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CORP. DOWNSIZING.
Term Paper ID:23616
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Essay Subject:
From co. & indivdual perspectives. Purpose, financial effects, alternatives, impact on careers, job performance, longevity, morale.... More...
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6 Pages / 1350 Words
8 sources, 12 Citations,
APA Format
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Paper Abstract:
From co. & indivdual perspectives. Purpose, financial effects, alternatives, impact on careers, job performance, longevity, morale.
Paper Introduction:
Introduction
Downsizing, or rightsizing or restructuring are all terms used to describe corporate layoffs. When a company downsizes, it reduces the size of its workforce, generally because it is reorganizing (hence the association with the term "restructuring") or because it is engaging in severe cost cutting measures. Sometimes, the move is motivated by downward profit performance and a desire to rebuild the company's edge; in other cases, the move is proactive and designed to prevent the company from encountering serious financial problems. This research examines corporate downsizing from both a company standpoint and a human resource standpoint, and attempts to determine whether downsizing meets a company's objectives.
Corporate Analysis
When companies opt fo
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58). Stovall, R. (1996, 1 July). These employees no longer are confident that theywill always have a job since some of their associates are now unemployed,and they may take steps to make themselves more valuable to theorganization at which they currently work, and more attractive to employersoutside of the organization. Economists debate effect of layoffs.Knight-Ridder/Tribune Business News, p. This factor caninfluence the decision to lay off employees if management wants the marketto perceive that it is aggressively meeting its corporate obligations(Stovall, 1996, p. In some cases, the labor reductionis the only step that is taken, but more often, there are other steps whichaccompany the process. 814 361). In addition to public criticism of layoffs, there issome debate over the long-term effect of layoffs on the remaining workersin the company, including managers. Some of the effects of downsizing can be mitigated by the companytaking pains to explain their actions to employees. Looking for layoffs. (1996, 3 June). However, companies which take alonger-range view of their situation may be able to keep productivity andmorale up through more creative alternatives to downsizing, includingretraining, outplacement services, and other forms of cost cutting.Downsizing is not likely to pass from the corporate scene in the nearfuture, but other forms of cost cutting may arise which supplant thedevastating effects of this most drastic of measures. (1996, March). This can be important in the company's long-term prospects andcan help rebuild the local region if it is a region dependent on only a fewindustries (Mariotti, 1996, p. Corporate execs: Villains or heroes?Industry Week, p. 17). Morale The morale of the surviving workers suffers greatly immediatelyfollowing downsizing. (1996, March). 23). Future Outlook Companies are likely to continue to use layoffs as a means to reducecosts, but the increased attention focused on layoffs and on the salariesof managers may make this alternative less acceptable in the future than ithas been in the past. 64). 16-2 . If management takes the timeand care to address the concerns of employees, it can help build up moralemore quickly than if it ignores the valid concerns of its workforce(Dentzer, 1996, p. (1996, 14 August). This can greatly change the skills andtraining that they would otherwise seek (Wormser, 1996, p. 4. H. Because of this, downsizingcan be a risky activity which may speed the company on a downward spiraltoward inefficiency (Dentzer, 1996, p. The other factor that determines employee longevity is the state ofthe economy in the region. Job Performance Companies which engage in downsizing typically need for survivingworkers to perform better than they have in the past; in short, they needproductivity gains because they have fewer employees but need to generateproducts or services at the same level (or more) than before the downsizingoccurred. In addition, union rules may also dictate the exactsteps that a company can take when faced with reducing its labor force, andthose steps may preclude intermediate steps short of laying off workers(Mahoney, 1996, p. 58). Railway Age,p. Some companies, for example, have enacted across-the-board pay cutsuntil the company has sufficiently regained its profitability. 34-35. Inaddition, there can be a lack of training provided to workers who must nowperform at higher levels than in the past, and workers may resent having toperform jobs that formerly required more than one worker to complete. News & World Report, p. Because of this, somecompanies may find other ways to reduce their labor costs in the futurewhich stop short of the drastic step of downsizing, and which offer greaterbenefit to companies. 58. Introduction Downsizing, or rightsizing or restructuring are all terms used todescribe corporate layoffs. These solutions work best in privatelyheld companies which are not subject to the scrutiny of the stock market.Still other companies retrain employees for other jobs which eliminate theneed for layoffs. For some employees, downsizing that occurs in their company can have asignificant impact on their career objectives even if they are notimmediately affected. Corporate Analysis When companies opt for a downsizing solution, they generally do sobecause they have decided to cut costs by reducing their workforce ().Labor is often the most significant cost that a company has, and reducingthe labor force results in savings not only directly (by eliminating wagesand salaries), but also indirectly, by reducing benefits and overheadassociated with employees. Longevity Employees who witness downsizing activities at their organizations arenot likely to want to remain with the company which participates in thedownsizing. For example, PBX operators are increasingly being replaced bycompanies who are installing telephone systems which eliminate theirfunction. B. Planning, pp. However, the most immediate effect of the downsizing process is adownturn in productivity; this is true at both the management and laborlevels (Dentzer, 1996, p. These employees are likely to remain with the organization, andmay even be key success factors in the long-term (Heller, 1996, p. 814 361). Types of Companies Which Downsize There is no specific type of company which downsizes; small companiesand large companies both engage in the proactive, as do privately heldcompanies and publicly traded companies. In cases where the downsizing is theresult of restructuring (such as a division being closed), the layoffs canbe viewed as inevitable and a sound business decision (although theunderlying restructuring may be questioned). Alternatives There are alternatives to layoffs which can result in effective costcutting without providing the company with the severe effects that layoffsbring. The result here is that the workers are available when the companyreturns to greater profitability. U.S.News & World Report, p. Some employees will beeminently employable and will have little trouble finding other jobs; otheremployees have either highly specialized skills which are not in muchdemand in the market, or skills which do not transfer well to othercompanies. Lacking this communication,employees will speculate (often erroneously) about the reasons for thedownsizing, and may spend the company's resources on their own job searchrather than on completing the task at hand. (1996, May). 64. The fallout from dumping workers.U.S. The effect of this downturn in morale is greater loss ofproductivity, and a resentment of management by workers who remain at thecompany. Mariotti, J. Who manages management? ManagementToday, p. Career Objectives Career objectives can change when an individual is laid off; this isparticularly true if the downsizing results from the introduction of newtechnology since the individual's skills may no longer be needed in themarketplace. In many cases, the decline in morale extends tosupervisors as well as to peers of the laid off workers (Dentzer, 1996, p.58). In some cases, employees may have attractive "goldenparachutes" which make it more expensive to lay the employee off than toretain them; this is particularly the case with senior executives.However, despite short-term cash demands, downsizing can reduce thecompany's costs in the long-term, which is why it is a popular costreduction technique (Miller, 1996, p. When a company downsizes, it reduces the sizeof its workforce, generally because it is reorganizing (hence theassociation with the term "restructuring") or because it is engaging insevere cost cutting measures. Companies which are seen as taking proactive measures tocontrol their costs, which downsizing represents, can receive a "bounce" intheir stock price immediately after announcing a layoff. Creators of the 21st century. Downsizing's other down side. (1996, 11 March). Mahoney, J. 23. Sometimes, the move is motivated by downwardprofit performance and a desire to rebuild the company's edge; in othercases, the move is proactive and designed to prevent the company fromencountering serious financial problems. Wormser, L. Severance packages, accrued vacation andother related costs must be paid immediately when an employee isterminated. If there is a single commonalitywhich can be found among companies which engage in downsizing, it is adesire to become more competitive in the marketplace (), and to do so bybecoming "leaner and meaner." All companies which engage in downsizing doso as part of a cost cutting program. 24). Heller, R. Getting to less. This communicationshould involve all of the cost cutting measures which are beingimplemented, not merely the layoffs. Another financial effect of downsizing is that it can have abeneficial effect on the company's stock, a critical factor if the companyis publicly held. For some employees, downsizing at a companymeans that they will move to another organization which is more stable evenif they are not directly affected because they no longer trust the companyfor which they currently work. Chief among these is the individual employee andthe skills and talents possessed by that employee. 58). If the economy as a whole is poor, employeeswill be more likely to stay with the company and try to make it workbecause they recognize that their employment outlook is poor outside thecompany. The longevity of employees after a downsizing move depends onseveral factors, however. Because of this, their skills are no longer applicable in themarket and their career objectives are likely to change as a result(Zuckerman, 1996, p. Financial Effects The immediate effect of downsizing can actually be a boost in thecompany's financial liabilities. Job performance is related to corporate culture, and if the companyhas not adequately communicated the reasons behind the downsizing and whatthe ultimate benefit to the employees who remain will be, productivity canbe expected to remain low for some time. Sales &Marketing Management, pp. References Dentzer, S. 24. Miller, L. Such a downturn in productivity can betraced directly to a downturn in morale which follows layoffs. Conclusion Retaining employees who have skills which no longer match thoserequired by an organization does not make sense, and some companies are insuch dire financial straits that downsizing represents the only realalternative for the company to survive. Othercompanies have put workers on flex-time or reduced schedules so that theykeep their jobs, but the company is not responsible for benefits or othercosts. 4). A loss of productivity and a highemployee turnover may result at companies which engage in downsizing withthe result that the company may actually lose more than it gains throughthe downsizing activity (Mahoney, 1996, p. S. This research examines corporatedownsizing from both a company standpoint and a human resource standpoint,and attempts to determine whether downsizing meets a company's objectives. (1996, March). Human Resource Analysis The most immediate effect of downsizing is on the employees at thecompany, both those who are laid off (since they must find new work andpossibly new skills), and those who remain with the organization.Companies are interested in modifying the productivity of those employeeswhom they retain, but they are also increasingly interested in finding waysto avoid layoffs. 814 361. Zuckerman, M. 34).
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