Layoff and Strategic Downsizing Decisions
INTRUDUCTION
Downsizing is a permanent reduction of workforce through layoffs and other means. Organizations usually downsize to save payroll costs and prevent bankruptcy during tight economic conditions. Downsizing, when done right, makes the organization more efficient, lean, and mean .On the other side, a faulty approach to downsizing can cause the organization to run the risk of losing key talent and intellectual capital, and becoming dysfunctional by breakdown of hierarchies and systems. The criteria adopted for who stays and who goes largely determines the success of the downsizing intervention Many organizations, especially traditional ones, in a bid to ensure impartiality and objectivity adopt the LIFO or “Last in First Out” principle whereby those who joined the organization last become the first to leave. The rationale of making seniority the basis of downsizing is that newer employees have spent less time in the organization and are less committed or acquainted with the finer nuances of its running. Also, the organization would have invested lesser time and resources training such employees compared to older employees. other organizations make the combination of competence and performance, or the ability 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 determining who goes and who stays. Those at the bottom of the appraisal list usually get the layoff notice first. While making performance the primary selection criteria for downsizing and restructure is apparently a just and equitable method, two 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 indicators of performance might churn up a wrong list, causing the danger of the organization dispensing with true performers and retaining people who
Downsizing is a permanent reduction of workforce through layoffs and other means. Organizations usually downsize to save payroll costs and prevent bankruptcy during tight economic conditions. Downsizing, when done right, makes the organization more efficient, lean, and mean .On the other side, a faulty approach to downsizing can cause the organization to run the risk of losing key talent and intellectual capital, and becoming dysfunctional by breakdown of hierarchies and systems. The criteria adopted for who stays and who goes largely determines the success of the downsizing intervention Many organizations, especially traditional ones, in a bid to ensure impartiality and objectivity adopt the LIFO or “Last in First Out” principle whereby those who joined the organization last become the first to leave. The rationale of making seniority the basis of downsizing is that newer employees have spent less time in the organization and are less committed or acquainted with the finer nuances of its running. Also, the organization would have invested lesser time and resources training such employees compared to older employees. other organizations make the combination of competence and performance, or the ability 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 determining who goes and who stays. Those at the bottom of the appraisal list usually get the layoff notice first. While making performance the primary selection criteria for downsizing and restructure is apparently a just and equitable method, two 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 indicators of performance might churn up a wrong list, causing the danger of the organization dispensing with true performers and retaining people who
References: Reference Book: Writer name: Belcourt Ms Monica. Published: 2011-2012. Name: Strategic Human Resources Planning. Edition: Second Edition at York University. Publication by Renate McCloy. Page:265-293. Websites: 1.www.google.com 2.www.wikipedia.com