You are on page 1of 42

c 

DOWNSIZING

Õ Reducing the number of employees on the


operating payroll.
Õ Reducing the total number of employees at a
company through terminations, retirements,
or spinoffs
Õ Most preferred option of companies

Õ Important management venture


Ú SONS FOÚ DOWNSIZING
Õ @  
 

Õ  
Õ  


Õ  
   
Õ   
Õ    
Õ          
   
Õ    
Õ    


 #  

  
  
     

"
! 
 



à RY
EPRI 

Employee decides,
for personal or professional reasons,
to end the relationship with employer.
Ià RY
EPRI 

Employer terminates relationship


with employee due to
economic necessity or poor fit
between employee and organization.
ú E I EMP YME
P IúIE
j Reduction through attrition

j úut part-time employees

j úut internships or co-ops

jeave of absence

j Reduce work hours


ú E I J  E I

j ransfers
jJob sharing
j Job rotations
j Job enlargement
j emotions
ú E I EE I

jPay freeze
j úut overtime pay
j se vacation / leave days
jProfit sharing or variable
pay
 

PúEME

j Reduce morale problems of


employees about to be laid off
j Minimize litigation
j ssist separated employees in
finding comparable jobs quickly
PRP E & RI

 I I
PRP E = Improve financial performance
through
Õ úost-cutting, while also achieving long-term
effectiveness, efficiency, productivity,
competitiveness
IEMM of ownsizing
Õ hort term cost cutting may lead to negative
psychological reactions that RM the long
term aim of increased competitiveness.
Õ Mind shift

Õ úulture úhange

Õ ack of commitment
FILUÚ S OF DOWNSIZING
ÕOnly between 25% and 50% of
downsizing companies meet their
financial targets (improved
productivity, higher returns on
investment, higher profits, etc.)
Õ ven these mediocre results do not
consider psychological and
behavioural reactions from survivors
which are likely to be negative and
further impair financial performance
O NIL DV ÚS SUÚVIVOÚ
Ú IONS O DOWNSIZING

  ! "#$ #R R %


&'R 
R      
R      
 
 
   
  

,$R- RR# 
R(       * 
      
 )  + 
i 
 

Õ 
Õ
 

Õ 

Õ !"#$

Õ %&%
$'

  (
) 

j  )* +,,-.

j /$

j 0/1

j (0% $
6$ '

j 0$%"

j2$31%%41

j 0$0$0

j 4 $3

j245"

j $0%66

$66 %%'
EMP YEE  I I

Ú  
  $
%Ú  &

!  $M   



   M    ' 
 
   &
ú RY ER¶  I I

   
 (  )  *  +(  
,
    &

- 
   % %.  /
M    &

#   "0
+    1M 
 
.     
RE 

Ì 
  
 
  &

Ì     (  M      


 / 
&

, (  ( %Ú $%&

   
%2     3Ú &
   (   &

  
 -  

 4 
&

%ÚÚ%   -   


 &

  ( 
  # &
j In the mid of 1990s the emp. ownsizing is
reduced across the globe
fall in inflation
increase in national income
high profit
stronger economic
j ut in the late 1990s downsizing was picked up
again
economic recession
increase in global competition
slump in I industries
change in technologies
j In the late 1990s & early 21st century
he organizations had
spend less money on labor force
reduce wage

j Many companies suffered of downsizing

j ost some of their best emp.

j ue to loss of experienced workers


lack of experienced workers
reduced productivity & fall in quality
incurred expenditure on overtime
&
j Rehiring its former emp.

 
j 2000- increase in salary
j 2001-downsized 2400 emp.


R
j 2001-emp. ill forgo bonus
Eú  P  E

  I I
Mid 1990¶ - downsizing reduced.

- stronger economies
- fall in inflation
- high profit etc.,

In late 1990¶s- picked up.


-world wide economic recession
-global competition
-slump in I industry
{ oon criticism began on downsizing.

{egative effects were faced by the companies.


- loss of best employees
- uneven distribution of employees
- excess workload
- reduced productivity

{oss of experienced workers resulted in


- expenditure on overtime pay
- employment of temporary and contract workersl
{& in 1998 downsized 18000 employees,
- lacked experienced workers
- not able to manage equipments
- hired former employees
- paid twice the salaries of laid off workers to bring back
them

{llegations raised
- downsizing is adopted to increase .E pay
- 1996- remuneration of chairman doubled even
downsizing 40000 employees.
{   faced same criticism.
- increased 6 E. pay by 8.9% to 25.2%.
- remuneration of úE exceeded $73 million
- after this raise, downsized 2400 employees-2001.

{ fter the negative effects and demand by employees, some


companies voluntarily announced to cut down top executives
remuneration and bonus- while layoff.
-
ord is one among them.

{ nnounced 6000 of its top executives would forgo bonus in


2001- including úE .
- MR group, elta, úontinental and outhwest airlines.
SY

Õ Reasons:
Õ I firms send the excess staff cost which cost
more than companys expenses
Õ ne-fourth of the companys work force
comes around 10,000
Õ Employees will be taken right back if there is
any project right back
INFOSYS

Õ Reasons:
Õ ecause of the effect of economic crisis

Õ he company will layoff around 5% of its total


work force.
Õ úompany asks senior manager to give
lowest performance rating
Õ bout 50 sales executives have been asked
to quit
SUN IROSYS S

Õ Reasons:
Õ Reduction of 15% to 18% of the companys
global work force
Õ ecause of markets shifted to closed-source
to open source technology
Õ lso because of the resources that are
captured
O ING

Õ Reasons:
Õ ecause of the loss of  air force contract

Õ It announced a layoff of 750 workers

Õ he company blamed the longer duration of


the government contracts as a major factor
for the downsizing.
LING  VILS OF
DOWNSIZING
Õ Flexible Working rrangements:-

increases the morale of the employees and productivity


decreases the absenteeism and employee turnover
Reduces the stress
Increases the ability to recruit and retain superior quality
employees
better use of equipment and space

Õ oncept of ontingent mployment:-

No payment of unemployment taxes ,retirement or


health benefits
salaries less than permanent staffs
No long term commitments
LING  VILS OF
DOWNSIZING
Õ llowing Legal oncerns to design the layoff:-
s per the law-no discrimination

Õ Give little notice as soon as possible

Õ Severance pay:-
mployer have to provide to employee include layoffs, job
elimination, and mutual agreement to part ways for whatever reason.

Õ Severance package might include extended benefits and outplacement


assistance.
?c

$ +   *


   *
* **   .

j *+ +

j   )
  
  

       

       

j    +)
  /

0
+
   
*1(     
**2
OW N NG ÚS ND LOY S
Ú IN  IÚ OÚGNIZIONS V N S
 Y ONFÚON  N D O DOWNSIZ 
RE 
j +  

j + 3 
 

j #   +  
DOING OÚ WI L SS.´

j  
(  
(
!   
(  *
   
 + (    +
 2
úú? 
Õ +
  3 *

 
+ 4      2

Õ  *** !  3   *


     2

Õ  3      

 
(**     +* 
  3
*+ 3        
+(
2
  Y