Organisational Downsizing
Group 4: Aniri Herrera Sandino, Anthony Pablo, Christine Lorbiecki, Elena López-Tello, Paula Roibas
Sustainability
Introduction
“Downsizing is the conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness”
(Budros, 1999)
Saving financial problems
Effects on the organization
&
the employees
Effects
Effects on the organisation
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
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
- 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.
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.
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.
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
"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
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:
- 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?