Employee dissatisfaction starts with a few murmurs, "Am I living in the Land of blah?" "Do promises mean nothing?" The talk soon leads to a change in behavioural patterns, resulting in probably a slowdown in work and employees saying "no" to extra work.
Executives and bosses, if you identify with the above scenarios, then you are in the danger zone, and it is time to find a necessary solution.
"I believe it is (employee angst) a very important factor as it is a natural tendency of every good employee/ top performer to grow and prosper"- Tejinder Pal SinghPartner and HeadHealthcare Practice India
Employee angst not only propagates demotivation, but often goads an individual leave the company. And you can imagine the impact, when a top performer leaves. "I believe it is (employee angst) a very important factor as it is a natural tendency of every good employee/top performer to grow and prosper," says Tejinder Pal Singh, Partner and Head-Healthcare Practice India, Transearch India. "If opportunities do not exist for such an employee, he will move on for greener pastures to satisfy those needs," he adds. What is worse, it affects productivity and overall morale. Unhappy customers and a drought of passionate employees propagate politics at work and other integrity issues, making the overall situation difficult for both, the employee and the employer. Thus companies not only have to deal with high attrition, but also have to take measures to deal with the negative vibes around.
Attention pharma!
"While for some it maybe the money, for others it is job satisfaction. It has been rightly said that in most of the cases people leave managers and not companies" - Priya Brid Senior Manager, HRMetropolis Health Services
The issue of employee angst becomes all the more relevant to the pharma and healthcare industries (more so for the pharma sector) as these are knowledge- driven sectors. Also, pharma, like its IT counterpart, is in a growth phase. "In the initial high growth time of IT, in some sense, all of us went through the same issues that pharma is facing today. In IT, now people have learnt to deal with it," elucidates Prashant Sankaran, CEO, Blueshift Technologies, an IT firm, while trying to draw comparisons between the people issues faced by the two industries. "Pharma is probably going through that phase now, but there are enough lessons to learn from what IT went through or is going through," he adds.
Attrition too, has become the mainstay of the Indian pharma industry. There has been a constant movement of the intellectual capital across companies (to and from MNCs and domestic, large and small) and across departments. Hence, the investment done by pharmacos in training the employees—in terms of time, energy and money—cannot be recovered, if they are not able to retain them. And attrition, opine HR experts, is one of the direct outcomes of dissatisfaction.
Today with changing times the reasons for quitting differ from person to person. "While for some it maybe the money, for others it is job satisfaction. It has been rightly said that in most of the cases people leave managers and not companies," states Priya Brid, Senior Manager, HR, Metropolis Health Services. "Some other critical reasons identified for quitting maybe because the work environment is not conducive, there is too much work pressure, office politics, etc., and then there are other common reasons like lack of growth opportunities, interpersonal relations, infrastructure, salary and unprofessional attitude by seniors and co workers in the company," she adds.
Additionally, as good talent is scarce, getting a good replacement especially in a buoyant market like this is extremely difficult to find and this adds on to the costs. The company in such cases loses out on good employees. "Today, with several opportunities available in the market it is very important for companies to find the root cause of such problems and work on it constructively. There is a huge paucity of talent in the industry and virtually every sector is facing the brunt of it," opines Brid.
Top Triggers of Employee Angst
· Ambiguity in role and responsibilities · Responsibility without accountability. If one has responsibility but no power to take decisions or accountability one gets demotivated as one cannot show results or move things forward. · Sometimes employees set too high/ unrealistic standards/ expectations for themselves and that too sometimes leads to angst within them. In this case if they do not have a good mentor, it may lead to a lot of stress and pressure as inability to achieve unrealistic goals may be due to circumstances beyond their control. · Lack of professionalism, lack of systems and processes also leads to employee angst. · Biased approach/favoritisms/discrimination at work · Lack of challenge in the work/lack of opportunities to move up the career ladder Courtesy: Transearch India
What breeds angst
There are many reasons for employee dissatisfaction turning into angst. Broken promises, miscommunication, lack of transparency in operations and absolutely no sync and understanding between the deliverables and rewards, can be some of the reasons for angst.
Sometimes in knowledge-intensive industries like the pharma, managers, with a view to retain a good employee end up making promises that might not be viable. When these are not fulfilled, they end up losing that employee's trust. They end up pushing him/her out of the company, when in fact they wanted to prevent just that. "At times, people do take a short-term view and say look let me buy some time and by giving him/her some promise. Sometimes line managers are not able to honour them," states Sankaran. "But if you want the employees to be happy in the long term, the HR department has to honour the promise made by anybody in the company and then put in enough controls and checks to see that people who are not authorised to make those promises. But once a promise is made, whether it is okay or not, we need to honour them," he adds.
Miscommunication between the superior, the sub-ordinate and the HR department can also lead to dissatisfaction, which, again, if not dealt with leads to angst. "Miscommunication never works if there in a long-term approach and for an organization that is serious about it's most important resource i.e. the people," expresses Singh. "This (miscommunication) raises serious questions related to integrity, ethics which can badly tarnish the image of the company," he adds.
When it comes to freezing in on the KRAs, deliverables and the growth path, then like the companies, every employee has a specific career graph in their mind, and they work assiduously towards it. "When things don't move according to their expectation it starts converting into dissatisfaction at work. If the employee has been repeatedly trying to bring this to the notice of the seniors and there has still been little action on the same their frustrations convert into angst," reveals Brid. Lack of vision, commitment, organization passion, systems and processes, empty promises, leadership that doesn't inspire confidence in the employee are important triggers of dissatisfaction and angst. No intellectual stimulation for the employee and too much of tactical behaviour without a long-term strategic intent also leads to this. While there is too much to lose, if companies do not deal with the problem of employee angst and control it, it takes very minuscule efforts on their part to deal with the same.
Finding a solution
There are several methods that companies can adapt to curtail the problem. Accessibility to the immediate superior and immediate action taken by them on the grievances is the most critical to weed out employee angst and its ill-effects.
"It is very important that at every level the employee should have the comfort to approach his/her immediate superior or the respective department head, who can help solve their grievances," pronounces Brid. "It is essential to give them a chance to talk about their concerns without anyone being biased towards them. Also management should adopt transparent ways of handling promotions, upgradation, keeping communication channel more aggressive and persistent," she adds.
It would also do well for companies to be clear and transparent with respect to employee expectations, as expectation is a mutually contributed thing. "So the company has to be very clear on what it promises to the employee and the employee has to be clear about how he/she sees that commitment or promises," says Sankaran. "It is actually the ownership of the manager and the HR team to be as realistic as possible with respect to the promises it makes to the employees," he adds. This is where the induction programme can make a difference. During the recruitment and induction stage, the manager and the HR department have to play a proactive role in spelling out to employees what they can expect. If he/she has enough clarifications, then the instances of expectations being unfulfilled will be much lesser.
Another idea that can be implemented is that of identifying good performers and then continuously keeping them challenged by understanding their aspirations and aligning them with the overall objectives and aspirations of the organization. Many organizations also assign mentors to such individuals to inspire them. Another way to keep them happy is by continuously engaging them in arduous tasks that tickle their intellect and keep them on their toes. Also by establishing appropriate reward and recognition systems in place as wealth (here income through perks) creation opportunities are always a big motivator and driver.
"If bosses and HR heads are truly convinced about the potential of the particular employee, I think they should do everything to facilitate and create an environment of joy and pride at work. Keep them challenged at work, give them opportunities to grow and prosper, invest in their training and development," expresses Tejinder Pal Singh. "Have policies and practices that foster innovation and creativity in ensuring that these gems can be accommodated and given an opportunity to perform. This would also result in both employee and job loyalty which is so rare to find in these days," he adds. Today, companies across all the knowledge intensive industries need to realise the fact that action speaks more than words-their actions and behaviour does have an impact on an employee, his attitude and his satisfaction levels in a company. Clarity and transparency will work like a glue to bind the employees and the company together. On the other hand, empty promises, lack of transparency and scant regard to their concerns, will make employees wonder if they are living in the land of blah and will give birth to the KILLER.
Monday, May 25, 2009
Methods of Shaping Behavior:
Extinction:
According to operant conditioning, both good and bad behaviors are controlled by reinforced consequences. Identifying behavioral reinforces and removing them can decrease a behavior. An undesired behavior without reinforcement can diminish until it no longer occurs. This process is called extinction.
Extinction can modify the behavior of a worker who spends much time talking or telling jokes. The attention of coworkers reinforces this behavior. If coworkers stop talking and laughing, the worker is likely to stop telling jokes. Although extinction is useful, it takes time to eliminate the undesired behavior. When behaviors need to stop immediately, managers may resort to punishment.
Punishment:
Punishment consists of administering a negative consequence when the undesired behavior occurs. Punishment is not the same as negative reinforcement. It decreases a behavior, whereas negative reinforcement increases the frequency of a behavior. Punishment administers a negative consequence, whereas negative reinforcement removes a negative consequence.
Reinforcement
Reinforcement is the process that increases the probability that desired behaviors occur by applying consequences. Managers use reinforcement to increase the likelihood of higher sales, better attendance, or observing safety procedures.
Reinforcement begins by selecting a behavior to be encouraged. Correctly identifying the behavior is important, or reinforcement will not lead to the desired response. A manager must decide if attendance at meetings is the desired behavior or attendance and participation. The manager would need to reinforce both behaviors if both are desired.
According to operant conditioning, both good and bad behaviors are controlled by reinforced consequences. Identifying behavioral reinforces and removing them can decrease a behavior. An undesired behavior without reinforcement can diminish until it no longer occurs. This process is called extinction.
Extinction can modify the behavior of a worker who spends much time talking or telling jokes. The attention of coworkers reinforces this behavior. If coworkers stop talking and laughing, the worker is likely to stop telling jokes. Although extinction is useful, it takes time to eliminate the undesired behavior. When behaviors need to stop immediately, managers may resort to punishment.
Punishment:
Punishment consists of administering a negative consequence when the undesired behavior occurs. Punishment is not the same as negative reinforcement. It decreases a behavior, whereas negative reinforcement increases the frequency of a behavior. Punishment administers a negative consequence, whereas negative reinforcement removes a negative consequence.
Reinforcement
Reinforcement is the process that increases the probability that desired behaviors occur by applying consequences. Managers use reinforcement to increase the likelihood of higher sales, better attendance, or observing safety procedures.
Reinforcement begins by selecting a behavior to be encouraged. Correctly identifying the behavior is important, or reinforcement will not lead to the desired response. A manager must decide if attendance at meetings is the desired behavior or attendance and participation. The manager would need to reinforce both behaviors if both are desired.
Organizational Downsizing
Organizational Downsizing
(version 1.0)
Learning outcomes:
1. What is organizational downsizing?
2. 30 substitute terminologies for downsizing
3. Four Attributes of downsizing
4. Does downsizing occur to deal with internal financial crisis?
5. The trouble with downsizing
6. How downsizings may help erase the Glass Ceiling for women?
7. How to protect your job in a recession?
8. How to maximize your take when you get laid off?
9. Three approaches to downsizing
Introduction
Downsizing is a pervasive activity that has been undertaken by a majority of organizations in the industrialized world in the last two decades.
The long-term impact on organizational performance and individual well-being, however, has been largely negative.
Research has demonstrated that the way downsizing is implemented is more important than the fact that it is implemented.
It is still rare to go a week without reading about one more organization’s massive layoff or downsizing effort somewhere in Europe, North America and, increasingly, Asia.
Important:
Please refer to your home page to download the scholarly articles used in this treatise. This literature is provided only for the students of Iqra University (Gulshan Campus) Karachi and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of Organizational Downsizing.
1. What is organizational downsizing?
Organizational downsizing refers to a set of voluntary activities, undertaken on the part of the management of an organization, designed to reduce costs.
The focus may be monetary costs, time costs, or technological costs.
Downsizing is usually, but not exclusively, accomplished by reducing the size of the workforce. That is, downsizing is a term used to encompass a whole range of activities from personnel layoffs and hiring freezes to consolidations and mergers of organization units.
In fact, identifying the definition and conceptual boundaries of downsizing is more relevant for theoretical purposes than for practical ones. For example, the terminology used to describe downsizing strategies was quite unimportant to practicing managers.
2. Thirty substitute terminologies for downsizing:
The term used to describe downsizing activities did not matter much. An array of alternative terms is used as substitutes for downsizing by practitioners such as:
1. Building-down;
2. Compressing;
3. Consolidating;
4. Contracting;
5. De-hiring;
6. De-massing;
7. Dismantling;
8. Downshifting;
9. Lay off;
10. Rationalizing;
11. Reallocating;
12. Reassigning;
13. Rebalancing;
14. Redeploying;
15. Redesigning;
16. Redirecting;
17. Reduction-in-force;
18. Reengineering;
19. Renewing;
20. Reorganizing;
21. Reshaping;
22. Resizing;
23. Restructuring
24. Retrenching;
25. Revitalizing;
26. Rightsizing;
27. Slimming down;
28. Streamlining;
29. Transferring; or even
30. Leaning up
These terminologies are used interchangeably however each one may have a different connotation.
Although practicing managers care little about the precise definition of downsizing, for scholarly purpose, a carefully constructed conceptual meaning is required in order for cumulative and comparative research to occur.
For example, on the surface downsizing can be interpreted as a mere reduction in organizational size. However, when this is the case, downsizing is often confused with the concept of organizational decline, which also can be interpreted as reduction in organizational size.
Yet important differences exist that make downsizing and decline separate phenomena conceptually and empirically. Several important attributes of downsizing also make is distinct from other related concepts such as those listed above <…30 substitutes terminologies for downsizing>. These attributes of downsizing refer to:
· Intent;
· Personnel;
· Efficiency; and
· Work processes.
3. Four attributes of downsizing
Intent:
Downsizing is not something that happens to an organization, but it is something that managers and organization members undertake purposively. This implies, first of all, that downsizing is an intentional set of activities. This differentiates downsizing from loss of market share, loss of revenue, or the unwitting (mean: unconscious/unaware) loss of human resources that are associated with organizational decline. Downsizing is distinct from mere encroachment by the environment on performance or resources because it implies organizational actions.
Personnel:
Downsizing usually involves reductions in personnel, although it is not limited solely to personnel reductions. A variety of personnel reduction strategies are associated with downsizing, such as transfers, outplacements, retirement incentives, buyout packages, layoffs, attrition, and so on. These reductions in personnel may occur in one part of an organization but not in other parts (for example, in the production function but not in the engineering function), but still be labeled organizational downsizing. However, downsizing does not always involve reduction in personnel because some instances occur in which new products are added, new sources of revenue opened up, or additional work acquired without a commensurate (mean: appropriate, corresponding, equal) number of employees being added. Fewer numbers of workers are then employed per unit of output compared to some previous level of employment.
Efficiency:
Downsizing is focused on improving the efficiency of the organization and occurs either proactively or reactively in order to curtail costs, enhance revenue or bolster (mean: strengthen, boost, augment, reinforce, support) competitiveness. That is, downsizing may be implemented as a defensive reaction to decline or as a proactive strategy to enhance organizational performance.
Operational Effectiveness (OE) is not Strategy (Porter, 2002).
In either case, it represents a set of activities targeted at organizational improvement. By and large (mean: in general; on the whole), downsizing in most firms has been implemented as a defensive reaction to financial crisis, loss of competitiveness, or inefficiency.
Proactive and anticipatory downsizing has been rare, although recently reengineering and restructuring, coupled with downsizing, have become common proactive strategies.
Work Processes:
Downsizing affects work processes, wittingly or unwittingly. When the workforce contracts (… contraction …mean: the total number of labor is decreasing), for example, fewer employees are left to do the same amount of work and this has an impact on what work gets done and how it gets done. Work overload, burnout, inefficiency, conflicts and low morale are possible consequences, or more positive outcomes may occur such as improved productivity, efficiency or speed.
Employees who survive the purges (mean: people who stay with the organization after a massive downsizing activity) often become narrow-minded, self-absorbed, and risk-averse* (mean: a person who dislikes risk). Motivation levels drop off because any hope of future promotions – or even future – with the company dies out.
*Risk averse: Describes an investor who, when faced with two investments with a similar expected return (but different risks), will prefer the one with the lower risk.
Moreover, when downsizing activities include restructuring, reengineering, or eliminating work (such as discontinuing functions, abolishing hierarchical levels, merging units or redesigning tasks), work processes are usually altered substantially.
Regardless of whether or not the work is the focus of downsizing activities, work processes are always influenced one way or another by downsizing.
Four attributes of downsizing… Conclusion:
In case of each of these attributes, the level of analysis for downsizing is the organization itself, not the individual or the industry.
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What do we mean by an industry?
An industry is a group of firms that offer a product or a class of products that are close substitutes for one another. Industries are classified according to number of sellers (including pure monopoly, oligopoly, monopolistic competition and pure competition); degree of product differentiation; presence or absence of entry, mobility, and exit barriers; cost structure; degree of vertical integration; and degree of globalization.
Which one is important? The Firm or the Industry!
It is the firm that matters, not the industry. Successful businesses ride the waves of industry misfortunes; less successful businesses are sunk by them. This view contrasts sharply with the popular, but misguided, school of thought that believes that the fortune of a business is closely tied to its industry. Those who adhere to this view believe that some industries are intrinsically more attractive for investment than others. They (wrongly) believe that if the business is in a profitable industry, then its profits will be greater than if the business is in an unprofitable industry.
The role of the industry in determining profitability:
Old Views
· Some industries are intrinsically more profitable than others.
· In mature environments, it is difficult to sustain high profits.
· It is environmental factors that determine whether an industry is successful, not the firms in the industry.
New Views
· There is a little difference in the profitability of one industry versus another.
· There is no such thing as a mature industry, only mature firms; industries inhabited by mature firms often present great opportunities for the innovative.
· Profitable industries are those populated by imaginative and profitable firms; unprofitable industries have unusually large numbers of uncreative firms.
Concluding remarks (firms versus industry):
Organizations that have become mature and suffer from poor performance typically view themselves as Prisoners of their environment. Often their managers blame everyone but themselves for their poor performance. Labeling their environment as mature or hostile, they identify excess capacity, unfair competition, adverse exchange rates, absence of demand, and a host of other factors to explain why they are doing badly. Alas! Too often these external factors are NOT really the causes of their demise but rather the symptoms of their failure. This conclusion is not so new; others have made the point before, yet their words appear to have been forgotten.
Source: Charles Baden-Fuller and John Stopford (1992) The Firm matters, not the industry.
For instance, Hall (1980, p.78) noted:
Even a cursory analysis of the leading companies in the eight basic industries leads to an important observation: survival and prosperity are possible even when the business environment turns hostile and industry trends change from favorable to unfavorable. In this regard, casual advice frequently offered to competitors in basic industries – that is diversify, dissolve or be prepared for below average returns – seems oversimplified and even erroneous. A hostile environment offers an excellent basic investment opportunity and reinvestment climate, at least for the industry leaders insightful enough to capitalize on their positions.
===========================================
Four attributes of downsizing… Conclusion:
(…continued)
The most common action taken by organizations engaging in downsizing is laying off workers; downsizing entails a much broader set of actions and connotations.
Disclaimer:
At the industry level of analysis, a large literature also exists on divestiture, mergers and industry realignments. Market segmentation, divestitures of unrelated businesses, reconfiguring competitive positions, reinforcing core competencies and consolidating industry structures are among the topics addressed. The definition of organizational downsizing being described here, however, may or may not involve selling off, transferring out, merging businesses or altering the industry structure.
Much less research has investigated the organizational level of analysis than the individual and the industry level analysis. That is, strategies for approaching downsizing, process for implementing downsizing and impacts on organizational performance seem to have been under-investigated in the scholarly literature.
To summarize, organizational downsizing refers to an intentionally instituted set of activities designed to improve organizational efficiency and performance which affects the size of the organization’s workforce, costs and work processes.
· Example: On 06 October 2008, Ms Suzanne Deffree reports in Electronic News (Vol. 54 Issue 40, page 4) on the initiative of Sony Ericsson to start a worldwide and reorganization and headcount reduction by cutting 2,000 jobs. It is stated that the action is part of Sony Ericsson's effort to save $422 million over the time period. According to the company, they will begin to implement a plan to align its operations and resources worldwide to meet an increasingly competitive business environment and to help restore its capability for profitable growth.
· Example: On 01 October 2008, Jeanne Whalen reports in Wall Street Journal - Eastern Edition, (Vol. 252 Issue 78, pB7) on the plan of drug manufacturer GlaxoSmithKline PLC to reduce jobs in research and development (R&D) in the U.S. and Great Britain. It states that the declining profits in the drug industry have made companies cut staff and costs. It mentions that the inability of R&D employees to produce enough new products to keep sales growing has placed them under particular pressure.
· Example: On 22 September 2008, Patrick Thibodeau reports in Computerworld (Vol. 42 Issue 38, p6) on the announcement of the plan of Hewlett-Packard Co. (HP) to cut around 24,600 jobs, which is part of the restructuring program following the acquisition of Electronic Data Systems Corp. (EDS). HP chairman and CEO (chief executive officer) Mark Hurd explains that the company will be getting stronger by the time EDS will be integrated. It explains that 7.5% workforce reduction will spread in the span of three years. The restructuring is expected to cut annual costs by about $1.8 billion. Key information on the reduction is presented.
· Example: Personnel Today, on page 3 of its 02 September 2008 issue reports on the possibility of job cuts in British Airways PLC (BA) as the airline struggles with falling profits. BA's HR director Tony McCarthy stated that he is working hard to avoid losing staff following a fall of 90% in BA's profits in the first-quarter of 2008 and informed that the rising oil prices and credit crunch are affecting the company's profit and sustainability. In August 2008, BA reduced its number of winter flights by 3.1% and stopped new recruitments.
· Example: On 05 August 2008, Carl Winfield of Business Week Online, (p29) looks at the economic downturn in the U.S. and its impact on the career of executives. It is stated that executives have been taken down by the latest downsizing wave. Many of them are looking at their severance packages and wondering how to make the best of a bad situation. Some ways as how to get the best severance package, including money and health insurance are also suggested. It is stated that if one takes steps for the best severance deal, chances for a saved career are there.
It is implied that downsizing is usually undertaken in order to improve organizational performance. Downsizing, therefore, may be:
a) Reactive and defensive; or it may be
b) Proactive and anticipatory
Ineffectiveness and impending failure are the most common motivations for downsizing, but they are not prerequisites. Downsizing may be undertaken when no threat or financial crisis exists at all.
4. Does downsizing occur to deal with internal financial crisis?
n No. In fact, over 80% of the cases where downsizing took place, the organizations initiating the cutbacks were making a profit at the time.
n Example: In 1998, General Electric Company set in motion a $2 billion restructuring program even though all of GE’s divisions were generating double-digits returns on investments (ROI).
n Example: On 14 October 2008, Roberta Cowan reports in Wall Street Journal - Eastern Edition (Vol. 252 Issue 89, pB10) on the plan of Philips Electronics NV to cut jobs as it posted a 7.9% rise in profit in the third quarter of 2008.
Chaiporn Vithessonthi and Markus Schwaninger of Mahasarakham University and University of St. Gallen respectively carried out a study to test whether job motivation and self-confidence for learning and development influence employee support for downsizing. Data were gathered from a sample of 86 teachers at one private school in Bangkok, Thailand. The results suggest that the level of job motivation is negatively associated with the level of support for change, and that the level of self-confidence for learning and development is not associated with the level of support for change (Vithessonthi & Schwaninger, 2008).
5. The trouble with downsizing
The trouble with downsizing is that as a strategy for improvement it is, by and large, a failure. Admittedly, downsizing announcements usually lead to POSITIVE reactions among the financial community. Almost universally favorable reactions have occurred because of the promise of cost savings, reduced expenses and increased competitiveness.
· Example: The average increase in stock price the day after a downsizing announcement was made in seven major firms in 1993 (IBM, Sears, Xerox, US West, McDonnell Douglas, RJP Nabisco and DUPont) was 5.5%.
However, two-thirds of companies that downsize end up doing it again a year later, and the stock prices of firms that downsized during 1980s actually lagged behind the industry average in the 1990s.
One survey found that 74% of senior managers in downsized companies said that morale, trust and productivity suffered after downsizing, and half of the 1,468 firms in another survey indicated that productivity deteriorated after downsizing.
A majority of organizations that downsized in a third survey failed to achieve desired results, with only 9% reporting an improvement in quality.
These outcomes led to much criticism in the popular press, with organizations being accused of ‘dumb-sizing’ instead of downsizing.
By way of example, in a review of a scholarly literature on the effects of layoffs, turnover and job rotation policies, Cole (1993) identified a variety of problems associated with job loss resulting from downsizing:
1. Loss of personal relationships between employees and customers;
2. Destruction of employee and customer trust and loyalty;
3. Disruption of smooth, predictable routines in the firms;
4. Increases in formalization (rules), standardization and rigidity;
5. Loss of cross-unit and cross-level knowledge resulting from longevity and from interpersonal interactions over time;
6. Loss of knowledge of how to respond to non-routine challenges faced by the firms;
7. Less documentation and, therefore, less sharing of information about changes;
8. Loss of employee productivity;
9. Loss of common organizational culture.
Cameron et al. (1993) reported still another set of negative outcomes uncovered in a study of organizations in the car industry. Effects of downsizing include:
1. Increased centralization of decision making;
2. The adoption of short-term, crisis mentality;
3. Loss of innovativeness;
4. Increased resistance to change;
5. Decreasing employee morale, commitment and loyalty;
6. The escalation of politicized special interest groups and political infighting;
7. Risk-aversion and conservatism in decision making;
8. Loss of trust among customers and employees;
9. Increasing interpersonal conflicts;
10. Restricted communication flows and less information sharing;
11. Lack of teamwork;
12. Loss of accessible, forward-thinking, aggressive leaders.
The negative effects of downsizing on individual well-being, physical and emotional health, personal attributes, family relationships, and personal economic factors have been less disconcerting. Research has shown that in a variety of types of organizations and with a variety of types of employees, downsizing has produced negative rather than positive results (Kozlowski et al. 1993; Brockner 1998).
Despite this track record, downsizing remains a strategy of choice for organizations faced with excess capacity, bloated employees ranks, sky-high costs and declining efficiency. Most observers simply see no other choice available, plus the fact that downsizing does seem to produce some positive outcomes. Tomasko (1987), for example, identifies ways in which downsizing has had positive impact on the performance of the organizations in adapting to change, and Richardson (1988) argued that downsizing provides an ‘ultimate advantage’ in containing costs. Consequently, downsizing is normally the first alternative selected by organizations under pressure to cut expenses and improve efficiency.
Restructuring is tough, but it can be managed…
On 28 July 2008, Jenny Schade of Advertising Age, (Vol. 79 Issue 29, p.28) identified five tips to re-engage and motivate staff:
1. Continue to communicate, even when you don't have all the information
2. Highlight the positive
3. Listen to employees
4. Honestly address issues
5. Ensure that all supervisors are making it a priority to both listen to and talk to employees
6. How downsizings may help erase the Glass Ceiling for women?
Employer downsizings may be eroding the glass ceiling for women, according to a study by John Dencker, a sociologist and professor at the University of Illinois Institute of Labor and Industrial Relations.
The research found that while downsizing can reduce
the pool of jobs available for both men and women, it also is a time when employers make an effort to balance gender inequality by accepting more women
into male-dominated management ranks. The study,
published in the June issue of the American Sociological Review, looked at nearly 30 years of employment records from a Fortune 500 manufacturer. Women accounted for almost 36 percent of the company’s managers following a restructuring, compared with an average of about 24 percent prior to layoffs.
“It might be that they try to make up for past inequalities or they may be aware of other firms that
have had legal difficulties and want to make sure they don’t run into the same problems,” Dencker said.
Unfortunately, the effect is not permanent: One to two years after layoffs, neither gender sees a lot of promotions because there are fewer people to promote.
7. How to protect your job in a recession?
As the economy softens, corporate downsizing appears almost inevitable. Don't panic yet, though. While layoff decisions might seem beyond your control, there's plenty you can do to make sure you retain your job. In this article, Banks, a former HR executive at Chase Manhattan and FleetBoston Financial, and Coutu, an HBR senior editor and former affiliate scholar at the Boston Psychoanalytic Society and Institute, describe how to improve your chances of survival. It is mostly a matter of coolheaded planning, they observe. When cuts loom, the first thing to do is act like a survivor. Be confident and cheerful. Research shows that congeniality trumps competence when push comes to shove. Look to the future by focusing on customers, for without them, no one will have work. Survivors also tend to be versatile; tight budgets demand managers who can wear several hats, so start demonstrating what other capabilities you can offer. If you are, say, a manager who once worked as a teacher, take on a training role. Remember to be a good corporate citizen: Participation matters now more than ever. It isn't the time to behave as if work is beneath you or to argue for a new title. When one executive's department was folded under the management of a less-experienced colleague, she swallowed her pride and wholeheartedly supported the new hierarchy. Her superiors noticed her commitment and eventually rewarded her with a prestigious appointment. It is also important to offer leaders hope and realistic solutions. Energize your colleagues around change, like the VP of learning at a firm undergoing major staff reductions did. He organized a humorous in-house radio show that revived spirits and helped management communicate with employees--and ended up with a promotion (Banks, and Coutu, 2008).
On 04 August 2008, Carl Winfield of Business Week Online, (p10) commented on ‘how to keep your job in hard times?’ The first and most important move workers should make: Look for new experiences with their current employer.
“People like to do what they're good at," says Melaine Kusin, vice-chairman at Heidrick & Struggles (HSII). "But it's just as important to volunteer for special projects and develop skills that can be applied to other parts of the business."
"Be Visible":
The best way for executives to keep their jobs or move to the next level is to develop an understanding of the whole business, rather than the part that relates only to them. Executives to be careful about what they say in the workplace. "You need to take the lid off your thinking and take a look at how what you do relates to the rest of the business," says Dale Kurow, a NY-based consultant. "If you don't know how your part in the business is connected to the others, chances are you're not going very far."
Cultivate a Mentor:
Workers who are more engaged with the day-to-day operations at their companies have a distinct advantage over those clock-punchers who focus solely on the tasks in their job descriptions. But staying in a job is also about building relationships. While it's advisable to work well with your peers, it never hurts to develop a close relationship with a mentor, particularly with someone higher up who can help keep you out of harm's way when the ax-man cometh.
The job market is getting tougher to negotiate for workers in all age groups. But according to coaches like Haberfeld, you can keep your job as long as you don't mind maintaining a high profile. Establishing yourself as a leader could make the difference between moving up or being moved out.
8. How to maximize your take when you get laid off?
To find the upside when you get downsized, follow these four steps, suggests Lancaster, Pa. employment lawyer Christina Hausner
STEP 1: Chill. The meeting in which your boss breaks the news will be traumatic — but don't burn bridges (thereby losing your chance to negotiate) by voicing any bitterness or anger. The only two questions you should ask are "Who do I call about benefits?" and "Who do I contact about getting a letter of reference?" Never sign a severance agreement that day.
STEP 2: File for unemployment. The sooner you apply, the sooner you will be able to receive benefits -generally about half your salary, up to a few hundred dollars a week, for at least six months (longer at times of high unemployment). Get details from your state's unemployment office (you can find it at workforcesecurity.doleta.gov/unemploy).
STEP 3: Begin horse-trading. To get more than the typical week or two of pay per year of service, your best strategy is to offer to give back something of value to your old employer — for example, by volunteering to sign a noncompeting agreement. If you're being offered outplacement services you're not interested in, ask if you can get more money instead.
STEP 4: Consider getting legal — gingerly. If you think you need a lawyer to get what's due you, by all means consult one. But don't rush to send her into battle on your behalf, because your employer may turn quite hostile when confronted by legal threats. "Sometimes I'll say to a client, 'You write the letter — see how far you get with that,' " says Hausner.
9. Three approaches to downsizing
1. Workforce reduction strategy
2. Organizational redesign strategy
3. Systemic (i.e. focused on systems) strategy
3.1 Internal systems (e.g. values, communication, production and HR systems)
3.2 External systems (e.g. the production chain including upstream suppliers and downstream customers).
--------------------------------------------------------------------
Researched, compiled and edited by:
Shahnawaz Adil
Assistant Professor
Department of Business Administration
IQRA University (Gulshan Campus), Karachi
Dated: Tuesday, November 11, 2008
Special thanks to:
Harvard Business School, United States
London Business School, United Kingdom
Newcastle University Business School, United Kingdom
References
Banks, J., & Coutu, D. (2008). How to protect your job in recession? Harvard Business Review , 86 (9), 113-116.
Brockner, J. (1988). The effects of work layoff on survivors. In B. M. Cummings, Research in Organizational Behavior. Greenwich, CT: JAI Press Inc.
Cameron, K. S., Freeman, S. J., & Mishra, A. K. (1993). Downsizing and redesigning organizations. In G. P. Huber, & W. H. Glick, Organizational change and redesign. New York: Oxford University Press.
Cole, R. E. (1993). Learning from learning theory: implications for quality improvements of turnover, use of contingent workers, and job rotation policies. Quality Management Journal , 9-25.
Hall, W. K. (1980). Survival strategies in a hostile environment. Harvard Business Review , 75-85.
Kozlowski, S. W. J.; Chao, G.T.; Smith, E.M.; Hedlund, J.;. (1993). Organizational downsizing: strategies, interventions, and research implications. In C. L. Cooper, & I. T. Robertson, International Review of Industrial and Organizational Psychology. New York: Wiley.
Porter, M. E. (1996). What is strategy? Harvard Business Review , 61-78.
Richardson, P. (1988). Cost Containment: The Ultimate Advantage. New York: Free Press.
Tomasko, R. (1987). Downsizing: reshaping the corporation for the future. New York: AMACOM Books.
Vithessonthi, C., & Schwaninger, M. (2008). Job motivation and self-confidence for learning and development as predictors of support for change. Journal of Organizational Transformation & Social Change , 5 (2), 141-157.
(version 1.0)
Learning outcomes:
1. What is organizational downsizing?
2. 30 substitute terminologies for downsizing
3. Four Attributes of downsizing
4. Does downsizing occur to deal with internal financial crisis?
5. The trouble with downsizing
6. How downsizings may help erase the Glass Ceiling for women?
7. How to protect your job in a recession?
8. How to maximize your take when you get laid off?
9. Three approaches to downsizing
Introduction
Downsizing is a pervasive activity that has been undertaken by a majority of organizations in the industrialized world in the last two decades.
The long-term impact on organizational performance and individual well-being, however, has been largely negative.
Research has demonstrated that the way downsizing is implemented is more important than the fact that it is implemented.
It is still rare to go a week without reading about one more organization’s massive layoff or downsizing effort somewhere in Europe, North America and, increasingly, Asia.
Important:
Please refer to your home page to download the scholarly articles used in this treatise. This literature is provided only for the students of Iqra University (Gulshan Campus) Karachi and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of Organizational Downsizing.
1. What is organizational downsizing?
Organizational downsizing refers to a set of voluntary activities, undertaken on the part of the management of an organization, designed to reduce costs.
The focus may be monetary costs, time costs, or technological costs.
Downsizing is usually, but not exclusively, accomplished by reducing the size of the workforce. That is, downsizing is a term used to encompass a whole range of activities from personnel layoffs and hiring freezes to consolidations and mergers of organization units.
In fact, identifying the definition and conceptual boundaries of downsizing is more relevant for theoretical purposes than for practical ones. For example, the terminology used to describe downsizing strategies was quite unimportant to practicing managers.
2. Thirty substitute terminologies for downsizing:
The term used to describe downsizing activities did not matter much. An array of alternative terms is used as substitutes for downsizing by practitioners such as:
1. Building-down;
2. Compressing;
3. Consolidating;
4. Contracting;
5. De-hiring;
6. De-massing;
7. Dismantling;
8. Downshifting;
9. Lay off;
10. Rationalizing;
11. Reallocating;
12. Reassigning;
13. Rebalancing;
14. Redeploying;
15. Redesigning;
16. Redirecting;
17. Reduction-in-force;
18. Reengineering;
19. Renewing;
20. Reorganizing;
21. Reshaping;
22. Resizing;
23. Restructuring
24. Retrenching;
25. Revitalizing;
26. Rightsizing;
27. Slimming down;
28. Streamlining;
29. Transferring; or even
30. Leaning up
These terminologies are used interchangeably however each one may have a different connotation.
Although practicing managers care little about the precise definition of downsizing, for scholarly purpose, a carefully constructed conceptual meaning is required in order for cumulative and comparative research to occur.
For example, on the surface downsizing can be interpreted as a mere reduction in organizational size. However, when this is the case, downsizing is often confused with the concept of organizational decline, which also can be interpreted as reduction in organizational size.
Yet important differences exist that make downsizing and decline separate phenomena conceptually and empirically. Several important attributes of downsizing also make is distinct from other related concepts such as those listed above <…30 substitutes terminologies for downsizing>. These attributes of downsizing refer to:
· Intent;
· Personnel;
· Efficiency; and
· Work processes.
3. Four attributes of downsizing
Intent:
Downsizing is not something that happens to an organization, but it is something that managers and organization members undertake purposively. This implies, first of all, that downsizing is an intentional set of activities. This differentiates downsizing from loss of market share, loss of revenue, or the unwitting (mean: unconscious/unaware) loss of human resources that are associated with organizational decline. Downsizing is distinct from mere encroachment by the environment on performance or resources because it implies organizational actions.
Personnel:
Downsizing usually involves reductions in personnel, although it is not limited solely to personnel reductions. A variety of personnel reduction strategies are associated with downsizing, such as transfers, outplacements, retirement incentives, buyout packages, layoffs, attrition, and so on. These reductions in personnel may occur in one part of an organization but not in other parts (for example, in the production function but not in the engineering function), but still be labeled organizational downsizing. However, downsizing does not always involve reduction in personnel because some instances occur in which new products are added, new sources of revenue opened up, or additional work acquired without a commensurate (mean: appropriate, corresponding, equal) number of employees being added. Fewer numbers of workers are then employed per unit of output compared to some previous level of employment.
Efficiency:
Downsizing is focused on improving the efficiency of the organization and occurs either proactively or reactively in order to curtail costs, enhance revenue or bolster (mean: strengthen, boost, augment, reinforce, support) competitiveness. That is, downsizing may be implemented as a defensive reaction to decline or as a proactive strategy to enhance organizational performance.
Operational Effectiveness (OE) is not Strategy (Porter, 2002).
In either case, it represents a set of activities targeted at organizational improvement. By and large (mean: in general; on the whole), downsizing in most firms has been implemented as a defensive reaction to financial crisis, loss of competitiveness, or inefficiency.
Proactive and anticipatory downsizing has been rare, although recently reengineering and restructuring, coupled with downsizing, have become common proactive strategies.
Work Processes:
Downsizing affects work processes, wittingly or unwittingly. When the workforce contracts (… contraction …mean: the total number of labor is decreasing), for example, fewer employees are left to do the same amount of work and this has an impact on what work gets done and how it gets done. Work overload, burnout, inefficiency, conflicts and low morale are possible consequences, or more positive outcomes may occur such as improved productivity, efficiency or speed.
Employees who survive the purges (mean: people who stay with the organization after a massive downsizing activity) often become narrow-minded, self-absorbed, and risk-averse* (mean: a person who dislikes risk). Motivation levels drop off because any hope of future promotions – or even future – with the company dies out.
*Risk averse: Describes an investor who, when faced with two investments with a similar expected return (but different risks), will prefer the one with the lower risk.
Moreover, when downsizing activities include restructuring, reengineering, or eliminating work (such as discontinuing functions, abolishing hierarchical levels, merging units or redesigning tasks), work processes are usually altered substantially.
Regardless of whether or not the work is the focus of downsizing activities, work processes are always influenced one way or another by downsizing.
Four attributes of downsizing… Conclusion:
In case of each of these attributes, the level of analysis for downsizing is the organization itself, not the individual or the industry.
===========================================
What do we mean by an industry?
An industry is a group of firms that offer a product or a class of products that are close substitutes for one another. Industries are classified according to number of sellers (including pure monopoly, oligopoly, monopolistic competition and pure competition); degree of product differentiation; presence or absence of entry, mobility, and exit barriers; cost structure; degree of vertical integration; and degree of globalization.
Which one is important? The Firm or the Industry!
It is the firm that matters, not the industry. Successful businesses ride the waves of industry misfortunes; less successful businesses are sunk by them. This view contrasts sharply with the popular, but misguided, school of thought that believes that the fortune of a business is closely tied to its industry. Those who adhere to this view believe that some industries are intrinsically more attractive for investment than others. They (wrongly) believe that if the business is in a profitable industry, then its profits will be greater than if the business is in an unprofitable industry.
The role of the industry in determining profitability:
Old Views
· Some industries are intrinsically more profitable than others.
· In mature environments, it is difficult to sustain high profits.
· It is environmental factors that determine whether an industry is successful, not the firms in the industry.
New Views
· There is a little difference in the profitability of one industry versus another.
· There is no such thing as a mature industry, only mature firms; industries inhabited by mature firms often present great opportunities for the innovative.
· Profitable industries are those populated by imaginative and profitable firms; unprofitable industries have unusually large numbers of uncreative firms.
Concluding remarks (firms versus industry):
Organizations that have become mature and suffer from poor performance typically view themselves as Prisoners of their environment. Often their managers blame everyone but themselves for their poor performance. Labeling their environment as mature or hostile, they identify excess capacity, unfair competition, adverse exchange rates, absence of demand, and a host of other factors to explain why they are doing badly. Alas! Too often these external factors are NOT really the causes of their demise but rather the symptoms of their failure. This conclusion is not so new; others have made the point before, yet their words appear to have been forgotten.
Source: Charles Baden-Fuller and John Stopford (1992) The Firm matters, not the industry.
For instance, Hall (1980, p.78) noted:
Even a cursory analysis of the leading companies in the eight basic industries leads to an important observation: survival and prosperity are possible even when the business environment turns hostile and industry trends change from favorable to unfavorable. In this regard, casual advice frequently offered to competitors in basic industries – that is diversify, dissolve or be prepared for below average returns – seems oversimplified and even erroneous. A hostile environment offers an excellent basic investment opportunity and reinvestment climate, at least for the industry leaders insightful enough to capitalize on their positions.
===========================================
Four attributes of downsizing… Conclusion:
(…continued)
The most common action taken by organizations engaging in downsizing is laying off workers; downsizing entails a much broader set of actions and connotations.
Disclaimer:
At the industry level of analysis, a large literature also exists on divestiture, mergers and industry realignments. Market segmentation, divestitures of unrelated businesses, reconfiguring competitive positions, reinforcing core competencies and consolidating industry structures are among the topics addressed. The definition of organizational downsizing being described here, however, may or may not involve selling off, transferring out, merging businesses or altering the industry structure.
Much less research has investigated the organizational level of analysis than the individual and the industry level analysis. That is, strategies for approaching downsizing, process for implementing downsizing and impacts on organizational performance seem to have been under-investigated in the scholarly literature
To summarize, organizational downsizing refers to an intentionally instituted set of activities designed to improve organizational efficiency and performance which affects the size of the organization’s workforce, costs and work processes.
· Example: On 06 October 2008, Ms Suzanne Deffree reports in Electronic News (Vol. 54 Issue 40, page 4) on the initiative of Sony Ericsson to start a worldwide and reorganization and headcount reduction by cutting 2,000 jobs. It is stated that the action is part of Sony Ericsson's effort to save $422 million over the time period. According to the company, they will begin to implement a plan to align its operations and resources worldwide to meet an increasingly competitive business environment and to help restore its capability for profitable growth.
· Example: On 01 October 2008, Jeanne Whalen reports in Wall Street Journal - Eastern Edition, (Vol. 252 Issue 78, pB7) on the plan of drug manufacturer GlaxoSmithKline PLC to reduce jobs in research and development (R&D) in the U.S. and Great Britain. It states that the declining profits in the drug industry have made companies cut staff and costs. It mentions that the inability of R&D employees to produce enough new products to keep sales growing has placed them under particular pressure.
· Example: On 22 September 2008, Patrick Thibodeau reports in Computerworld (Vol. 42 Issue 38, p6) on the announcement of the plan of Hewlett-Packard Co. (HP) to cut around 24,600 jobs, which is part of the restructuring program following the acquisition of Electronic Data Systems Corp. (EDS). HP chairman and CEO (chief executive officer) Mark Hurd explains that the company will be getting stronger by the time EDS will be integrated. It explains that 7.5% workforce reduction will spread in the span of three years. The restructuring is expected to cut annual costs by about $1.8 billion. Key information on the reduction is presented.
· Example: Personnel Today, on page 3 of its 02 September 2008 issue reports on the possibility of job cuts in British Airways PLC (BA) as the airline struggles with falling profits. BA's HR director Tony McCarthy stated that he is working hard to avoid losing staff following a fall of 90% in BA's profits in the first-quarter of 2008 and informed that the rising oil prices and credit crunch are affecting the company's profit and sustainability. In August 2008, BA reduced its number of winter flights by 3.1% and stopped new recruitments.
· Example: On 05 August 2008, Carl Winfield of Business Week Online, (p29) looks at the economic downturn in the U.S. and its impact on the career of executives. It is stated that executives have been taken down by the latest downsizing wave. Many of them are looking at their severance packages and wondering how to make the best of a bad situation. Some ways as how to get the best severance package, including money and health insurance are also suggested. It is stated that if one takes steps for the best severance deal, chances for a saved career are there.
It is implied that downsizing is usually undertaken in order to improve organizational performance. Downsizing, therefore, may be:
a) Reactive and defensive; or it may be
b) Proactive and anticipatory
Ineffectiveness and impending failure are the most common motivations for downsizing, but they are not prerequisites. Downsizing may be undertaken when no threat or financial crisis exists at all.
4. Does downsizing occur to deal with internal financial crisis?
n No. In fact, over 80% of the cases where downsizing took place, the organizations initiating the cutbacks were making a profit at the time.
n Example: In 1998, General Electric Company set in motion a $2 billion restructuring program even though all of GE’s divisions were generating double-digits returns on investments (ROI).
n Example: On 14 October 2008, Roberta Cowan reports in Wall Street Journal - Eastern Edition (Vol. 252 Issue 89, pB10) on the plan of Philips Electronics NV to cut jobs as it posted a 7.9% rise in profit in the third quarter of 2008.
Chaiporn Vithessonthi and Markus Schwaninger of Mahasarakham University and University of St. Gallen respectively carried out a study to test whether job motivation and self-confidence for learning and development influence employee support for downsizing. Data were gathered from a sample of 86 teachers at one private school in Bangkok, Thailand. The results suggest that the level of job motivation is negatively associated with the level of support for change, and that the level of self-confidence for learning and development is not associated with the level of support for change (Vithessonthi & Schwaninger, 2008).
5. The trouble with downsizing
The trouble with downsizing is that as a strategy for improvement it is, by and large, a failure. Admittedly, downsizing announcements usually lead to POSITIVE reactions among the financial community. Almost universally favorable reactions have occurred because of the promise of cost savings, reduced expenses and increased competitiveness.
· Example: The average increase in stock price the day after a downsizing announcement was made in seven major firms in 1993 (IBM, Sears, Xerox, US West, McDonnell Douglas, RJP Nabisco and DUPont) was 5.5%.
However, two-thirds of companies that downsize end up doing it again a year later, and the stock prices of firms that downsized during 1980s actually lagged behind the industry average in the 1990s.
One survey found that 74% of senior managers in downsized companies said that morale, trust and productivity suffered after downsizing, and half of the 1,468 firms in another survey indicated that productivity deteriorated after downsizing.
A majority of organizations that downsized in a third survey failed to achieve desired results, with only 9% reporting an improvement in quality.
These outcomes led to much criticism in the popular press, with organizations being accused of ‘dumb-sizing’ instead of downsizing.
By way of example, in a review of a scholarly literature on the effects of layoffs, turnover and job rotation policies, Cole (1993) identified a variety of problems associated with job loss resulting from downsizing:
1. Loss of personal relationships between employees and customers;
2. Destruction of employee and customer trust and loyalty;
3. Disruption of smooth, predictable routines in the firms;
4. Increases in formalization (rules), standardization and rigidity;
5. Loss of cross-unit and cross-level knowledge resulting from longevity and from interpersonal interactions over time;
6. Loss of knowledge of how to respond to non-routine challenges faced by the firms;
7. Less documentation and, therefore, less sharing of information about changes;
8. Loss of employee productivity;
9. Loss of common organizational culture.
Cameron et al. (1993) reported still another set of negative outcomes uncovered in a study of organizations in the car industry. Effects of downsizing include:
1. Increased centralization of decision making;
2. The adoption of short-term, crisis mentality;
3. Loss of innovativeness;
4. Increased resistance to change;
5. Decreasing employee morale, commitment and loyalty;
6. The escalation of politicized special interest groups and political infighting;
7. Risk-aversion and conservatism in decision making;
8. Loss of trust among customers and employees;
9. Increasing interpersonal conflicts;
10. Restricted communication flows and less information sharing;
11. Lack of teamwork;
12. Loss of accessible, forward-thinking, aggressive leaders.
The negative effects of downsizing on individual well-being, physical and emotional health, personal attributes, family relationships, and personal economic factors have been less disconcerting. Research has shown that in a variety of types of organizations and with a variety of types of employees, downsizing has produced negative rather than positive results (Kozlowski et al. 1993; Brockner 1998).
Despite this track record, downsizing remains a strategy of choice for organizations faced with excess capacity, bloated employees ranks, sky-high costs and declining efficiency. Most observers simply see no other choice available, plus the fact that downsizing does seem to produce some positive outcomes. Tomasko (1987), for example, identifies ways in which downsizing has had positive impact on the performance of the organizations in adapting to change, and Richardson (1988) argued that downsizing provides an ‘ultimate advantage’ in containing costs. Consequently, downsizing is normally the first alternative selected by organizations under pressure to cut expenses and improve efficiency.
Restructuring is tough, but it can be managed…
On 28 July 2008, Jenny Schade of Advertising Age, (Vol. 79 Issue 29, p.28) identified five tips to re-engage and motivate staff:
1. Continue to communicate, even when you don't have all the information
2. Highlight the positive
3. Listen to employees
4. Honestly address issues
5. Ensure that all supervisors are making it a priority to both listen to and talk to employees
6. How downsizings may help erase the Glass Ceiling for women?
Employer downsizings may be eroding the glass ceiling for women, according to a study by John Dencker, a sociologist and professor at the University of Illinois Institute of Labor and Industrial Relations.
The research found that while downsizing can reduce
the pool of jobs available for both men and women, it also is a time when employers make an effort to balance gender inequality by accepting more women
into male-dominated management ranks. The study,
published in the June issue of the American Sociological Review, looked at nearly 30 years of employment records from a Fortune 500 manufacturer. Women accounted for almost 36 percent of the company’s managers following a restructuring, compared with an average of about 24 percent prior to layoffs.
“It might be that they try to make up for past inequalities or they may be aware of other firms that
have had legal difficulties and want to make sure they don’t run into the same problems,” Dencker said.
Unfortunately, the effect is not permanent: One to two years after layoffs, neither gender sees a lot of promotions because there are fewer people to promote.
7. How to protect your job in a recession?
As the economy softens, corporate downsizing appears almost inevitable. Don't panic yet, though. While layoff decisions might seem beyond your control, there's plenty you can do to make sure you retain your job. In this article, Banks, a former HR executive at Chase Manhattan and FleetBoston Financial, and Coutu, an HBR senior editor and former affiliate scholar at the Boston Psychoanalytic Society and Institute, describe how to improve your chances of survival. It is mostly a matter of coolheaded planning, they observe. When cuts loom, the first thing to do is act like a survivor. Be confident and cheerful. Research shows that congeniality trumps competence when push comes to shove. Look to the future by focusing on customers, for without them, no one will have work. Survivors also tend to be versatile; tight budgets demand managers who can wear several hats, so start demonstrating what other capabilities you can offer. If you are, say, a manager who once worked as a teacher, take on a training role. Remember to be a good corporate citizen: Participation matters now more than ever. It isn't the time to behave as if work is beneath you or to argue for a new title. When one executive's department was folded under the management of a less-experienced colleague, she swallowed her pride and wholeheartedly supported the new hierarchy. Her superiors noticed her commitment and eventually rewarded her with a prestigious appointment. It is also important to offer leaders hope and realistic solutions. Energize your colleagues around change, like the VP of learning at a firm undergoing major staff reductions did. He organized a humorous in-house radio show that revived spirits and helped management communicate with employees--and ended up with a promotion (Banks, and Coutu, 2008).
On 04 August 2008, Carl Winfield of Business Week Online, (p10) commented on ‘how to keep your job in hard times?’ The first and most important move workers should make: Look for new experiences with their current employer.
“People like to do what they're good at," says Melaine Kusin, vice-chairman at Heidrick & Struggles (HSII). "But it's just as important to volunteer for special projects and develop skills that can be applied to other parts of the business."
"Be Visible":
The best way for executives to keep their jobs or move to the next level is to develop an understanding of the whole business, rather than the part that relates only to them. Executives to be careful about what they say in the workplace. "You need to take the lid off your thinking and take a look at how what you do relates to the rest of the business," says Dale Kurow, a NY-based consultant. "If you don't know how your part in the business is connected to the others, chances are you're not going very far."
Cultivate a Mentor:
Workers who are more engaged with the day-to-day operations at their companies have a distinct advantage over those clock-punchers who focus solely on the tasks in their job descriptions. But staying in a job is also about building relationships. While it's advisable to work well with your peers, it never hurts to develop a close relationship with a mentor, particularly with someone higher up who can help keep you out of harm's way when the ax-man cometh.
The job market is getting tougher to negotiate for workers in all age groups. But according to coaches like Haberfeld, you can keep your job as long as you don't mind maintaining a high profile. Establishing yourself as a leader could make the difference between moving up or being moved out.
8. How to maximize your take when you get laid off?
To find the upside when you get downsized, follow these four steps, suggests Lancaster, Pa. employment lawyer Christina Hausner
STEP 1: Chill. The meeting in which your boss breaks the news will be traumatic — but don't burn bridges (thereby losing your chance to negotiate) by voicing any bitterness or anger. The only two questions you should ask are "Who do I call about benefits?" and "Who do I contact about getting a letter of reference?" Never sign a severance agreement that day.
STEP 2: File for unemployment. The sooner you apply, the sooner you will be able to receive benefits -generally about half your salary, up to a few hundred dollars a week, for at least six months (longer at times of high unemployment). Get details from your state's unemployment office (you can find it at workforcesecurity.doleta.gov/unemploy).
STEP 3: Begin horse-trading. To get more than the typical week or two of pay per year of service, your best strategy is to offer to give back something of value to your old employer — for example, by volunteering to sign a noncompeting agreement. If you're being offered outplacement services you're not interested in, ask if you can get more money instead.
STEP 4: Consider getting legal — gingerly. If you think you need a lawyer to get what's due you, by all means consult one. But don't rush to send her into battle on your behalf, because your employer may turn quite hostile when confronted by legal threats. "Sometimes I'll say to a client, 'You write the letter — see how far you get with that,' " says Hausner.
9. Three approaches to downsizing
1. Workforce reduction strategy
2. Organizational redesign strategy
3. Systemic (i.e. focused on systems) strategy
3.1 Internal systems (e.g. values, communication, production and HR systems)
3.2 External systems (e.g. the production chain including upstream suppliers and downstream customers).
--------------------------------------------------------------------
Researched, compiled and edited by:
Shahnawaz Adil
Assistant Professor
Department of Business Administration
IQRA University (Gulshan Campus), Karachi
Dated: Tuesday, November 11, 2008
Special thanks to:
Harvard Business School, United States
London Business School, United Kingdom
Newcastle University Business School, United Kingdom
References
Banks, J., & Coutu, D. (2008). How to protect your job in recession? Harvard Business Review , 86 (9), 113-116.
Brockner, J. (1988). The effects of work layoff on survivors. In B. M. Cummings, Research in Organizational Behavior. Greenwich, CT: JAI Press Inc.
Cameron, K. S., Freeman, S. J., & Mishra, A. K. (1993). Downsizing and redesigning organizations. In G. P. Huber, & W. H. Glick, Organizational change and redesign. New York: Oxford University Press.
Cole, R. E. (1993). Learning from learning theory: implications for quality improvements of turnover, use of contingent workers, and job rotation policies. Quality Management Journal , 9-25.
Hall, W. K. (1980). Survival strategies in a hostile environment. Harvard Business Review , 75-85.
Kozlowski, S. W. J.; Chao, G.T.; Smith, E.M.; Hedlund, J.;. (1993). Organizational downsizing: strategies, interventions, and research implications. In C. L. Cooper, & I. T. Robertson, International Review of Industrial and Organizational Psychology. New York: Wiley.
Porter, M. E. (1996). What is strategy? Harvard Business Review , 61-78.
Richardson, P. (1988). Cost Containment: The Ultimate Advantage. New York: Free Press.
Tomasko, R. (1987). Downsizing: reshaping the corporation for the future. New York: AMACOM Books.
Vithessonthi, C., & Schwaninger, M. (2008). Job motivation and self-confidence for learning and development as predictors of support for change. Journal of Organizational Transformation & Social Change , 5 (2), 141-157.
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