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Downsizing and Restructuring

Downsizing aims to improve organizational efficiency by reducing the workforce, redesigning work, or changing systems. There are three types of downsizing strategies: workforce reductions through attrition/early retirements/severance; work redesign to eliminate functions; and long-term systematic changes to culture and values. Organizations may also restructure through portfolio, financial, or organizational changes. Downsizing impacts employees through job losses, survivor reactions, and adjustments. Key issues involve determining who leaves, communication, legal impacts, and evaluating downsizing efforts.

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Ratul Ahamed
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221 views

Downsizing and Restructuring

Downsizing aims to improve organizational efficiency by reducing the workforce, redesigning work, or changing systems. There are three types of downsizing strategies: workforce reductions through attrition/early retirements/severance; work redesign to eliminate functions; and long-term systematic changes to culture and values. Organizations may also restructure through portfolio, financial, or organizational changes. Downsizing impacts employees through job losses, survivor reactions, and adjustments. Key issues involve determining who leaves, communication, legal impacts, and evaluating downsizing efforts.

Uploaded by

Ratul Ahamed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Downsizing and Restructuring

Chapter 11

1
Downsizing and Restructuring

Downsizing-is the strategy to improve an


organization’s efficiency by reducing the
workforce, redesigning the work, or
changing the systems of the organization.
Downsizing strategies are there to improve
an organization’s efficiency by reducing the
workforce, redesigning the work or
changing the systems of the organization.

2
Taxonomy of Downsizing
Kim Cameron's downsizing strategies are :
1. Workforce Reductions- short-term strategy to cut the
number of employees through attrition, early retirement or
voluntary severance packages, and layoffs or termination.
2. Work Redesign- medium-term strategy in which
organizations focus on work processes and assess whether
specific functions, products and/or services should be
eliminated.
3. Systematic Change- long-term strategy that changes the
organization's culture and attitudes, and employees' values,
with the goals of reducing costs and enhancing quality.

3
Taxonomy of Downsizing (cont)
Merely cutting staff is usually insufficient to achieve organizational
objectives and therefore, organizations look to restructure. There are
3 types of restructuring:

1. Portfolio restructuring - involves changes to


the business portfolio;
2. Financial restructuring - financial changes
such as reducing cash flow or increasing
levels of debt;
3. Organizational restructuring - any major
reconfiguration of internal administrative
structure that is associated with an
intentional management change program. 4
Why do organizations Downsize
Declining profit
Business downturn or increased pressure from
competitors
Merging with another organization, resulting in
duplication of efforts
Introduction of new technology
The need to reduce operating costs
The desire to decrease levels of management
Getting rid of employee "deadwood"

5
Alternatives to Downsizing:
 Hiring freeze
Mandatory vacation
Reducing the workweek and overtime
Reducing salaries (and extending if necessary)
Short-term facility shutdowns
Obtaining cost-reduction ideas from employees
Voluntary sabbaticals
Lending employees
Exit incentives

6
In placement and Out placement Issues
Outplacement --> providing a program of
counseling and job-search assistance for
workers who have been terminated.

In placement --> reabsorbing excess or


inappropriately placed workers into a
restructured organization

7
Some Key issues of Downsizing
Determining how many people will lose their
jobs?
Determining who will be let go; and on what
basis (seniority, performance, or potential)
Determining how the reduction will be carried
out; which methods will be used (attrition, early
retirement, severance, layoffs or termination).
Determining the legal consequences; will there
be violations (wrongful dismissal, employment
standards , collective agreement or human
rights).
8
Some Key issues of Downsizing (cont)
Designing current and future work
plans (Represents a key challenge for
the organization and is frequently
neglected).
Implementing the decision
Performing follow-up evaluation and
assessment of the downsizing efforts
(This step is crucial, but is often
ignored)
9
Adjustments to the Job Loss
According to USA study 67% of the
downsized workers would never work
for the former company whereas, 54%
would not recommend that others
purchase the company’s products or
service and 11% would want to go to
media & talk about their lay-offs.

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10
Adjustments to the Job Loss (cont)
Advance notification of layoffs, which gives
employees time….
Severance pay and extended benefits
Education and retraining programs, which give
individuals time to acquire marketable skills
Outplacement assistance to inform employees of
new job opportunities and to improve their ability to
"market" themselves
Clear, direct, and empathetic announcement of
layoff decisions
Consideration of HR planning practices that
represent alternatives to large-scale layoffs
11
Survivor Reactions on Downsizing
Negative attitudes and behaviors
Reduced performance capabilities
Lower organizational productivity
Less effort to ensure that the quality of the
individual's.
A lower score on "organizational citizenship
behavior“
Lower organizational loyalty (commitment to the
organization)
Higher levels of career loyalty .
Effective Practices of Downsizing
Downsizing should be initiated from the top
Workforce reduction must be selective in application and
long term in emphasis
Special attention should be paid to both those who lose
their jobs and to the survivors who remain in the
organization
Decision-makers should identify where inefficiencies and
cost exist
Should result in the formation of small semi-autonomous
organizations within the broader organization
Must be proactive strategy focused on increasing
performance
13
Financial Performance and Downsizing
HRM Involvement in Downsizing
Advising on restructuring the organization to maximize
productivity and retain quality performers.
Develop skill inventories and planning charts to evaluate
the impact of downsizing on HR needs and projected
capabilities.
Communicating the downsizing decision effectively.
Evaluating the downsizing program after completion.
Includes the assessment of who left the organization
and who remains.
Key issues include job design and redesign, worker
adjustment to change, the need for employee
counseling, organizational communication and a review
of the appropriateness of HRM policies and programs.
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