Restructuring & Downsizing

Topics: Human resource management, Human resources, Layoff Pages: 6 (1648 words) Published: June 12, 2013
Can Downsizing be a prudent HR Management decision?


Human resource management has evolved from a largely administrative and operational role to one that plays an important part in strategic planning. This shift is more evident in its role towards downsizing. The decision to downsize is a decision that requires careful planning and consideration. It is critical to consider the long-term effects that short-term cost cutting measures can bring.

Downsizing creates disruptions in the organization’s relationships with customers, suppliers and employees, organization’s structure, culture and climate. As Wayne F. Cascio says “if you must downsize, do it right, that no class of employee can be disproportionately affected.” Finding the best way to downsize is crucial, because the success of organisations that have downsized in the past has not been particularly laudable.

Downsize Decision

The downsizing decision is the most demoralizing and stressful aspect of the emerging Human resource managerial role. Downsizing is viewed as having a profound effect on the organization and the personnel including those who are terminated and those who survive. Yet it is the integral part of any workforce management decision. It involves understanding the tangible pitfalls of a reduction in workforce and analyzing the emotional and practical ramifications.

Downsizing may occur intentionally as a strategic, proactive response designed to improve organizational effectiveness, increase productivity and cost cutting strategy. This response may involve mergers, acquisitions, sell-offs, or restructuring to better enable the organization to meet its mission or fill an environmental niche.

It may involve reduction in personnel through transfers, outplacement, retirement incentives, buyout packages, layoffs, attrition, and so on or may occur in which new products added, new sources of revenue are opened up, etc. It affects work processes. Fewer employees may be left to do the same amount of work and the quality may suffer. Downsizing activities may include discounting functions, abolishing hierarchical levels, merging units, or redesigning tasks. Downsizing can impact financial well-being, health, personal attitudes, and family relationships.

Before downsizing HR need to explore possible alternatives such as reducing hours across the board, introducing forced vacation, asking for layoff volunteers, compressed workweek, hiring freeze, and early retirement or implementing other cost-cutting measures. Human resource managers should weigh in on several factors that influence downsizing decisions. They need to identify the specific problems downsizing is expected to solve, consider overall financial health of the company, fiscal operating policies, and industry benchmarks before proceeding, and review all legal implications.

Managing Process

One key to a successful downsizing plan lies in management’s ability to clearly convey to employees the purpose behind the cost-cutting efforts. Secondly, consider any oral or implied contracts of employment, review employee files, plan for the contingencies, know the stakeholders, clearly define criteria for selection factors on which downsizing decisions will be made.  

Downsizing may have variety of adverse effects on layoff individuals, survivors and organizations such as loss of morale, distrust, anxiety, feelings of job insecurity, anger, job stress, physical ailments, poor mental health, decreased loyalty, lowered motivation and productivity, increased resistance to change, crisis mentality, politicised special interest groups, occupational violence, lack of teamwork, perception of unfairness, lack of leadership and overall commitment to the organization. Downsizing decision has to be a prudent one because it deals with lives of people.

The managers will be faced with a work force at least partly staffed with survivors of downsizing.Providing information...

References: Buch, K. (1992). “How does downsizing affect employee involvement?” Journal of Quality and participation, 15, 74-77.
Cameron, K.S. (1994). “Strategies for successful organisational downsizing”. Academy of Management Journal, 30, 126-138.
Marjorie Armstrong-Stassen, Julian Cattaneo, (2010) “The effect of downsizing on organizational practices targeting older workers”. Journal of Management Development, Vol. 29 Iss: 4, pp.344 – 363.
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