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Organisational Downsizing

Group 4: Aniri Herrera Sandino, Anthony Pablo, Christine Lorbiecki, Elena López-Tello, Paula Roibas

Sustainability

Introduction

Resource

management

Human

management

Downsizing

“Downsizing is the conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness”

(Budros, 1999)

VS.

Saving financial problems

Reducing costs

Results as wished?

VS.

Positive

Effects

Negative

Effects

Strategies

Source: Cameron, 1994

Effects on the organization

&

the employees

Effects

ORGANISATION

Effects on the organisation

POSITIVES NEGATIVES

Financial savings

Repetition

Scaling Operations

Reputation

Losing wrong people

Costs associated

Wayne L. Strom; 1998

William J. Baumol ,‎ Alan S. Blinder ,‎ Edward N. Wolff; June 2003

David G. Javitch; April 2010

Beth Crosby; September 2008

David G. Javitch; April 2009

Karl Heil

EMPLOYEES

Effects for the employees

  • Employees do not appear to respond to downsizing in a uniform fashion (Mishra & Spreitzer, 1998).

-Increased productivity

-Sense of relief

-Seen as an opportunity to pursue more fulfilling career alternatives

Reduced:

-Commitment

-Job involvement

-Job satisfaction

-Motivation

Increased:

-Absenteeism

-Turnover

(McCarthy & Hall, 2000)

  • Recent survey of over 700 UK managers in downsized companies (Worrall, Cooper & Campbell, 2000):

-60% felt employee loyalty had decreased.

-76% felt morale had diminished.

-59% perceived a decline in motivation.

Case Study

Coca-Cola

  • It affected 821 employees.
  • Employees were not correctly informed.
  • April 2014, Coca-Cola decided to close four plants.

  • The National High Court declared null the redundancies because trade unionists were not fully informed about the company's restructuring.
  • On July 2014, the National High Court decreed that the company was obliged to re-hire the employees.
  • Coca-Cola re-opened the plant in Fuenlabrada as a logistic centre with 325 re-hired employees.

Product

Schweppes

  • The production centre of Schweppes in Arteixo announced its closure.

  • Closure would affect 150 employees caused by the drop in returnable glass botttles market.

  • The employees accepted the conditions stablished in the downsizing.

  • They could chose between: taking early retirement, mantaining their jobs in other plants or accepting the dismissal compensation package.

How can HR make Downsizing easier?

HR Tasks

HR tasks and supporting responsibilities, outplacement services and cost adjustments strategies.

HR Management tasks

The tasks of HRM

A new mandate for HR (Ulrich, 1998):

- Partner in strategy execution

- Administrative expert

- Employee champion

- Change agent

More tasks during downsizing:

- Managers in paradox

- Managing employee´s expectations

- Acting as career managing experts

Sahdev K., Vinnicombe S., and Tyson S. (1999)

Outplacement services

Outplacement Services

"Professionally designed services to help redundant employees to find a new job and a new employer".

Alewell, D. & Hauff, S., 2013.

Supporting cost adjustment strategies

Cost Reduction Strategic Stages

Conclusions

Conclusions

Internal and External

Internal:

External:

  • Cuts labour costs, but erodes on employee performance.

  • Downsizing long-term success will depend on survivors.

  • Downsizing: the addictive short-term strategy solution.

  • HRM should strive to align with "best practices"
  • Could also erode customer loyalty in the long term. Sometimes irreparable damage to reputation.

  • Sends a reassuring signal to markets that managers are ‘in control’ and acting to put things right.

  • HRM should strive to align with "best practices".

Brunning 1996

Wilkinson 2004

Farell & Mavondo 2003

Robbins 2009

Class Discussion

Class Discussion:

  • Which downsizing alternatives do you think are the most beneficial for employees?

  • Why do you think managers insist on downsizing instead of re-designing?

  • What would you expect from employers?

Questions?

Case study

Questions?

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