Downsizing - Human Resource Management - Lecture Slides, Slides of Human Resource Management

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Downsizing

Downsizing: Why?

• Domestic competition

• Foreign competition

• Technological change

• Change in firm strategy

• Too often… Bad Management

Sources: Cascio, 2002; Fox & Bernasek, 2003

Downsizing: Cases For and Against

• Benefits of downsizing
  • Reduced costs
  • Symbolism of cutting jobs
• Costs of downsizing
  • Costs associated with downsizing
  • Potential lawsuits
  • Public image of firm
  • Decreased loyalty of current employees
  • Danger of losing the wrong people
  • Difficulties in recruitment

Alternatives to Pure Downsizing

• Prevent the need…
  • Staff with contingent workers
• Treat employees as assets…
  • Reassign workers to different jobs within firm
  • Retrain workers in new technologies
  • Shorten hours / pay cuts
• When there’s no alternative….some less painful options
  • Attrition
  • Early retirements
  • Layoffs (temporary)
  • Voluntary severance

Early Retirement

• How and where
  • Financial incentives to retire
  • FedEx
• Advantages
• Less painful
  • Older and/or more senior workers are often paid more than younger workers, so fewer people affected
  • Older workers may not have skills needed for new technologies
• Disadvantages
  • Cost
  • Lack of control
  • May not attract enough people
  • May attract too many people

Temporary Layoffs

• How and where
  • Workers placed on furlough
  • Seasonal industries (i.e., agricultural workers, IRS)
  • Heavy industry (automobiles, steel)
  • Temporary downturns (airlines...)
• Advantages
  • Firm can decide which jobs to eliminate
  • Laid-off workers can be recalled if needed
• Disadvantages
  • Decreased loyalty and commitment
  • Workforce may look for permanent work

Source: Zimmerman, 2001

Responsible Downsizing

• Think through what you’re doing and why
• Weigh the long-term advantage of keeping people, versus short-term benefits of layoffs
• Seek employee input
• It’s not a quick fix
• Make the process fair
• Communicate
• Give survivors hope
• Assist employees to cope with change
• Examine HR policies

Sources: Barnes, 2003, Cascio, 2002