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Downsizing is sometimes seen primarily as a cost-reducing response to various crises and external factors over which management has little or no control. Others see downsizing as a strategic management initiative in its own right. A considerable body of literature indicates workforce reductions often lead to. negative financial and operational outcomes for the downsizing firm as well as negative psychological outcomes for victims, survivors, and executioners
downsizing is sometimes seen as reducing costs in response to the crisis and external factors over which management has no control. or only slightly But while downsizing The project is of strategic management, which often leads to results of psychological negative for the reputation of the organization and for the remaining staff are
some of the theoretical possibilities that surround the issue of downsizing and its outcomes to enable an understanding of "How. does downsizing positively or negatively affect organizational and employee outcomes? "The application of material developed in related literatures may shed light on how, if at all, downsizing can more effectively help employees and all types of organizations realize their goals.downsizing, have become commonplace. in many industries worldwide. In practice, many downsizings fail to achieve desired long-term results o downsizing can be functional for the organization in terms of short-term profits and losses while simultaneously be dysfunctional for employees facing unemployment, loss of benefits, and a. host of negative psychological effects. the perspective of the theory that there was a dispute over some In direct contradiction, several authors maintain that the "downsizing is detrimental" perspective, suggesting that downsizing hinders organizational goal attainment (eg Baily et al., 1994; Cascio,. 1993; De Meuse et al., 1994; Faltermayer, 1992; O'Neill and Lenn, 1995; "The death of corporate loyalty," 1993). Echoing others' arguments, Cascio (1993: 95) observed that "in many firms. anticipated economic benefits fail to materialize, for example, lower expense ratios, higher profits, increased return-on-investment, and boosted stock prices. "While most published evidence supports one side or the other in this debate, there has been little attempt to. Reconcile these divergent perspectives. There are, of course, several Ways that the argument Can be Reconciled. One Way, for example, would be to recognize that the question is not as Simple at it First appears and that, while downsizing Can be beneficial for. organizations (as in a "necessary evil"), it is frequently not good for the laid-off employees or for the guilt-ridden "survivors." Another possible reconciliation considers the tradeoff between the short-term and long-term merits versus costs. of downsizing. It Can be argued, for example, that downsizing Can be functional for the Organization in terms of short-term Profits and losses while simultaneously be dysfunctional for employees Facing unemployment, Loss of Benefits, and a Host of negative Psychological effects. conversely. , in the long-run downsizing can be detrimental for an organization since fewer human resources are available to respond to market demand or required product development (Dougherty and Bowman, 1995); concurrently, downsizing may be helpful for employees in the long run to the. extent that those laid off Find better jobs and Increased Employment Security. While both these possible reconciliations Offer Post-hoc Explanations that May partially Explain the Simultaneous functional and dysfunctional effects of downsizing, neither Advances our understanding of the processes Surrounding downsizing. Downsizing is a Way. of life in organizations today. Yet these performance improvement initiatives create feelings of anger, apathy, resentment and stress in the surviving workforce which leads to low productivity. This low productivity often works against the gains the leaders often anticipate. Human resource leaders know the importance. and value of employees; therefore, HR leaders are presented with an opportunity to add value by taking an early leadership role before, during and after downsizing initiatives to address the healing of the surviving workforce. This healing begins with a holistic approach in establishing and implementing. strategies that will increase the likelihood of a healthier, productive workforce after downsizing. Human resource leaders need to ensure that downsizing plans include strategies that focus on six major areas: 1. employee involvement, 2. communication, 3. support programs, 4. selection. processes, 5. Human Resource Management Tools and Systems Alignment, and 6. Training and Development. MAKE A FULL PARTNER OF THE STRATEGIC PLANNING PROCESS downsizing Planning is concerned with Setting goals, evaluating External threats and opportunities, assessing internal strengths and Weaknesses, Analysing issues. , weighing up alternatives, and developing priorities and programmes to achieve stated goals within a timescale. Few people can argue otherwise than that good planning should be a prerequisite of downsizing, but often it does not happen. The circumstances with which the organizational leader has to. grapple may be so overwhelming that planning may be challenged at all levels. At IBM Lou Gerstner became CEO in early 1993 with no computer industry knowledge but a track record of innovation, change and cost control at American Express and RJR Nabisco. IBM is faced with. declining financial results, aggressive competitors in the PC business, an erosion of the core mainframe business, and an organization with a culture of dominance which may be resistant to change. Shareholders expect Gerstner not only to downsize further and cut costs, but also to develop. an innovative global business strategy aimed at restoring profitability. This is perhaps an extreme case where corporate strategy must be rethought along most dimensions, however, many smaller organizations in different industries face not dissimilar challenges. In-house strategic planning capabilities should not be weakened at. a time when they may be needed most. However if inhouse planning groups have become bureaucratic, incapable of creativity or going beyond conventional wisdoms then new methods or approaches are needed. Action learning, scenario analysis and leadership development could be useful in such circumstances. Expert. outside planning consultants may help in benchmarking the best downsizing practices of other organizations and supplementing in-house skills. Planning techniques and approaches such as portfolio and value-chain analysis can be used for setting downsizing priorities, and should be used in conjunction with accounting tools. such as activity-based costing. Where the task of downsizing is undertaken by a team, there should be at least one expert strategic planner as team-member.
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