Downsizing Essay Research Paper 1 IntroductionDownsizing is

Downsizing Essay, Research Paper

1. Introduction

Downsizing is the process of “reducing employment to improve efficiency, productivity, and competitiveness” (Schwind et al., p 538). There has been a surprisingly large amount of downsizing. Between 1984 and 1994 “total employment of Fortune 500 companies fell by 3 million people” (Anthony et al, p 655). This paper will focus on how to manage downsizing and will involve analyzing the downsizing process in stages. First is the pre-downsizing stage. This is where an organization analyzes the issues involved in downsizing their company. Second, there is the planning stage where by the organization plans the downsizing process that will be taken. The third phase is the process of implementation and the fourth stage being managing the survivors. It is very important that human resources be greatly involved during the complete downsizing process. The reason for this is that downsizing is a very difficult situation for all parties involved and the process should be managed properly and delicately. There are many different reasons why organizations feel that downsizing is the only option with certain keys that will lead to a successful downsizing.

2. Keys to a Successful Downsizing Process

As already stated, downsizing in most cases is a very delicate situation. Schwind notes “the average size of downsizing ranges from 14 to 20 percent of the work force”. This is a very significant amount of people therefore the downsizing process should be handled very carefully. The six key principles to keep in mind for a successful downsizing process are (Schwind et al, p539):

1. Downsizing should be initiated from the top but requires hands-on involvement from all employees.

2. Work force reduction must be selective in application and long-term in emphasis.

3. There is a need to pay special attention both to those who lose their jobs and to the survivors who remain with the organization.

4. It is critical that decision-makers identify precisely where redundancies, excess costs, and inefficiencies exist and attack those specific areas.

5. Downsizing should result in the formation of small semi-autonomous organizations within the broader organization.

6. Downsizing must be a proactive strategy focused on increasing performance.

The keys outlined above are only a guideline and other key factors should also be considered for a successful downsizing process. Communicating the organizations plan to downsize and why it must do so to the workforce early is good practice. This will give the employees that are being dismissed an opportunity to prepare for their futures and less of a feeling of uncertainty with their situation. It will also give the remaining employees more respect for the company and give them more job security since they feel that the company will be honest with them with respect to company business. Another factor that is important to consider during the downsizing process is that with a reduced workforce the remaining employees will need to pick up the slack. In downsizing situations the company should be aware of this fact and ask the remaining employees how they feel their jobs could be made easier in order to handle the increased workload.

3. Reasons or Advantages of Downsizing

The main reason why an organization chooses to downsize is that a company may wish to restructure their organization. Theoretically restructuring an organization is a means of increasing productivity and the efficiency of the company. Cutting the number of employees within an organization is the easiest and quickest way to cutting costs. Another advantage to downsizing is that certain positions or people that are unproductive are released. An increase in international competition is another reason organizations choose to downsize. Some companies feel that in order to compete in their respective industries globally that downsizing is the solution.

4. Disadvantages of Downsizing

There are both advantages and disadvantages of an organization downsizing its number of employees. One of main disadvantages of downsizing is the affect that downsizing has on the remaining employees. After a major organizational downsizing there is a decrease in morale and a sense of insecurity amongst the remaining employees. The decrease in morale is not only felt by the colleagues of the released employees but by everyone within the company at all levels. The people that were in charge of the actual firing might feel guilty which might bring on depression. A decrease in employee loyalty and a feeling of resentment towards the company are also a result of downsizing. The results of which may result in lower productivities and higher turnover rates. In some cases the quality of produce being produce can also decrease as a result of employee attitudes. As noted above downsizing is “theoretically” supposed to increase productivity. The reason why it is only theoretical is that there are different studies to support both the increase and decrease in productivities as a result of downsizing.

Studies show that:

. ‘fewer than one-third of downsized firms received expected profit increases’ (Duran et al).

. ‘38% of surveyed companies that downsized reported no change in worker productivity; 34% reported increased worker productivity; a

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