Viet Nam. global competition Age of Welfare America ‡ unemployment compensation ‡ Social Security ‡ welfare ‡ workplace standards (FLSA) ‡ employer-employee long term commitment ‡ insurance & health benefits ‡ workers compensation & disability ‡ retirement plans ‡ education & training ‡ salary steps & promotion 90% employees . 1987 Stock crash. S&L debacle. Middle East Oil Embargo.Background on Downsizing ‡ 1800s-1930s emphasis on individual. self reliance. and laissez faire government 80% Self-employment ‡1930s New Deal Legislation & regulation of employer dominated workplace ‡ Healthy post-WWII economy ‡ Korea.

defer maintenance. including layoffs. Long Fiscal Crush Great change: redefine mission. stall payments Fiscal Squeeze Anticipate budget cuts & plan appropriate action: change operations management. temporary employees & volunteers Stress Fiscal Crunch Short-term budget balancing: reduce over time. termination of programs. shed functions. change size & mission Low . etc.Fiscal Stress & Immediacy of Downsizing Duration Short High Fiscal Crisis All tactics. freeze hiring & expenditures. cancellation of equipment replacement.

6-6-91 .Downsizing Change Drivers ‡ Mergers & Acquisitions ‡ Avoid bankrupcy ‡ Prepare for privatization ‡ Reduce costs to remain competitive Goals ‡ Reduce expenses (46%) ‡ Increase profits (32%) ‡ Improve cash flow (24%) ‡ Increase productivity (22%) ‡ Increase ROI (21%) ‡ Increase competitive advantage (19%) ‡ Reduce bureaucracy (17%) ‡ Improve decision making (14%) ‡ Increase customer satisfaction (14%) ‡ Increase sales (13%) ‡ Increase market share (12%) ‡ Improve product quality (9%) ‡ Advance technology (9%) ‡ Increase motivation (7%) ‡ Avoid takeover (6%) Wall Street Journal.

000 DuPont 4.4% US News & World Report.000 Sears 50. 12-20-93 .7% 3.0% 4.6% 7.700 RJR Nabisco 6.9% 4.000 McDonnell 8.6% 7.000 Xerox 10.0% 3.000 US West 9.500 7.Checking the Numbers in Downsizing Percent of First Day Stock Change IBM 60.

& reengineering efforts are not successful Personal Modifiers on Downsizing Effects ‡ age ‡ gender ‡ financial position ‡ social support ‡ length of employment ‡ level of education ‡ previous occupational level ‡ degree of satisfaction with terminated job ‡ career status ‡ individual stress-coping ability Organizational Changes ‡ changed job responsibilities ‡ modified reporting relationships ‡ new co-workers ‡ new policies & procedures ‡ fewer personnel for job ‡ expanded role responsibilities ‡ Additional (re)training Survivor Reactions ‡ lower job satisfaction\ ‡ lower commitment ‡ lower job involvement ‡ increased intention to turnover ‡ decreased morale ‡ mistrust (35% credibility drop) ‡ anxiety ‡ survivor guilt (depression) .Downsizing Effects Organizational Modifiers ‡ method of termination* ‡ advance notice ‡ channels used ‡ outplacement counseling ‡ retraining availability ‡ extended benefits ‡ severance pay About 68% of all downsizing. restructuring.

siege mentality Cameron.focus on individual protection ‡ Non-priorized cutbacks-. unclear priorities.neglect long term strategy ‡ Increasing conflict-.fragmentation ‡ Loss of innovation-. low tolerance for risk ‡ Short-term crisis mentality-. Whetten.competition for scarce resources ‡ Restricted communication-.less creativity.threat rigidity ‡ Loss of trust-.across-the-board cuts ‡ Centralization--top down deicsions. . & Kim (1987).infighting & mean mood ‡ Lack of teamwork-.loss of confidence both ways ‡ Decreasing morale-.The Dirty Dozen Attitudes Associated with Downsizing ‡ Resistance to change-.only good news shared ‡ Lack of leadership-.scapegoating. less power sharing ‡ Politicized special interest groups-.

Downsizing Strategies 1 2 Workforce Reduction ‡ early retirement ‡ transfers ‡ outplacement ‡ buy-out packages ‡ golden parachutes ‡ attrition ‡ lay-offs Organizational Redesign ‡ eliminate functions ‡ cut hierarchical levels ‡ drop divisions or products ‡ consolidate or merge units ‡ reduce work hours ‡ lengthen shifts 3 Systemic Strategies (TQM): Redefine change as-‡ as a way of life ‡ ongoing process ‡ continual improvement ‡ simplification ‡ enroll employees to generate and implement ‡ accountability .

benefits improperly terminated or withheld ‡ Tort claims-.Age Discrimination in Employment Act (over 40) ‡ Race & gender discrimination-. sex.Intentional infliction of emotional distress.courts & legislatures have exceptions to ³at-will´ doctrine of employment ‡ Lack of advance termination notice-. color.Employment Retirement Income Security Act. invasion of privacy. contract interference. religion.Worker Adjustment and Retraining Notification Act ‡ Employee benefits-. fraud .Americans with Disabilities Act ‡ Breach of contract-. ‡ Handicap & disability discrimination-. defamation. national origin regarding hiring & retention.Legal Risks in Downsizing ‡ Age discrimination-.Title VII of Civil Rights Act prohibits discrimination based on race.

Effective Downsizing: Best Practices ‡ Top-down & bottom-up: employees analyze jobs & tasks to reduce redundancy and improve efficiency ‡ Across the board and selective: ‡underline seriousness. customers. include suppliers. (1993) .improve productivity and enhance competitiveness Huber & Glick. distributors in planning & implementation ‡ Small semi-autonomous & large well-integrated structures ‡ Means to end and end in itself-. status quo not acceptable ‡ Target key internal & external elements: remove blockages.

what should they consider in viewing downsizing as an option (what questions to decide go/no go)? 2. what should be done to regain survivors as an effective work force? . prepare. For a company in or approaching a crisis. how can it best be implemented (how select.Three Questions-1. Following downsizing. and transition people out)? 3. If downsizing is decided on.

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