Strategic Management of Downsizing

Strategic Management of DownsizingIntroductionThis has become a major strategic alternative by healthy known firms such(prenominal) as DuPont, ATT and IBM (Hopkins, S Hopkins W., 1999). It is non and told in the daily newspapers solely as well as in the entertainment industry. The new-fangled motion picture empowerd Up in the Air starred by George Clooney wherein his rail stylus line was to tell employees that their position is no longer available.Top instruction plays an definitive role in this course of action. The strategic close to nap surface implies some honourable issues first, the theater directors obligation for the best interest of the fraternity and secondly, do sure non to violate the rights of the employees. It is in fact, the close to selectred option of companies to sustain run apostrophizes and comply with the existing scope of the business. It is an important management take a chance and requires large assistance from the piece option manage ment team. Downsizing is highly nasty. No one looks forward to creation laid complete. The extremely difficult decisions of who must be laid off, how much get a line they solelyow for be given, the amount of severance pay, and how far the comp each bequeath go to assistance the cease employee find some different crease ar given little than adequate attention. These be critical decisions that deport as much to do with the future of the organisation as they do with the future of the lay off employees.How It both StartedDownsizing is the conscious use of permanent somebodynel reducings in an search to improve efficiency and/or effectiveness (Budros 1999, p.70). Since the 1980s, lay off has gained strategic legitimacy. Indeed, recent research on lay off in the US (Baumol et al. 2003, see besides the Ameri cobblers last Management Association annual inspects since 1990), UK (Sahdev et al. 1999 Chorely 2002 Mason 2002 Rogers 2002), and Japan (Mroczkowski and H anaoka 1997 Ahmakjian and Robinson 2001) suggests that economizement is be regarded by management as one of the preferred routes to go around declining system of ruless, cutting cost and improving organizational performance (Mellahi and Wilkinson 2004) more or less often as a cost-cutting measure.Euphemisms atomic digit 18 often used to dsoften the pull in the transition of firing and be fired, (Wilkinson 2005, Redman and Wilkinson, 2006) including downsize, scanty, rightsize, delayering, smartsize, redeployment, custody reduction, breakforce optimization, simplification, force shaping, recussion, and reduction in force ( similarly c whollyed a RIF, especi every(prenominal)y in the government exercise sector). Mass layoff implies laying off a large bite of workers. scrape implies that positions will be eliminated as workers quit or retire. Early seclusion means workers may quit now yet still delay eligible for their retirement benefits later. While redundancy i s a particularized legal term in UK labor law, it may be perceived as obfuscation. Firings imply misconduct or misery patch lay-offs imply economic forces beyond ones control.During the past several weeks, major provide reductions taking erupt crosswise the serviceman. Tens of abide byd professional Jewish communal workers along with efficient and loyal administrative and support cater look at received beg slips in some cases they were given just cardinal days nonice to clear out their offices as their jobs were being retrenched. These be saving measures be non unique to Jewish organizations and have been seen thorough-out the public, private and non-for-profit sectors the world over. However, these ample layoffs raise the issue of the honourableity of retrenchment and whether or non there is a Jewish come along to these practices, de fragmentisementicularly when it concerns employees who work for the Jewish community. wherefore Downsizing is an Ethical IssueAny meter were faced with a decision that suffer affect the rights or well-being of opposites, were looking at an estimable issue. No field of study how strong the justifications for reducing the workforce atomic number 18 or come along to be, laying off loyal and productive employees is an upsetting experience for all bear on, and those on the receiving end face non just financial provided mental injury.How so? For many of us, the work power isnt just a space for work its where we develop and maintain some of the most important relationships we have. During the week, we extend more time with co-workers than with our families, and for better or worse, work is how many of us define ourselves and give meaning to our lives. Getting laid off compromises all of these social functions, so managers should think of downsizing as a deep and dread(a) trauma for those being let go, and not as a incorrupt setback or reversal of fortune.Yes, downsizing has legal implicati ons, and it is understandable that companies postulate to minimize their liability when they downsize. Yes, there are economic matters to postulate, which spend a pennys downsizing a management issue, as well as. But at its core, downsizing is an ethical issue, and the trustworthy manager is concerned not just with entertaining the lodges financial and legal interests still also with honoring the dignity and integrity of the human beings who work on the front lines and who are the lifeblood of the organization.What Are Your Ethical ResponsibilitiesDownsizing success lavishy is immensely difficult. The following ideas erect sustain to focus thinking for anyone considering such a move.Treat all employees with respect. Communicate too much rather than hold back declareation.Research applicable laws and follow the spirit of the legislation.Then afterwards, give employees the psychological space to accept, and discuss, Downsizing refers to a companys decision to reduce its w orkforce not because of poor performance, criminal conduct, or unethical behavior on the part of those being let go. The word is a euphemism meant to soften the blow as much for the company as it is for the soon-to-be eliminated. There is no function wrong with making a difficult task easier to bear. In fact, there are good ethical intellectuals for doing so, as well soon see. Still, there is no get around the fact that downsizing is a type of layoff, with all that this implies. The ethical manager will encumber in mind what is really going away when he or she is charged with letting good volume go. Do it the right way. Showing compassion for these employees is the right thing and ethical thing to do no matter what the ultimate decision of the outcome.Do it in soulfulness. This seems obvious thing to do, unless surprisingly a number of reports give tongue to about employees who were downsized on the phone or by e-mail. Managers who use this parliamentary procedure claim it casts the whole thing easier to deal with. Yes, except for whom? Certainly, not for the employee being let go. As uncomfortable as it is to end someones employment, the right thing to do is to have a private conversation with him or her in person. The ethical principle of respect for others ( bloodWeek.com, 1/31/07) requires nada less.Do it privately. Respecting others means honoring their wishes and appraises, and it is reasonable to assume that most people would prefer to have perturbing news delivered in private. This means in your office, with the adit closed. Ive heard of managers who broke the bad news at the employees cubicle in spite of appearance earshot of everyone in the vicinity. Again, one would think that this would be a matter of common comprehend and common decency, scarcely ap enkindlely neither is all that common.Give the person your full attention. Interrupting the conversation to take phone calls, harbour your BlackBerry, or engage in other distractions isnt just rude, it tells the other person that the matter at hand isnt all that important to you. Thats yet another violation of the principle of respect. The impulse to turn your attention to less troubling matters is understandable, besides along with the privileges of being a manager come responsibilities, and downsizing with integrity is one of the most important obligations you have.Be honest, but not brutally so. Must you always tell the truth, the whole truth, and nothing but the truth? Yes, if youre giving sworn testimony in a tribunal of law, but beyond the courtroom the duty to tell the truth is restrict by the duty to minimize harm. In practical hurt, this means being forthright with the employee but also choosing with the care the words, tone of voice, and demeanor you use. compassionateness (BusinessWeek.com, 2/22/07) literally, suffering with someone honors the dignity of your employee and speaks to the better part of your nature. We nookyt always make things b etter (BusinessWeek, 1/18/07), but we shouldnt make things worse.Dont rush. A shock takes time to absorb. Imagine that your physician says you have a serious illness. Wouldnt you expect him or her to allow the news authorize in, rather than to summarily dismiss you and call for the next patient? world let go isnt as serious as getting a diagnosis of evokecer or heart disease, but it is still a major, life-changing event. You owe your employee the space to absorb the information, and you may have to explain more than once what is happening and why. You would demand nothing less if it were happening to you, and you would be right to do so.These guidelines assume that the organization has good reasons for downsizing but what if you dont see things this way? For example, suppose your company believes that it is necessary to shift its guest service jobs overseas (BusinessWeek.com, 9/27/07), and you believe that doing so is both unethical and bad for business. In this case, you not entirely have a right to object, you have an ethical obligation to object.Does this mean that you should be watchful to give up your job on moral grounds? non of necessity. Depending on your personal circumstances, your duties to your family or to yourself big businessman justifiably override the value of making a statement by quitting. Even if you are act to guardianship as many jobs in the U.S. as possible, this goal will take time to achieve, and it may be easier to do so from inside the company than from the outside.ConclusionThere are two main issues to cargo deck in mind when planning a layoff respecting employee dignity and business planning. No one, from the mailroom to the board-room, take pleasure in downsizing but when the need for a reduction in staff is unavoidable, a layoff can be over(p) in such a way that the chore is fixed and the organization excels. The bottom line is important, but so are the values of respect, compassion, and transparent human decency. The good manager takes all of these into account always.Derivative termsDownsizing has come to mean much more than job losses, as the word downsize may now be applied to almost everything. pot describe downsizing their cars, houses and nearly anything else that can be measured or valued.This has also spawned the opposite term upsize, which means to grow, expand or grease ones palms something larger.Ask the Ethics Guy September 12, 2008, 1157AM EST text size TTReferencesHopkins, S. Hopkins, W. (1999) journal of Ethics Perception of Rights and Responsibilities http//www.springerlink.com/content/m80p7mv83x110376/Byron, W. (2009) Philadelphia Business Journal The Ethics of Operating in downturns and downsizing http//philadelphia.bizjournals.com/philadelphia/stories/2009/01/12/smallb4.htmlFrom Alan Downs in Business The Ultimate ResourceDownsizing or doing layoffs is a toxic solution. use sparingly and with planning downsizing can be an organizational lifesaver, but when layoffs ar e used repeatedly without a thoughtful strategy, downsizing can destroy an organizations effectiveness. How you breed people really matters to the people who leave and the people who remain.One outcome of downsizing must be to preserve the organizations expert capital.How downsized employees are treated directly affects the morale and retention of valued, high-performing employees who are not downsized.Downsizing should never be used as a dialogue to financial centers or investors of the new managements tough-minded, no-nonsense style of management the cost of downsizing far outweighs any benefits thus gained.So what happens? These decisions are pass on to the legal section, whose primary objective is to reduce the risk of litigation, not to protect the morale and intellectual capital of the organization. Consequently downsizing is often penalize with a brisk, compassionless efficiency that leaves laid-off employees angry and surviving employees feeling at sea and de-motiva ted.Ineffective methods of downsizing abound. Downsizing malpractices such as those that follow are common they are also inefficient and very dangerous.Furthermore, attorneys advise against utter anything more than whats absolutely necessary to either the departing employees or the survivors. This caution is intentional to protect the company from making any implied or explicit promises that arent thusly kept. By strictly scripting what is said about the layoffs, the company is protecting itself from verbal slips by managers who are themselves stressed at having to release valued employees.This approach may succeed from a legal perspective, but not necessarily from the larger and more important concern of organizational health. First, laying off employees by a flat percentage across contrasting incisions is irrational. How can it be that accounting can cope with the identical proportion of less employees as human resources? Could it be that one department can be externalized and the other left intact? The decision of how many employees to layoff from each department should be based on an analysis of business needs, not an dogmatic statistic.The concept of laying off employees strictly on the basis of higher rank is also irrational. The choice of employees for a layoff should be based on a redistribution of the work, not the date the individual employee was hired. roughlytimes an employee of 18 months has a expertness far more valuable than one with 18 years seniority. incessantly Respect Peoples DignityThe methods employed in many poorly execute layoffs treat employees like children. Information is withheld and doled out. Managers control over their employees is violated. Human resource representatives scurry around from one hush-hush meeting to another. How management treats laid-off employees is how it vicariously treats remain employees everything you do in a layoff is done in the arena, with everyone observing. How laid-off employees are treat ed is how surviving employees assume they may be treated.Why does this matter? Because successfully planning for the new organization will keep it going and improve its results. You must keep that exceptional talent, who are also the employees most marketable to other organizations. When they see the company treating laid-off employees poorly, theyll start looking for a better mail to work, fearing their heads will be next to roll.While its important not to allow the legal department to design a layoff, its nevertheless important that you respect the employment laws. In different countries such laws include entitlements tied to civil rights, age discrimination, disabilities, worked adjustment, and retraining. These laws are important and should be respected for what they intend as well as what they prescribe or proscribe. If you have planned your lay-off according to business needs, and not on head count or seniority, you should have no problem upholding the law. You will almost a lways find yourself in legal pother when you base your layoff on factors other than business needs.The method of separation may have an effect on a former employees ability to nab whatever form of unemployment compensation might be available in their jurisdiction. Unemployment claim and receive compensation. unemployment benefits, as are those who are fired for take in misconduct. Also, lay-offs receivable to a firms moving production overseas may entitle one to increased re-training benefits.Certain countries (e.g. France), distinguish between leaving the company of ones free will, in which case the person isnt entitled to unemployment benefits and leaving the company voluntarily in the frame of a RIF, in which case the person is entitled to them. An RIF reduced the number of positions, rather than laying off specific people, and is usually accompanied by internal redeployment. A person might leave even if their job isnt reduced, unless the employer has strong objections. In th is moorage, its more dear for the state to facilitate the departure of the more professionally active people, since they are less likely to remain jobless. Often they find new jobs while still being paid by their old companies, costing nothing to the social security system in the end.There have also been increasing concerns about the organizational effectiveness of the post-downsized anorexic organization. The benefits, which organizations claim to be seeking from downsizing, centre on savings in labor costs, speedier decision making, better communication, reduced product development time, enhanced involvement of employees and greater responsiveness to customers (De Meuse et al. 1997, p.168). However, some writers draw attention to the obsessive pursuit of downsizing to the point of self-starvation marked by excessive cost cutting, organ failure and an extreme pathological fear of becoming inefficient. Hence trimming and modify belts are the order of the day (Tyler and Wilkinson 2007)Here are your ethical responsibilitiesBy Bruce Weinstein, PhDMost discussions about downsizing focus on the legal, economic, or psychological issues raised by this practice. These are essential concerns, but we rarely consider how or why downsizing is also an ethical issue. The next two columns are an attempt to redress that problem. Here, well consider your ethical responsibilities if you are the one charged with giving the bad news. In the second column, well look at what you ought and ought not to do if you are the one being downsized. (Weinstein, 2009)March 17, 2009 by Stephen G. Donshik http//ejewishphilanthropy.com/the-ethics-of-downsizing/No one is oblivious to the massive firings that have been taking place over the last eight months. As the quoin has been felt in countries without the world we have witnessed not still the collapse of financial markets but also the retraction taking place in multi-national corporations and among the largest manufacturers on all cont inents. More and more people are finding themselves unemployed, either the result of firms closing or staff reductions.In dealing with the ethics of downsizing our communal organizations we have an opportunity to portray both our leadership and our commitment toEven though a number of Federations have already implemented cuts and made difficult decisions it is not too late to assist others who are yet to face the need to retrench staff members. This is an area that is clamoring for both clarity and direction.Lets hope we can rise to the occasion. After all, it is in our tradition that we are a heat unto the nations.Stephen G. Donshik, D.S.W.,Managing Leadership The strategic role of the senior executivehttp//managingleadership.com/blog/2006/10/25/corporate-ethics-and-downsizing/Ethics cannot survive the retention in the management team of anyone who is liable for the downsizing predicament. They must reconcile, or, at a minimum, the CEO must resign. Furthermore, any member of t he board of directors complicit in the development of the crisis forcing this decision must resign also. Indeed, in the absence of a board that creates and enforces such an environment of ethical acknowledgement and acceptance of responsibility for executive and managerial decisions, there is not only no corporate ethics in the conventional sense there is also a fundamental lack of executive fiducial responsibility a lack that will ineluctably continue to constipation its partingholders, and as a result of that, also 1) the company 2) its employees, customers, and vendors and 3) its community.The unethical environment arises in the absence of a board that establishes and supervises this fiduciary responsibility.In such an unethical environment, the real specific ethical violations occur well in the beginning the dilemma such as the need to downsize that attracts all the attention. This is in evidently better times, when the CEO, executive teams, and consultants inflate the ro le and capabilities of the companys senior management, leading to what can only be described as juvenile ill-discipline and playing to the crowd. This is when they make the ill-advised decisions evaluated more for the force of the impact they create about the pseudo-gravitas and paradigm-shifting mass of these great personages, than for their contribution to the advancement of corporate aims and the growth of shareholder value both of which should be delineated to management by the board. These are the decisions that create the inflated work force.In the current environment of non-accountability, where half of a board consists of company management, and the other half of managers of other companies familiar with the game, it is only the work force that is downsized, and, possibly junior levels of management who have not yet attained the corporate version of tenure in this collusion. In such circumstances, the only possible outcome is downsizing, and this is not unethical in and of itself, taken as a distinct business decision. Taken as a whole, however, as Ive attempted to portray it, it is an extension of an unethical situation and of a chain of unethical decisions.Crocodile tears will be bedevil by a management team professing to be compelled to oh-so-reluctantly make tough business decisions and effect practical remedies that cannot be avoided and which must be taken to discharge their executive duties and serve the company and its shareholders considerations which neither concerned nor motivated them sufficiently, if at all, when they created the circumstances leading to the crisis.This was written by Jim Stroup. stick on on Wednesday, October 25, 2006, at 1002 am. Filed under Boards, CEOs, Ethics, Organizational Leadership. Bookmark the permalink. embrace comments here with the RSS feed. Post a comment or leave a trackback.42k-6 sec 56kwww.buzzle.com/articles/reasons-for-downsizing.htmlwww.buzzle.com/articles/reasons-for-downsizing.htmlReasons for DownsizingCorporate downsizing has been the biggest fallout of the troubled times, the world is witnessing. As we continue our efforts to fight the global downturn, downsizing has become a stark reality.Downsizing refers to a process where a company or a firm simply reduces its work force in order to cut the operating costs and improve efficiency. It has become a legitimize option for business growth strategies, especially after the 1980s. It is in fact, the most preferred option of companies to sustain operating costs and comply with the existing scope of the business. It is an important management venture and requires large assistance from the human resource management team.There are a number of reasons why a company downsizes its employee base.Merging of two or more firms When a authoritative firm combines its operations with another firm and operates as a single entity, in order to stay in profit or expand the market reach, it is called a merger. In case of a merger, certain p ositions become redundant. The same work is done by two different staff members. Usually in such a case, the company cuts staff to eliminate redundancy in work. It is characterized by some employees leaving an organization voluntarily, or by lay-offs, especially in case of higher management positions.Acquisition If one organization purchases another one, there is a defined change in the management and the acquired company staff has to face unemployment. The reason for this is the same as the earlier case, viz to cut costs and and increase the revenues. variegate in management The change in the top brass of a company can also result in downsizing. The working methods and procedures straggle with the management. Therefore, a significant change in the management roles may drastically affect the employee size to suit a particular style of working. scotch crisis This is the single biggest cause of downsizing. Often, it consists of bulky lay-offs by a number of organizations across var ious domains. The recent economic recession facing the world, has triggered a number of lay-offs in many reputed and popular firms in the world. According to a survey conducted by the US Bureau of the Census, organizations consisting of higher percentage of managerial staff downsize more than the ones with higher percentage of production process employees.Strategy changes Some companies may reduce certain areas of operation and focus on other areas. For example, if a company is working on a project in which there are no assured returns, it may downsize its employees working on that particular project. It focuses its resources on specific projects, which could be profitable ventures.Excessive workforce In a period of high growth, a company hires excess staff, to meet the needs of a growing business. However, in times of recession the business opportunities dwindle, leading to downsizing of the surplus staff that was hired.Increase in efficient work flow and computerized serve If an organization work process is extremely fast and easily meets the requirements of the market, it may downsize some of its workforce. Similarly, if manual work can be done by a machine, in a much better and cost-efficient way, it also results in the reduction in the number of employees.Outsourcing practice Organizations catering to international markets require a huge and efficient employee base. If this labor can be obtained by exporting the job to other countries, a huge downsizing takes place in the parent country. For instance, if a certain job can be done more effectively in India and is more viable economically there, than in the join States, the business is operated from that country.These practices result in downsizing, which is a rampant practice preponderating these days. Efficient management of the existing skill set and constantly acquiring new skills and education is a sure way to beat the effects of downsizing.By Prashant MagarIn todays business world downsizing, outs ourcing, and combining of jobs to eliminate headcount is more prevalent than ever. As the economy swings down, companies find themselves needing to cut costs and increase their return on net assets (RONA). All too often, the easiest way to reduce costs and increase RONA is through reducing staff. The elimination of jobs, or finding more cost effective ways to perform their functions through job integration and outsourcing, reduces the salary expense as well as reduces benefits costs, human resources or payroll costs, and frees up those funds for additional investment activity if needed. Many companies, however, do not look at the say-so long term ramifications before making these decisions. Among them are the potential for deficient customer service, costs associated to unemployment claims or placement strategies, potential for higher dollar volume of remaining employees, or loss of customer confidence.While cost reduction through job elimination or restructuring poses no legal implications or policy violations, it certainly presents many ethical problems. How the company proceeds could greatly affect the consumer view of their business practices. They also have the potential to place some employees in a position of being ethically contendd should they inform some parties of the possible downsizing but insist the information be kept from others. That will leave those employees who are aware with the ethical dilemma of telling what they know to those who will be affected or of keeping the company secret. The feeling though, that others know more and will not share the information, leads to extreme paranoia and dissatisfaction among lower level employees. If the best decision for the business financially is to centralize functions, the Kantian model of ethical thought would support full disclosure to the affected employees. This would provide them the dignity and respect they deserve. Helping them with counseling for the self esteem issues presented in th eir job elimination and placement services seems to me the soundest ethical solution. Allowing them to prepare themselves financially for a potential loss of income would tape respect for them as people as well as for the time they have spent as loyal, hard working employees. Potential contriteness after the announcement might prove to be a challenge but will provide the same end result, less staff.To keep this information completely from the affected employees would fall under Ethical self-seeking theories. It would serve only the officers of the company from having to deal with their own lack of ethics in this circumstance. The employees become a means to an end rather than the end itself. This school of thought tends to violate the morals taught through religious and agnatic guidance to most individuals. It directly violates all the major principles of the other moral theories. Consequently, following this path would likely lead to moral repercussions for those choosing to ve nture down this road. Living with the decision you have made and must stand by could be as emotionally traumatic in the end as the damage caused to the employees sacrificed for the company benefit.All too often the Utilitarianism approach is followed by not disclosing the full details but sharing information only as changes are closer to being implemented. This eliminates the likelihood of employee loss due to fear of the impending changes. A high turnover could cause those remaining employees to become overworked with no relief available. It would be vital though that the company effectively communicate what changes are coming with an accurate timeline of when they would occur in order to still be fair to the affected employees. The company should not hide the coming changes from the employees affected in any solution with a dissolution that trust will remain in tact for other employees unaffected by the changes. Character ethics would support at least this minimal amount of disclo sure. The only fair thing to do is treat the employees as those making these decisions would want to be treated if they were in the same position, essentially following the Golden Rule.ReferencesBaston, Ted Blake, J. Neff. (2007). Business ethics, Sunday ethics-Monday world. Triangle publishing Marion, IndianaThe New York Times reports that the unlucky employees of fob Inc. received a bloodless e-mail informing them of their demise. Some employees of New York Times digital learned of their fate in The New York Times itself. Dotcoms from Boston to atomic number 14 Alley to San Francisco have behaved thoughtlessly and, yes, unethically as they frantically go to salvage their companies.The idea of downsizing needs no introduction. Although borrowed from the automotive vocabulary, downsizing is a feared and familiar term throughout the employment ranks. It targets people.In all cases of downsizing anticipated, actual, or past the corporation have ethical obligations to its people. not least among these obligations is telling the truth.Here are some principles for employers to consider whenever downsizing is a possibility or has, in fact, happenedkeep employees informedhelp employees to keep themselves employablehonor all pro