Downsizing Has Become a Management Thesis

Excerpt from Thesis :

Variables such as voluntary turnover rate, downsizing rate, and organizational commitment were measured. The researchers also included 12 measures as indices of human resource practices in the organizations. The survey also included questions asking about the existence of "an ombudsman who is designated to address any employee complaints, or a grievance or appeal process available to nonunion employees." [Trevor & Nyberg, pg (16)]

Overall it was found that downsizing occurred in 38% of the sample (102 companies). Logical regression analysis and multivariate tests were performed on the final completed data. The statistical analysis indicated that downsizing had a considerable effect on voluntary turnover rates. As a statistical measure one unit of downsizing increased voluntary turnover rate by .058%. The study also found that strong procedural justice practices as indicated by high rating of the HR measures tended to mitigate the negative effects of downsizing on the voluntary turnover rate. For instance, the study showed that downsizing .02 of the workforce resulted in an increase in voluntary turnover rate by about 63% in the absence of sound grievance address policies. While for the same rate of downsizing the increase in voluntary turnover rate was only 13% when the procedural justice index was high. [Trevor & Nyberg, pg 23]

Organizational Implications

Given the detrimental effects and the failure of organizations implementing downsizing it is necessary to analyze the mistakes. Almost all the studies that report failed downsizing indicate a total neglect on the part of the HR management. In this regard several studies have reached the consensus that appropriate planning, training and open communication are crucial for the success of downsizing operations. Studies have also pointed out the importance of proper training for the surviving workers so they are better prepared to handle the new roles and tasks assigned to them. Keeping the surviving employees motivated is crucial for the productivity of the organization.. As Dr. Judith Bardwick, author of the book 'One foot out the Door' writes, "After years of downsizing…most of today's workers have concluded that [companies] no longer value them. So they, in turn, no longer feel engaged in their work or committed to the company. The reality of mutual co-dependence between employees and organizations, and the advantages gained from long-term mutual commitment and engagement has been lost." [Caela Farren]

Many studies such as Beylerian & Kleiner, (2003) and Devine et al., (2003) report the gross negligence of organizations in dealing with the survivors of downsizing. The constant fear of losing the job and the insecurity that arises causes loss of organizational commitment and dysfunctional attitudes in 'surviving workers'. This is cited as the important reason why downsizing fails in most of the organizations. [Jeffery R. Woodall, pg 2] The organization should have clear HR policies that are oriented towards preparing the surviving employees embrace the change to the organizational structure. Therefore providing training and support prior to, during, and after the downsizing are very vital. This would help minimize the effects of 'survivor aftershocks' or what is also called as 'survivor illness'.

Conclusion

Downsizing has become a management mantra. Today organizations employ downsizing strategy not only as a cost cutting measure but also as a favorable restructuring strategy slated to increase the organizations productivity and competitiveness. Downsizing definitely has serious detrimental effects for the organization. The huge number of organizational failures post downsizing is enough proof of the detrimental effects of downsizing. Employee satisfaction and commitment to the organization are crucial for the productivity and success of any business. Downsizing has a negative impact on this important aspect as it instills a sense of fear and undermines the enthusiasm, morale and commitment towards the organization. Downsizing increases voluntary turnover rate leaving the organization leaner and understaffed. Companies that overlook the effects of downsizing on the survivor's motivation and their 'change readiness' are seriously risking their business by downsizing. HR management that fails to address these vital issues pertaining to downsizing are grossly negligent of employee dynamics. Downsizing is bad and a failed strategy that should be avoided as much as possible. Organizations should focus on other areas of cost cutting and performance enhancing. In the event that downsizing is unavoidable, organizations should have in place proactive HR policies to prepare, train and to motivate surviving employees so as to minimize the negative impact. Neglecting to do so is unprofessional and could prove to be a costly oversight.

Bibliography

1) BLS, 'Extended Mass Layoffs: Third Quarter of 2009', Accessed Dec 11, 2009', available online at, http://www.bls.gov/news.release/pdf/mslo.pdf

2) ICMR, 'The Downsizing Phenomenon Worldwide', Accessed Dec 11, 2009', available online at, http://www.icmrindia.org/free%20resources/casestudies/employee-downsizing-2.htm

3) James P. Guthrie & Deepak K. Datta, 'Dumb and Dumber: The Impact of Downsizing on Firm Performance as Moderated by Industry Conditions', Organization Science, Vol. 19, No. 1, January-February 2008, pp. 108-123

4) Jeffery R. Woodall, 'When Downsizing Fails', APUBEF Fall 2005. Available Online at, http://www.nabet.us/Archives/2005/pdf/woodall_downsizing1.pdf

5) Caela Farren Ph.D, 'The Downside of Downsizing', Accessed Dec 12th 2009, available online at, http://www.masteryworks.com/newsite/downloads/ArticleDec08_Downsizing.pdf

6) Freek Vermeulen, 'The Tricky Truth About Downsizing', Business Week, May 1, 2009, Accessed 11th Dec 2009, available at, http://www.businessweek.com/managing/content/may2009/ca2009051_612010.htm

7) Franco Gandolfi, 'Learning from the Past -- Downsizing Lessons for Managers', Journal of Management Research, Vol 8, No 1, April 2008. Available online at, http://www.boardoptions.com/Learning%20from%20the%20past%20-%20Downsizing%20lessons%20for%20managers.pdf

8) The Associated Press, 'Heinz Earnings Fall on Cost of Downsizing', Accessed Dec 11th 2009, available at, http://www.nytimes.com/2006/03/01/business/01heinz.html?n=Top/Reference/Times%20Topics/Subjects/F/Food

9) Charlie O. Trevor & Anthony J. Nyberg, "Keeping your Headcount when all about you are loosing theirs: Downsizing, Voluntary Turnover Rates and the Moderating role of HR…

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