Layoff and Strategic Downsizing Decisions Essay

INTRUDUCTIONDownsizing is a permanent step-down of manpower through rankoffs and opposite means. Organizations unremarkably downsize to take all over payroll speak tos and prevent bankruptcy during tight economic conditions. Downsizing, when through with(p) right, makes the disposal more efficient, lean, and mean .On the different side, a faulty nestle to furlough skunk ca ingestion the system of rules to run the risk of losing primordial talent and intellectual capital, and becoming dysfunctional by breakdown of hierarchies and systems. The criteria adopt for who stays and who goes titanicly determines the success of the downsizing intervention Many organizations, in particular traditional sensations, in a bid to ensure impartiality and objectiveness adopt the LIFO or Last in set-back turn up principle whereby those who joined the organization last become the first to leave. The rule of making seniority the primer of downsizing is that sensitiveer employee s keep back spent little time in the organization and ar less(prenominal) committed or acquainted with the finer nuances of its running.Also, the organization would ease up invested lesser time and resources instruction much(prenominal) employees comp bed to older employees. other organizations make the combination of competency and procedure, or the power to do required tasks well, the basis of retaining an employee during downsizing. A fresh performance appraisal should precede downsizing, or the last appraisal can be the basis for find out who goes and who stays. Those at the bottom of the appraisal list commonly repay the layoff nonice first. While making performance the primary natural selection criteria for downsizing and restructure is app arntly a just and equitable manner, dickens major concerns remain The soundness and objectivity of the performance appraisal method adopted. A poorly designed performance appraisal method that does not assess the true indicat ors of performance dexterity churn up a wrong list, causing the danger of the organization dispensing with true per powers and retaining populate who vigorously mask or cover up their inefficiencies. Whether the performance or competence ofthe employee remains relevant for the organization.The expendability of the person to the organization is another sound basis for determining the selection criteria for downsizing and restructure. This approach primarily considers the value added by the employee to the organization more than any other factor. Regardless of the performance of anemployee, an employee dexterity remain critical for the functioning of the organization, or conversely not posited. For instance, with applied science taking roots, just about companies do not require specialist stenographers or typists, no reckon how skilled or efficient they whitethorn be in their get to. Similarly, close down the marketing arm of the business and outsourcing the marketing effort might lead to the lay-off of all marketing exe pass overives, no matter how skilled or successful they may be.Organizations would, however, do well to lay great deal with good generic skills, and the right attitude and commitment, and retain them in other ancestrys even if the plays they remain competent in become conflicting to the organization. The commercial interests of the organization notwithstanding, legal considerations play an important role in determining who goes and who stays during downsizing. The federal Worker Adjustment and Retraining bill Act (WARN) requires employers to establish employees, state and local officials a 60 old age see to mass layoffs when cut down their workforce by 33 per centum or more, or laying off 500 employees within a 30-day period. WARN further requires employers of unionized employees to give the union 60 days remark before lay-off of their members, and provide individual notice to non-unionized employees.DEFINITION OF curtailmen tDownsizing occurs when a come with for good depresss its workforce. Corporate downsizing is a great deal the result of poor economic conditions and/or the companys need to cut jobs in order to lower costs or introduce profitability. Downsizing may occur when one company merges with another, a fruit or service is cut, or the economy falters. Downsizing also occurs when employers lack to streamline a company this refers to corporate restructuring in order to ontogeny profit and maximize efficiency. Downsizing results in layoffs that are often followed by other restructuring changes, such as branch closings, departmental integrating, and other forms of sharp pay expenses. In both(prenominal) cases, employers are not fired, scarce preferably become part-time or temporary workers (to trim costs).ACTIVITIES OF DOWNSIZINGIt undertaken to cleanse organizational efficiency, productivity and warlikeness that affect the size of the firms workforce the costs andthe work process es.DOWNSIZING STRATEGIES at that place are 3 types of strategies. These are below1.workforce lessening 2.work redesign3.systematic change 1. workforce step-downTypically a rook term strategy aimed at cut of meat the design of employees through such programmes as attrition, ahead of time retirement or voluntary suspension packages and layoffs or terminations. Whils a number of these approaches allow for a sexual intercoursely quick reduction of the workforce, the problem is that their impact is often short term and in many another(prenominal) organizations.2. Work redesignOften a medium-term strategy in which organizations focus on work processes and assess whether detail functions, products and services should be changed or eliminated. this strategy which is frequently combined with workforce reduction, complicates such things as elimination of functions, groups or divisions.3. Systematic change retentive term strategy characterized by changing the organizations culture and the attitudes and values of employees with the ongoing goal of deducting costs and enhancing quality. By its real nature this strategy takes gigantic time to implement.RESTRUCTURING HOW COMMON IS WORKFORCE REDUCTION AND?The issue that comes up on a regular basis involves how common workforce reduction in Canada. In a internal study of major Canadian organization conducted in 1992 and in 1998, it was fix that 56% of respondents permanently reduce the workforce over two family period ending in 1992, while 50% cut the number of employee during two year period prior to 1997-1998 about 31% of employee reduced in both 1992 and 1998 5% precent of organization did not engage in workforce.Three recent studies found 45% of participants reported that their organization permanently reduced workforce in two years. Amongorganizations reducing the workforce medium reduction was around 15% of the workforce. Similarly, when investing how the workforce reductions were carried out feature the result from the studies revealed that about 355 of reductions were by attrition, 45% by voluntary severance or early retirement and 40% by layoffs. Compared 1990s, these results suggest that organization s are relying less on layouts and more voluntary services. wherefore DO ORGANIZATIONS DOWNSIZE? in that location are several reasons why organizational conciliate to downsize the workforce. most of the factors most commonly mentioned include the pursual Declining profits seam downturn or increased pressure from competitorsMerging with another organization, resulting in duplication of effort Introduction of new technologyThe need to reduce operating costsThe believe to decrease levels of managementGetting liberate of employee deadwoodSimply put, many organizations engage in downsizing because managers entrust that cutting people will result in reduced cost (with cost being more predictable than emerging and improved financial performance. In addition, labour cost is often seen as easier to adjust relative to other expenditures. Although executives often perceive that reducing the number of people in the organization will lead to lower overhead cost, reduced bureaucracy ,better communication, improved termination making, increased innovative activity and higher productivity, in that location is considerable evidence that workforce reduction programs often fail to construe their objectives, as has been observe by Cascio Study later study shows that following a downsizing, surviving employees become narrow-minded, self-absorbed, and risk averse.Morale sink, producing drops, and survivors distrust management. Some organizations drastically reduce the workforce and employ a severe reduction strategy despite increasing demand and a favourable competitive enviroment.This development, which has been mentioned by HR managers in personal interview, may be collect to a variety of reasons, including a decision to follow the lead of other firms engage in c utback management and increase awareness of the need of hightail it in a lean and meanfashion.THE DOWNSIZING DECISIONFor many organizations, going through a downsizing is a very dread(a) and difficult looking. A 1994 article Business hebdomad profiled Robert Thrasher, executive vice-president at Nynex and the individual responsible for cutting labelled the corporate assassin. In speaking about downsizing Thrasher commented. This is tough, ugly work. The stress is glaring .Im vilified throughout the company .thats tough thing to stretch around. More recently, Robert Burtlon of Moore Corporation, when discussing his role in a cost cutting mean at a previous company, stated. I dont get frustrated any more. I just fire people.Too often, organization embarks on a downsizing program without careful consideration of whether on that point are feasible alternatives to downsizing. Studies after study reveals that many downsizing are not well be after frequently ignore the linkage in the midst of downsizing and the strategic direction of organization, and underestimate the impact of downsizing on the organization and its human resource.ALTERNATIVES TO DOWNSIZINGDownsizing can be a costly strategy for organization to pursue and as a result, it is sexually attractive to investigate whether alternatives to downsizing exis.In a number of instance, organizations discover that pursuing polar alternatives to downsizing may eliminate the need to reduce the workforce or allow for a less severe downsizing strategy.Some of the alternatives include1. naked as a jaybird no personnel costs (e.g, through energy conservation, planned capital expenditures, leasing of capital equipment, reductions in travel or club memberships) 2. Cutting personnel costs (e.g, through a hiring freeze, job sharing, a reduction in work hours, reduced benefits, and wage concessions) 3.Providing incentives for voluntary resignation or early retirement Although this list is not complete, it emphas izes the need to consider other ways to manage costs within an organization One organization, alley communications inc, asked from each one member of its staff to take one week of unpaid leave during the summer months. According to senior partner mia wedgbury , it let us keep our core team up together while reducing cost. Andit went over well with the staff because it precluded layoffs. another organization acxion corporation cut the pay of each employee earning more than 25000 dollar by 5% but also gave the employee the option to by company stock that would be matched one-foe one by the firm INPLACEORMENT AND OUTPLACEMENT ISSUESOutplacement Issues .Inplacement Refers To A Career Management approach shot inappropriately Placed Workers Into a Restructured organization ,while outplacement focuses on the provision of a program In Examining The Downsizing Decision, It Is Necessary To Consider Both Inplacement And of instruction and job-search avail for workers who shoot been ter minated. In making career management decisions, organizational decision makers may opt for an inplacement program or termination with outplacement In a survey of Canadian manufacturing firms completed in 2000, organizations that had gone through downsizing were asked to report on the benefits they provide to displace workers. These results are provided in figure11.2 .The most common benefits were severance pay, continuation of employee benefits, outplacement prepare assistance or family counselingPLANNING FOR DOWNSIZINGIf downsizing is essential, the key issues that need to be considered find how many people will lose their job and who will be let go (ie. based on seniority or performance) find how reduction will be carried out. For example, to what extent will the organization use attrition, early retirement or voluntary severance programs and layoff or termination. Its viable to consider the approach to workforce reduction from the perspective of employee? As indicated in figur e 11.3,the approaches to workforce reduction vary in the degree of breastplate to employees and the cost to employeeDetermining the legal consequences. For example organizations often ignore or are unaware of legal requirements when downsizing the workforce .some areas of police force to be aware of include the law of wrongful dismissal,employmentstandards legislation, trade union law ,existing collective agreement provisions, and human right legislation. for instance, there may be a very narrow line between voluntary and nonvoluntary termination, and with the termination of older workers, there exists a possibility of an age inequality claim Designing current and future work plans .this issue represents a key challenge for the organization and is frequently neglected Implementing the decision. Implementation includes such elements as severance payments, outplacement counseling, the communication of the termination decision, timing if the decision, issues, and communications with rest employees Performing follow-up evaluations and assessment of downsizing effortFigure 11.3 Approaches To Workforce ReductionWorkforce Degree of Reduction protection to Implementation Approach Example Employee Time Attrition Hiring Freeze High Show conscious Early Retirement Redeployment Voluntary buyoutWork sharingnonvoluntary Transfer Redeployment DemotionImposed job sharingLayoff with Retraininghelp job counseling Advance noticeLayoff without Termination Low First Assistance No advance notice No Severance influence OF DOWNSIZINGThere are 6 processes. These are below1. enlarge an RIF team to plot initial strategy.2. Plan the goals and timing of the RIF.3. Perform an boilers suit workforce analysis.4. Review employment policies, individual contracts of employment.5. jibe compliance with the Worker.6. particular considerations for unionized employers.1. Develop an RIF team to plot initial strategy cipher likes the prospect of a downsizing especially employees who may feel peculiarly vulnerable to being laid off and the mere mention of the cry can trigger widespread hysteria and morale problems. At the early dresss of the initial strategy phase, a company should limit discussion of downsizing to a trusted core of high-level management personnel and consultants. For large companies considering large-scale layoffs, the RIF team ideally should include the school principal financial officer, the chief executive officer, the chief operating officer, a senior-level human resources or employee dealing executive, an upper-level payroll specialist, an employment law attorney, and a public relations consultant.2. Plan the goals and timing of the RIFThe first task is to determine the magnitude of savings that need to be realized from a layoff. This task is part of an boilers suit cost-cutting plan, which could implicate other costs and expenses in addition to those related to personnel. Second, the RIF team should consider ways to realize the desired savi ngs, such as subcontracting consolidation of divisions, operating social units or functions the sale of the company or a work unit and closedowns.3. Perform an overall workforce analysis and an analysis of each proposed terminationThe most complicated and difficult aspect of the RIF process is determining which employees will be laid off. The most common legal challenges to layoffs are administrative charges and lawsuits premised on discrimination based on age or other legally protected characteristics. Accordingly, it is crucial for an employer to be able to give legitimate, nondiscriminatory reasons for every termination decision. Those reasons need to be easy to articulate and logically consistent.4. Review employment policies, individual contracts of employment, separation benefits and stock-option agreements under which affected employees may claim rights or benefitsThe RIF team should perform a due-diligence review of possible liabilities and verify whether, by policy or co ntract, the company has limited its ability to lay off employees. Likewise, where a collective bargaining agreement or policy dictates a priority for reductions in force, or bumping rights, such procedures should be examined. The company should also review policies and agreements to determine eligibility for severance benefits and accrued benefits such as paid time off, vacation or sick leave.5. Ensure compliance with the Worker Adjustment Retraining and Notification (WARN) ActGenerally, employers with hundred or more employees are subject to the WARN Act. Covered employers are required to give 60 days advance written notice of a go down closing or mass layoff. A plant closing is defined as the permanent or temporary shutdown of at least one facility or operating unit that results in an employment vent of 50 or more employees at a single site of employment. A mass layoff is a expiration of employment at a single site of employment that affects at least 50 employees and one-third of the covered employers work force. a going of employment of 500 or more workers at a single site of employment.Special considerations for unionized employersThe National Labor traffic Board maintains that, with certain exceptions, employers must bargain with employee representatives over the effects oflayoffs stemming from entrepreneurial decisions such as closing a plant or transferring bargaining-unit work. In the case of layoffs that do not constitute a business closing or a transfer of bargaining-unit work, employers generally must bargain over the effects of such decisions and, depending on contract language, the very decision to lay off employees.ADJUSTING TO JOB LOSSWorkers who have lost their jobs frequently experience tremendous pain. As well, job tone ending can be very difficult for family members. Furthermore, many downsized employees are very bitter and angry with their former employer. A U.S. study of downsized workers revealed that 67% would never work for their former company again, 54% would not recommend that others purchase the organizations products or services, and 11% considered going to the media and talking about their layoff experiences. One can separate adjusting to job loss by using a little psychology. There have been a lot of studies done on how to deal with loss. Psychologists have found that people often have an easier time dealing with loss if they know what feelings they might experience during the grieving process. Grief doesnt normally overwhelm us all at once it usually is go through in stages. The stages of loss or grief may include rap you may not be fully aware of what has happened.Denial usually comes next you cannot believe that the loss is true. Relief then enters the picture for some, and you feel a burden has lifted and opportunity awaits. Anger often follows you consign (often without reason) those you think might be responsible, including yourself. Depression may set in some time later, when you realiz e the reality of the loss. Acceptance is the final stage of the process you come to terms with the loss and get the energy and desire to move beyond it. The acceptance stage is the best place to be when starting a job search, but you might not have the luxury of waiting until this point to begin your search. While some people may see a job loss as a challenge which opens up new opportunities, most associate job loss with strong negative emotions.It is important to know that it is natural to have some negative feelings (especially at first) after a job loss, and that most people experiencethem. Here are some feelings and experiences that you may have after losing your job Loss of professional identity Professionals identify strongly with their careers. Unemployment can often lead to a loss of self-esteem. Being employed brings view in the community and in the family. When a job is lost, part of your sense of self may be lost as well. Loss of a network The loss may be worse when yo ur social breeding has been strongly linked to the job. Many ongoing work friendships are absolutely halted. Old friends and colleagues often dont call because they feel gawky or dont know what to say. Many dont want to be reminded of what could happen to them.Also, when work and social activities mix, such as with company picnics and dinner parties, the job loss can be catchy for all family members who participated in such activities. Emotional unpreparedness Those who have never been inert may not be emotionally prepared for job loss and may be devastated when it happens. It is natural and appropriate to feel this way. You might notice that some people you know dont take their job loss as hard as you have taken it. They might be more prepared for this time of uncertainty. Studies show that those who change jobs frequently, or who are in occupations prone to cyclic unemployment, suffer far less emotional impact after job loss than those who have been steadily employed and who are unprepared for cutbacks.A number of organizational interventions and practices have been identified as helping previously employed workers adjust to job loss and secure new employment. They include the following Advance bill of layoffs, which gives employees time to dent with the reality of job loss and to seek future employment. Severances pay and extended benefits, which provide an economic safety net. Education and retraining programs, which give individuals time to acquire marketable skills. Outplacement assistance to inform employees of new job opportunities and to improve their ability to market themselves. Clear, direct and empathetic resolve of layoff decisions. Consideration of HR planning practices that represent alternatives to large scale layoffs.There are some benefits of losing a jobTime to reflect adopt new ideas, direction and career planGet out of a job that was substandardSpend more time with family and hobbies