Chapter 10 - Downsizing and Restructuring

Financial Restructing

includes the financial changes to an organization, like reducing cash flows or increasing debt levels

Portfolio Restructing

involves changes to the organization's business portfolio -this means changes in the mix or percentage makeup of the organization's businesses, divestitures, and acquisitions

Short-Term

-hiring freeze, mandatory vacation, reduced workweek, reduced overtime, reduced salaries, facility shutdowns, employee input for alternatives to cutbacks

Survivor Syndrome

-a description of the emotional roller coaster that survivors experience -some of these emotions include: anger, pain, fear, cynicism, stress, mistrust, risk aversion, overwork, job insecurity

Job Insecurity

-an employe's expectations of continued employment and the future existence of the job

Reasons for Downsizing

-declining profits -business downturn -increased pressure from competitors -organizational merger -new technology -reduce operating costs -decrease levels of management -get rid of employee "deadwood"

Ethical Consideration

-downsizing may infringe or principles of distributive, procedural, and interactional justice -communication during a downsizing is often mismanaged -managers may use and abuse information as a source of power or choose to conceal or distort information regarding the financial status of the business

Medium-Term

-extending reductions in salaries, voluntary sabbaticals, lending employees, exit incentives

Benefits to Job Loss

-time to reflect -grow new ideas, direction, and career plan -get out of a job that was substandard -spend more time with family and hobbies

Best Practices of Downsizing

1. Downsizing should be initiated from the top but include involvement at all levels 2. Workforce reduction must be selective in application and long-term in emphasis 3. Special attention should be paid both to those who lose their job and to the survivors who remain in the organization 4. Decision makers should identify where inefficiencies and costs exist 5. Should result in the formation of small, semi-autonomous organizations within the broader organization 6. Must be a proactive strategy focused on increasing performance

Survivor Reactions

1. negative attitudes and behaviours 2. reduced performance capabilities 3. lower organizational productivity survivors of layoffs report lower perceived organizational performance, lower job security, reduced attachment to the organization, and higher intention to quit

High-Involvement HRM

a commitment to HRM practices that treat people as assets (as opposed to costs) -organizations with high-performance work practices may rely more on workforce reductions -however, the restructuring may be less harsh - like attrition and voluntary severance

Systematic Change

a long-term strategy that changes the organization's culture, attitudes, and employee's values with the goals of reducing costs and enhancing quality

Work Redesign

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

Workforce Reduction

a short-term strategy to cut the number of employees through attrition, early retirement or voluntary severance packages, and layoffs or terminations

Psychological Contact

an unwritten commitment between employers and their employees that historically guaranteed job security and rewards for loyal service

Organizational Restructuring

any major reconfiguration of internal administrative structure that is associated with an intentional management change program -includes major restructuring of an organization's structure linked to management change programs

Procedural Justice

procedures or rules used to determine which employees will be downsized

Outplacement

providing a program of counselling and job-search assistance for workers who have been terminated

In-placement

reabsorbing excess or inappropriately placed workers into a restructured organization

Distributive Justive

the fairness of the downsizing decision

Reputation for Corporate Social Performance (RCSP)

the firm's reputation for principles, processes, and outcomes related to the social impact of the firm's operation -evidence that downsizing has a negative impact on an organization -even more pronounced for organizations that had high financial performance prior to the downsizing

Interactional Justice

the interpersonal treatment employees receive during the implementation of the downsizing decision

Interventionist Reponse

union get involved early in the restricting process through development and implementation

Pragmatic Response

union relies on management to make workplace changes and then negotiates the impact of the changes with management