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Categories:Types, Business/Law
Published by: rohan_rmv on Dec 02, 2010
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Rohan VishwasraoeMBA 9140Downsizing
Downsizing or restructuring refers to interventions aimed at reducing thesize of the organisation. This typically is accomplished by decreasing thenumber of employees through layoffs, attrition, redeployment, or earlyretirement or by reducing the number of organisational units or managerial levels through divestiture, outsourcing, reorganisation, or de-layering.
Cummins & Worley 2005
reveal, in practice, downsizing generallyinvolves layoff when a certain number or class of organisation membersis no longer employed by the organisation.
Distinction between Downsizing and De-layering
Downsizing is random reductions in employee numbers, often based onthose who offer volunteer redundancy. De-layering, on the other hand ischaracterised as a much more systematic process involving the removalwhole tiers of management in the hierarchy. Both activities remain a popular managerial action and make the operation more cost efficient andcompetitive. Downsizing increases work load and stress level of retainedstaff and de-layering empowers the staff down the hierarchy.
Techniques and strategies of downsizingAttrition
: The natural process of reduction in the workforce of theorganization by the way of retirement, death or resignation.
Voluntary Retirement and Buyout benefits
: It encouragesemployees to retire early with full or reduced pension benefits beforestipulated retirement age. Buyout is a similar technique that offersemployees lump sum amount to encourage employees leave the job.
Involuntary Separation / Layoffs
: Terminating the employees fromthe job without giving proper reasons for it.
Leave without Pay
: Employees are asked to go on a long leave withreduced benefits, but guarantees jobs when they return.
Important Consequence
An important consequence of downsizing has been the rise of thecontingent workforce. In companies like CISCO or MOTOROLA, lessexpensive temporary or permanent part-time workers are often hired bythe same organisations that just laid off thousands of employees.
Factors effecting organisation’s policies
According to Stone J.R. (1998) a lean and hungry organisation rather thana fat and comfortable one is the goal. Increased domestic andinternational competition, deregulation, mergers and acquisitions and pressures for increased profitability and performance have all played a part in forcing organisations to cut jobs. Even successful companies suchas IBM, KODAK and XEROX, long renowned for their no lay of policies, are now use downsizing as a standard business practice.
Response of Downsizing
Downsizing is generally a response to at least four major conditions.
It is associated increasingly with mergers and acquisitions. One innine jobs cuts during 2008 was the result of the integration of twoorganisations.
It can result from organisation decline caused by loss of revenueand market share and by technological and industrial change.
Downsizing can occur when organisations implement one of thenew organisational structures, for example, outsourcing.
Downsizing can result from beliefs and social pressures thatsmaller is better. Organisation may downsize for their own sakeand not think about future growth. They may lose key employeeswho are necessary for the future success. In such situations, it isquestionable whether downsizing is development.
Successful interventions of downsizing
Successful downsizing interventions tend to proceed by the followingsteps:
Clarify the organisation’s strategy
Assess downsizing options and make relevant choices
Implement of the change
Address the need of survivors and those who leave
Follow through with growth plans
 Successful Downsizing requires managers to:
 Evaluate the overall impact of Downsizing.
To evaluate the totalcost of downsizing, both financial and non-financial factors must be taken into account. Managers must calculate the present value of all costs and benefits associated with the cuts—including severance packages, lower employee productivity due to disorder or talentloss, eventual rehiring expenses and future rightsizing costs. Thevalue created should exceed the effects of lower employee moraleand the potential damage to the firm’s reputation.
 Develop a smooth Downsizing process.
It is crucial that managersaggressively invest in upfront planning of the job cuts. Firmstypically form committees to determine the appropriate level of 

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