Downsizing

Downsizing is one of the methods of staffing adopted by organizations all over the world. The concept of downsizing has been given a number of names to make it sound a bit soft, these include terms like workforce optimization, workforce reduction, redeployment, smart sizing, right sizing and simplification. Other alternatives that can be employed instead of downsizing include; hiring workers basing on the vision, cross training, succession planning, redeployment within the organization, creating a comprehensive model, reduced hours of work, lower wages, attrition and alternative placement. The concept of downsizing has been understood and defined in a number of ways some of which are listed below. Downsizing can be defined as the cautious use of permanent personnel reductions in an attempt to improve efficiency and effectiveness. It can also simply be defined as the planned elimination of positions or jobs. Bruce Weinstein defined downsizing as a company’s decision to reduce its workforce for reasons other than poor performance, criminal conduct or unwanted behavior on the part of those being let go. The origins of downsizing can be traced back to the 1980s and 1990s. It began as a strategy by sickly and collapsing corporations shedding workers in the face of weak demand, but was soon adopted even by strong firms looking to boost shareholders’ value even further. It was mainly used by CEOs as a solution to boost accounting profitability. This was because cutting labor was viewed as a necessary and relatively painless method to boost profit margins. In its early stages, downsizing was mainly a result of the increased use of machinery in the 1990s and 1980s. This had increased workers’ productivity and therefore reduced the amount of workers necessary for a given level of profit. As a result, there was reduced need for workers. Among the first companies to downsize was GE in 1980s when it released 104,000 of its 402,000 workers in a move to stay competitive. The process of downsizing is done in stages and these are the following; 1. Decision to downsize. 2. Planning the downsizing program. 3. Making announcement. 4. Implementing it. And the decision to downsize is influenced by factors such as; • Technological changes involving the use of machines. • Competitiveness resulting in reducing workers to increase profits. • Financial setbacks such a slump or bankruptcy. • Restructuring. • Merging. • Enterprise resource planning systems. However, it should be noted that downsizing is not an abrupt decision by managers but rather a result of an analysis. To achieve the desired goals of downsizing such as reduced total costs, increased quality and enhancing efficiency, the following is what should be considered before or when managers decide to take on downsizing. They should ask the following questions. • What is the vision of the company or organization' Leaders must have a clear picture of where they want to go. • Whether they have the skills needed to meet the vision. This is because often organizations find that they need to change drastically in order to meet their vision. • Will the option help the organization move to its vision' • Is the option consistent with your corporate values' This is because these values influence decision making. • What are the short term and long term financial costs of applying the option' • What impact will the option have on morale, quality and productivity' • What are the major benefits of taking this approach' Downsizing can rightly be referred to as a worldwide campaign which has affected a great number of companies in Uganda, some of the companies that have been affected or that have adopted the concept of downsizing include; ZAIN Uganda which this year downsized due to the prevailing credit crunch, The Coca Cola Company carried out downsizing in June, 2009, Barclays Bank also laid off 200 workers in February, 2009, Uganda Breweries limited a sub set of East African Breweries limited downsized in March, 2009 because of the economic recession and global financial crisis, National Housing and Construction Company also downsized. It should be noted that downsizing is practiced in both private and public organizations and it is important that organizations downsizing must be concerned about those going to be downsized and those maintained. How the concept of downsizing can be carried out successfully. Despite the fact that all these organizations have adopted downsizing as a policy to cover up for the reduced profits, not all of them have been successful enough to achieve their desired intentions and goals for downsizing. And therefore in order for managers to carry out successful downsizing, a number of factors should be put into consideration and employed during the application of the downsizing concept. Managers must improve their communication with the share holders who are skeptical of downsizing efforts. This is so because communication helps build critical relationships that harness the enthusiasm, loyalty and trust of an organization’s employees. When managers are to tell employees and stakeholders as much as possible and as soon as possible, it reduces the stress and anxiety that accompanies downsizing. Above all, communication must be interactive; that is, employees must be able to ask questions, share feedback, clarify the situation and prepare for the future. Besides the lack of knowledge can encourage the wrong people to leave. The communication by the managers should be open and honest. This is important to build trust and empowerment among those who have been designated to leave the organization and the survivors. That is to say, managers must be honest and open about the state of the business, the reason for downsizing, the process by which the downsizing program would take place and also the future of the business. Organizations must become more flexible. This includes asking individuals to perform a wider variety of tasks and expanding management’s ability to mobilize organizational resources. This is mainly due to the fact that the environment surrounding the organization is unstable and unpredictable. Empowerment of managers. Managers are the linking pins of the organization. If the top managers empower the line managers, then they can provide the flexibility to move across and between the various stages of downsizing. The middle managers must then be trained to communicate the organization’s vision and mission to the people. For successful downsizing the survivors must have a high level of trust in their organization’s leadership during and after downsizing, they should also be highly empowered. All of this is to help them go through the shock of the entire program and still have the same attitude towards their managers and their work. To ensure successful downsizing, when delivering the message to those who have fallen victim, managers should do it in person, in private, and when addressing them, you should give them your full attention. Be honest, but not brutally so meaning that you choose your words wisely, do not rush because the event is life changing, therefore explain what is happening and why you should downsize. Downsizing should be based on business motives. This is to avoid employees from claiming that they were dismissed for discriminatory reasons. These problems arise if managers use measures such as head counts or if they base on the first hire system. Managers should have empathy with the people who are losing their jobs, in order to allow for effective downsizing. This means managers should not ignore the incident and should allow employees to speak their minds freely, rather than ignoring the incident and not allowing people to talk about it. Employees should be treated with dignity. Some methods in downsizing treat employees like children, for example, withholding information and violation of control by managers over employees. Treating the laid off with dignity will encourage the surviving employees because they will assume they will be treated the same way. There should be a well defined vision of the company before downsizing is executed. This includes what the management wants to accomplish, where the emphasis will be in the new organization and what stuff will be needed. Having a well defined and shared vision of the new company among the entire management team will prevent the past from repeating its self. This factor if ignored may cause repeated layoff with little improvement in the organizational efficiency. Downsizing should be based on the problem of too many people rather than too little profit. When determining if you have too many employees, look at product and service which the organization will be offering, and what talent you will need to run the new organization. This will help avert the negative effects of downsizing to positive growth in value and efficiency. Hence, successful downsizing. Managers should respect the laws of employment during downsizing if the success of downsizing should be realized. These include entitlements tied to civil rights, age discrimination, disabilities, work adjustment and retraining. Therefore, lying off should not be based on head count but on business needs. There should be planning put in place for post implementation of the downsizing. These include surveys and explanatory meetings to maintain moral. In order to avoid the negative outcomes of the downsizing concept such as morale and production plummet, stress among employees and violent behavior among the laid off, the above points listed must be implemented into the downsizing process of any organization. However, it should be noted that in over half the cases, downsizing does not meet its intended goals and many companies find that they must rehire staff within a year. References: • Cameron K.S, 1994. Strategies for Successful Organizational Downsizing. • Bwdros, 1999 page 70. • Management and Organizational Behavior, Laurie J. Mullins and Griffin. • Human Resource Management by Gary Dresser. Published by prentice-Hal in USA. • US Department of Labor research paper by Wayne Casio “Responsible Restructuring.” • www.businessweek.com/innovate/content/oct2008/id20081027.htm • Mishra, A. K. and Spreitzer, G. M. (1998). Explaining how survivors respond to downsizing: The roles of trust, empowerment, justice and work redesign. Academy of Management Review, 23 (3/July), 567‐588. • Gandolfi, F. 2008. Learning from the past – Downsizing lessons for managers. Journal of Management Research, 8 (1/April), 3‐17. • Downsizing: What Do We Know' What Have We Learned' by Wayne F. Cascio “The Executive”, Vol. 7, No. 1 (Feb., 1993), Published by: Academy of Management Stable. • www.jstor.org/stable/4165111