have emerged are:

Hiring freeze

Mandatory vacation

Reduced workweek

Cut in overtime pay

Salary reduction

Temporary facility shutdown

Soliciting cost-reduction ideas from employees

Clearly, there are many HR practices and options that firms can adopt to reduce short-term

expenditures. While some firms have come up with fairly creative ideas, others have resorted to

corporate layoffs as a first resort.

Stage two: Medium-range cost adjustments

According to Vernon (2003), the second stage of the cost-reduction framework constitutes

medium-term cost adjustments in response to a business downturn exceeding six months. These

secondary cost-reduction adjustments are frequently signaled through extended company-wide

or industry-wide forecasts of diminished sales activity.

HR practices for medium-range cost adjustments

Firms typically adopt several HR practices in an effort to engage in secondary cost reductions:

Extended salary reductions

Voluntary sabbaticals

Employee lending

Exit incentives

Stage three: Long-range cost adjustments

According to Vernon (2003), the third stage of the cost-reduction framework represents long-

term adjustments which are necessary if a firm experiences a prolonged business downturn

exceeding 12 months and beyond. This stage may be recognized through an extended decline of

current and projected customer demand and/or extremely volatile economic conditions. This

third stage generally requires extended long-range expenditure adjustments on the part of the

firm. It is in this phase that downsizing-related layoffs are frequently inevitable.


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HR practices for long-range cost adjustments

Firms that are forced to embrace downsizing have shown to adopt various layoff-related

strategies and with various degree of success. It is beyond the purpose of this paper to review

and present the literature on the actual outcomes of downsizing.

Rehiring bonuses

Maintaining communication with laid-off employees

Internal job fairs

Selecting a downsizing strategy

Determining an appropriate workforce management strategy remains a vital task for firms.

According to Vernon (2003), at least six factors affecting the selection of a downsizing strategyneed to be considered:

Time, or the expected duration of an economic downturn

Resources, such as cash resources at hand

Budget, namely the financial condition of the firm

Corporate culture, for example, the institutional values and anticipated effects of cost

cutting

Demographics, the location of the firm/demographics of employees the firm would like

to retain or rehire

Labor market, specifically the state and condition of the labor market

These factors should be considered when selecting a particular downsizing approach.

SUMMARY AND FINDINGS

Downsizing in organizations is a popular management strategy. However, in the field of

organization change, the question of whether downsizing practices eventually improve

performance is frequently asked and is never satisfactorily answered. The consequences have not

always materialized over these years. On the negative side, downsizing harms employees, their


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families, and at the same time causes social chaos. The possible answers could be the ignorance

of some important mechanisms between them. The paper aims to explain this issue. The paper

applies the dynamic strategy capabilities concept from the strategy research field and strategic

human resource management (SHRM) practices concept from the SHRM research field. A

consolidated model is established to explain the relationships among these variables. The model

is expected to provide significant implications for thought leaders to reflect on the topics

regarding organizations' changes, firm's strategies and SHRM system and social issues.While

most of the human resource management research on downsizing has focused on the short term

impact on laid-off workers and survivors, the long term, systematic impact of downsizing on

organizational career development activities and employees' career development opportunities

has received much less attention. This rationale for downsizing the workforce, the goal of the

downsizing and the rate, size and scope of the downsizing differ dramatically across

organizations shrinking their workforces. Consequently, this study presents a theoretical

framework for understanding when organizations are likely to pursue different strategies for

reducing their core workforces, why downsizing organizations are likely to pursue differentstrategies for changing the emphasis of their career development activities and which employees

are most likely to experience deteriorating career development opportunities as a result.

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http://www.docstoc.com/docs/6119979/Corporate-Downsizing-In-India/

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http://www.siliconindia.com/shownews/IT_firms_begin_downsizing_in_India-nid-

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term paper of hrm down sizing 48

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