Chapter 10 - Downsizing

outplacement

focuses on the provision of a program of counselling and job search assistance for workers who have been terminated.

3 types of "restructuring":

(1) portfolio restructuring, which involves changes to the organization's business portfolio (changes in the mix and/or percentage makeup of the organization's businesses, including divestures and acquisitions); (2) financial restructuring, which may include financial changes such as reducing cash flow or increasing levels of debt; and (3) organizational restructuring, which is "any major reconfiguration of internal administrative structure that is associated with an intentional management change program."9 While portfolio and financial restructuring are important, the emphasis in this chapter will be on organizational restructuring. It is necessary, when considering downsizing, to distinguish an approach involving a reduction in the number of employees with one based on a strategically oriented organizational redesign or restructuring

several reasons organizations decide to downsize the workforce.

1)Declining profit 2) Business downturn or increased pressure from competitors 3) Merging with another organization, resulting in duplication of efforts 4)introduction of new technology 5) The need to reduce operating costs 6) The desire to decrease levels of management 7)Getting rid of employee "deadwood"

Systematic change

A long-term strategy characterized by changing the orga- nization's culture and the attitudes and values of employees with the ongoing goal of reducing costs and enhancing quality. By its very nature, this strategy takes considerable time to implement. The thrust of the strategy is to consider downsizing as an evolutionary part of an organization's life with the goal of continuous improvement: Employees assume responsibility for cutting costs and searching for improved methods and practices. Because of the human and finan- cial commitment required for strategy, the impact on the organization's bottom line is rarely immediate, and consequently the approach is less than appealing to firms that focus on short-term profits or budget goal

Work redesign

Often a medium-term strategy in which organizations focus on work processes and assess whether specific functions, products, and/or services should be changed or eliminated. This strategy, which is frequently combined with workforce reduction, includes things such as the elimination of functions, groups, or divisions; the reduction of bureaucracy; and the redesign of the tasks that employees perform. Because some planning is required, this strategy takes somewhat longer to implement and gets away from the problem of the organization simply doing what it always has done but with fewer people.

Distributive justice:

The fairness of the downsizing decision. For example, responses from employees may include feelings of guilt after seeing co-workers lose their jobs, support for the downsizing decision as necessary for the firm, or feelings of unfairness and concern that further layoffs may put their own job in jeopardy.*

Procedural justice:

The procedures (or "decision rules") used to determine which employees will leave or remain with the organization.

Interactional justice:

The type of interpersonal treatment employees receive during the implementation of the downsizing decision.

Workforce reduction

Typically a short-term strategy aimed at cutting the number of employees through programs such as attrition, early retirement or voluntary severance packages, and layoffs or terminations. While a number of these approaches allow for a relatively quick reduction of the workforce, the problem is that their impact is often short term, and in many instances the organization loses valuable human resources.

Inplacement

refers to a career management approach aimed at reabsorbing excess or inappropriately placed workers into a restructured organization,