Downsizing

Theory E Approach of Change

Management of Change: Chapter 02

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Downsizing…

Organization
improve organizational efficiency, productivity, and/or
competitiveness

Activities

Reduce the size of the firm's workforce, its costs, and

its work processes

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Focuses on:

Reducing the workforce

Redesigning the work

Changing the systems of the organization

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 Workforce Systematic

3 Reduction Change
Types

Downsizing Work
Strategies Design

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 Short Term Strategy
Workforce Reduction
Cutting the number of employees
through programs such as
attrition, early retirement or
voluntary severance packages,
and layoffs or terminations.
Medium Term Strategy
Work Design
Focus on work processes and
assess whether specific
functions, products, and/ or
services should be eliminated.
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Long Term Strategy
Systematic Change
organization's culture and
attitudes, and employees' values,
with the goals of reducing costs
and enhancing the quality.
Mishra & Mishra (1994)

Workforce Reduction
Cost Reduction
Organizational Redesign
Quality Improvement
Systematic Change
Organizational
Performance

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The result shows that …

Workforce Reduction

Organizational Redesign Organizational

Performance
Systematic Change

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 The need to reduce operating
Getting rid of employee
costs
"deadwood"

The desire to decrease levels of Introduction of new technology

management

Merging with another organization, resulting in

duplication of efforts

Business downturn or increased pressure from

competitors

Declining profit

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Performance Analysis Model …
H
Workhorse Star
Performance

Deadwood

L H
Potential

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 Alternatives to Hiring freeze
Job Sharing
Downsizing … Reduction in work hours Cutting personnel
Reduced Benefits Cost
Wage concessions

▪ Energy Conservation
▪ Planned capital expenditures
▪ Leasing of capital equipment
▪ Reduction in travel or club Providing incentives
membership for voluntary
resignation or early
Cutting Non-personnel
retirement
Cost
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In-placement Resorbing
Reabsorbing excess or inappropriately
placed workers into a restructured
organization

Out-placement Resorbing
Providing a program of counseling
and job search assistance for workers
who have been terminated

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 Determining how many people will lose their jobs.
▪ Potential
Determining who will be let go. ▪ Seniority
Planning for ▪ Performance
Downsizing
Determining how the reduction will be carried out
Attrition, Early retirement, Voluntary severance programs, and
layoffs or termination?

Determining the legal consequences

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 Designing current and future work plans

Implementation includes elements such as the communication

Planning for of the termination decision, the timing of the decision, security
issues, severance payments, outplacement counseling, and
Downsizing
communications with remaining employees.

Performing follow-up evaluation and assessment of the

downsizing efforts.

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 Workforce Reduction Examples Degree of Protection Implementation
Approach to Employee Time
Attrition Hiring Freeze High High

Early Retirement
Voluntary Redeployment Voluntary buyout
Work sharing
Transfer, Demotion
Involuntary Redeployment
Imposed job sharing
Advance Notice, Retaining &
Layoff with assistance
Job Counseling
Termination, No advance Low Low
Layoff without assistance notice, no severance

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 Advance notification of layoffs, which gives employees time
to deal with the reality of job loss and seek future
employment.

Adjusting to Severance pay and extended benefits, which provide an

Job Loss economic safety net

Education and retraining programs, which give individuals

time to acquire marketable skills

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 Outplacement assistance to inform employees of new job
opportunities and to improve their ability to "market"
themselves
Adjusting to
Clear, direct, and empathetic announcement of layoff decisions
Job Loss

Consideration of HR planning practices that represent

alternatives to large-scale layoffs

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Downsizing strategy requires
consideration of…
Tactics used to reduce workforce

Implementation processes and redesign of work

Participation, Communication, work & HR needs

The changes to or impact on structures and processes within the

organization

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Ineffective Downsizing Practices ..
01 Offering voluntary early-retirement programs

02 Instituting across-the-broad layoffs

03 Eliminating training programs

04 Making personnel cutbacks that are too deep

05 Placing survivors in jobs for each they lack the necessary skills and
hoping that they will learn by experience

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Ineffective Downsizing Practices ..
06 Emphasizing employee accountability instead of employee involvement

07 Expecting survivors to “row harder”

08 Implementing layoffs slowly in phases over time

09 Promising high monetary rewards rather than careers

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End of the chapter 2

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