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    Harsha Vallary
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    Downsizing is a strategy to reduce the scale and scope of a business by decreasing employee headcount in order to improve financial performance. Reasons for downsizing include reducing costs, mergers and acquisitions, economic crises, excess workforce, and strategy changes. Alternatives to reducing headcount include decreasing working hours, cutting part-time or temporary employees, and reducing benefits like overtime pay. Downsizing can be done through voluntary methods like buyouts, early retirements, and outplacement or involuntary layoffs. While downsizing aims to improve finances, it often negatively impacts employee motivation, increases stress for surviving employees, and damages a firm's reputation. Many downsizing efforts only achieve 25-50% of desired financial targets and impair

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    Downsizing is a strategy to reduce the scale and scope of a business by decreasing employee headcount in order to improve financial performance. Reasons for downsizing include reducing costs, mergers and acquisitions, economic crises, excess workforce, and strategy changes. Alternatives to reducing headcount include decreasing working hours, cutting part-time or temporary employees, and reducing benefits like overtime pay. Downsizing can be done through voluntary methods like buyouts, early retirements, and outplacement or involuntary layoffs. While downsizing aims to improve finances, it often negatively impacts employee motivation, increases stress for surviving employees, and damages a firm's reputation. Many downsizing efforts only achieve 25-50% of desired financial targets and impair

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    144 views12 pages

    Downsizing

    Uploaded by

    Harsha Vallary
    Downsizing is a strategy to reduce the scale and scope of a business by decreasing employee headcount in order to improve financial performance. Reasons for downsizing include reducing costs, mergers and acquisitions, economic crises, excess workforce, and strategy changes. Alternatives to reducing headcount include decreasing working hours, cutting part-time or temporary employees, and reducing benefits like overtime pay. Downsizing can be done through voluntary methods like buyouts, early retirements, and outplacement or involuntary layoffs. While downsizing aims to improve finances, it often negatively impacts employee motivation, increases stress for surviving employees, and damages a firm's reputation. Many downsizing efforts only achieve 25-50% of desired financial targets and impair

    Copyright:

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    of 12

    DOWNSIZING

    BYRITU ARIHANT BAPPI

    What is downsizing

    A downsizing strategy reduces the scale (size) and scope of a business to improve its financial performance (Robbins & Pearce, 1992). Reducing the number of employees on the payroll. Reducing total no. of employees through terminations, retirements .

    WHY???.........

    Reduce cost Merging of firm or acquisition. Change in management Economic crisis Excessive workforce Loss of the company Strategy changes.

    Alternatives to downsizing
    Change in employment policies

    Reduction through attrition Cut part time employees Cut interns and temps. Reduce working hours.

    Change in benefits

    Cut overtime pay Use vacation, leave days Profit sharing or variable pay

    Downsizing
    Reducing Costs

    Alternatives & separations

    Voluntary separations

    Involuntary separations.

    Buy out Benefits

    layoffs

    Early retirements

    outplacement

    Methods of Communication

    small meetings or all staff meetings face to face interaction or one-on-one discussion video conferencing use of newsletters telephone / fax Memorandam e-mail and bulletin boards

    Purpose and risk of downsizing


    PURPOSE= improve financial performance through cost cutting while also achieving long term effectiveness , efficiency and productivity. DILEMMA of downsizing Short term cost cutting may lead to negative psychological reactions that harm the long term aid of increased competitiveness.

    Failures of downsizing

    Only between 25% to 50% of downsizing companies meet their financial targets (improved productivity, higher returns on investment, higher profits, etc.) Even these mediocre results do not consider psychological andbehavioural reactions from survivors which are likely to be negative and further impair financial performance

    Downsizing effects
    Firms reputation as a good employer suffers. Example: Apple Computers reputation as good employer declined after several layoffs in 1990s. Employee motivation disrupted: increase in political behaviors, anger, fear - which is likely to negatively impact quality of customer service. Survivors experience more stress due to longer work hours with re-designed jobs, and increased uncertainty regarding future downsizings.

    Survivor Reactions to Downsizing


    PSYCHOLOGICAL STATES & WORK ATTITUDES

    BEHAVIOURIAL REACTIONS

    Anger Anxiety Stress Insecurity Dissatisfaction Low morale Low org commitment

    Absenteeism

    Turnover Risk aversion Resistance to change Less effort Poor performance

    Examples

    Intel :

    Efficiency Program I6000 workforce worldwide Save $ 1 billion Shut down technical support in India
    Cut of 50% of Maxtors workforce

    Apple Computers:

    Seagate Technologies: BSNL:

    Plans to cut off 1lakh workers

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