DOWNSIZING AND

RESTRUCTURING

Prof. Preeti Bhaskar

Symbiosis Centre for Management studies

Downsizing and Restructuring

Chapter Outline -:

• Meaning

• HR issues in downsizing

• In-placement and Out-placement

• Dealing survivors of downsizing

• Effective downsizing strategies

• HR issues in mergers and acquisitions.

From 1990s organizations became obsessed with reducing the workforce and operating in a

“Lean and Mean fashion”

Before 1990’s the focus was on growth and “bigger is better” the syndrome of firms.

Definition

Downsizing is the set of activities undertaken on the part of management and designed to improve organizational efficiency , productivity , and / or competitiveness.

• Kim Cameron

Synonyms of Downsizing

Reduction in force

Resizing

Rightsizing

Retrenched down

Building-down

De-recruitment

De- Recruitment

Re-engineered

De-hiring

Streamlined

Re-allocated

Surplus Reduction

What are the actual reasons of downsizing?

• Declining profits

• Business downturn

• Competition from rivals

• Mergers and acquisitions (duplication of efforts)

• Introduction of new technology

• Reducing operating costs

• Decrease levels of management

• Getting rid of employee ‘deadwood’.

Any Psychological Contract?

To define… it’s kind of unwritten agreement between employer and employees with respect to the job security over a period of time in the firm.

Perceived benefits….

• Low over-head costs,

• Better communications

• Improved decision-making

• Increased innovation

• Higher productivity

Studies proved that these are only the perceived ones and hardly find in reality.

HR ISSUE IN DOWNSIZING

• Determining how many people will lose their jobs

• Determining who will be let go. Parameters like seniority, performance, potential.

• Determining how the reduction will be carried out. (use of attrition, early retirement, layoffs, termination etc)

• Determining legal consequences (employment laws, trade union laws, human rights, equal employment law)

Cont.…

• Determining current and future work plans.

• Implementing the decisions (severance payments, outplacement counseling, communication of the termination, timing of the decision, security issues, communication with remaining employees.

• Performing follow-up evaluation and assessment. (ignore many a times)

Dealing survivors of downsizing

• Negative attitude and behaviors

• Reduced performance capabilities

• Survivors became narrow-minded, self-absorbed, and risk-averse.

• Morale sinks,

• Organizational productivity drops

• Distrust of management by employees.

• Many firms fail in estimating the cost of downsizing in right perspective.

Cameron identifies three types of strategies:

Effective Downsizing Strategies

Workforce Reduction

Work Redes

ign

Systematic Chan

ge

Workforce reduction

• Short-term strategy aimed at cutting the number of workers through such programs like attrition, early retirement or Voluntary severance packages, layoffs, terminations etc.

Work redesign

• Medium-term strategy wherein organizations focus on work processes and assess whether specific functions, products, services should be changed or eliminated.

• Elimination of certain functions, redesign of tasks through proper HRP. This leads to categorization of work.

• Competitive advantage of work (core work processes)

• Strategic support work, which assists in completing competitive advantage work

• Essential support work

• Non-essential work which does not add value to the mainline

Approaches to Workforce Reduction • Hiring freezeAttrition

• Early Retirement• Work sharing

Voluntary Redeployment

• Transfer• Demotion

Involuntary Redeployment

• Job counseling• Advance notice

Layoff with assistance

• Termination• No advance notice

Layoff without

assistance

• Retraining• Extended

benefits

Systematic change

• Long-term strategy characterized by changing the organizations culture and attitudes and values of employees with ongoing goal of cost reduction and quality promotion.

• This leads to process improvements through innovation also.

• Some firms felt that cutting back the no of people in the firm was not sufficient to achieve organization goals and so emphasis be laid on rightsizing or restructuring the workplace.

How to adjust to job loss?

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

• Severance pay and extended benefits which provide safety net.

• Education and retraining programs, which give individuals time to acquire marketable skills

• Outplacement assistance through information about new jobs and training them how to market themselves.

In-placement and Outplacement

• In-placement:

Refers to a career management approach aimed at Reabsorbing excess or inappropriately placed workers into a restructured firm

• Outplacement:

Focuses on the provision of a program of Counseling and job-search assistance for workers who have been terminated.

HR issues in Mergers and Acquisitions (M&A)

Merger- :

Combination of the two organization to create a third organization

Acquisition -:

The purchase of an entire company

Big is beautiful……….

HR issues in Mergers and Acquisitions (M&A)

Merge their system…. adopt any one…. or create a new one

• Cultural issues in M&A

• Issue in designing HRP

• Recruitment & Selection

• Compensation

• Performance Appraisal

• Training and Development

• Labor Relation

Revision Question:

1. What is Downsizing and Restructuring ?

2. What are HR issues in downsizing?

3. Difference between In-placement and Out-placement.

4. How to Deal with survivors of downsizing

5. What are the Effective downsizing strategies

6. What are HR issues in mergers and acquisitions.?