Chapter 10

Downsizing and Restructuring

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 The Downsizing Strategy

 Downsizing - strategies
to improve an
organization’s efficiency
by reducing the
workforce, redesigning
the work, or changing the
systems of the
organization

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 Survivor

 Survivor – an
employee remaining
with an organization
after a downsizing

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4 © 2010 by Nelson Education Ltd.
 Why do Organizations
Downsize?

 Declining profits  Introduction of new

 Business downturn or technology
increased pressure from  The need to reduce
competitors operating costs
 Merging with another  The desire to decrease levels
organization, resulting in of management
duplication of efforts  Getting rid of employee
“deadwood”

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 Three Types of
Downsizing Strategies

Cameron identifies three

types of downsizing
strategies:
1. Workforce reduction
2. Work redesign
3. Systematic change

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 Definitions

 Workforce reduction - a short-term strategy to cut

the number of employees through attrition, early
retirement or voluntary severance packages, and
layoffs or terminations
 Work redesign - a medium-term strategy in which
organizations focus on work processes and assess
whether specific functions, products, and/or services
should be changed or eliminated

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 Definitions

 Systematic change - a
long-term strategy that
changes the
organization’s culture,
attitudes, and employees’
values with the goal of
reducing costs and
enhancing quality

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 Can Losing a Job Be a
Good Thing?

There are some benefits of

losing a job:
 Time to reflect
 Grow new ideas, direction
and career plan
 Get out of a job that was
substandard
 Spend more time with
family and hobbies

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 The “Survivors” of
Downsizing

 Job insecurity -
feelings of concern
about the continuing
existence of a job

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11 © 2010 by Nelson Education Ltd.
12 © 2010 by Nelson Education Ltd.
13 © 2010 by Nelson Education Ltd.
14 © 2010 by Nelson Education Ltd.
 Effective Downsizing
Strategy

 Increased communication
 Increased employee
participation
 Systematic analysis of tasks
and personnel requirements
 Visibility of senior
management
 Focus on rightsizing
 Establish a sense of ownership
 Active role for HR department
 Monitor downsizing and link to
organizational strategy
 Train management with
downsizing techniques

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 Best Practices of
Downsizing

1. Downsizing should be initiated from the top

2. Workforce reduction must be selective in application
and long-term in emphasis
3. Special attention should be paid to both those who lose
their jobs and to the survivors who remain in the
organization

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 Best Practices of
Downsizing

4. Decision-makers should identify where inefficiencies

and costs exist
5. Should result in the formation of small, semi-
autonomous organizations within the broader
organization
6. Must be a proactive strategy focused on increasing
performance

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