DOWNSIZINGDOWNSIZING

It refers to a process where a company or a firm simply reduces its workforce in order to cut the operating costs and improve efficiency.

Downsizing is the planned elimination of positions or jobs in Downsizing is the planned elimination of positions or jobs in an organization.an organization.

Downsizing is a powerful tools in the hands of companies Downsizing is a powerful tools in the hands of companies trying to remain efficient.trying to remain efficient.

Merits of Downsizing

Impact on employerImpact on employer: Improved operational efficiencies. Profitability improves. Market share improves.

Impact on societyImpact on society: Profitable companies offering better

customer service. Scarce resources of a country put to

excellent use.

Demerits of Downsizing Impact on EmployerImpact on Employer:

Difficulty in finding reliable employees. Morale of employees takes a big negative hit.

Impact on WorkforceImpact on Workforce: Staff live with constant fear of job loss. Lower self confidence of employees.

Impact on SocietyImpact on Society: Greater unemployment. Lesser income levels and fall in standards of

living. Governments might be forced to take care of

displaced workers.

Reasons for Reasons for DOWNSIZINGDOWNSIZING

Merging of two or more firmsMerging of two or more firms:- Firms merge their operations to improve market

share. When this happens, some positions become redundant (dismissed from employment because no longer needed in firms) .

AcquisitionAcquisition:- If organization purchases another one,there is

definite change in the management and the acquired company staff has to face unemployment.

Change in the managementChange in the management:- Whenever there is a change at the top

level, companies resort to workforce reductions. The new management might

have a different way of dealing with things and people.

Economic crisisEconomic crisis:- Even Popular and reputed firms resort to downsizing with a view to staying lean &

efficient. Workforce reduction happen across the board and this might happen

without any violent protests.

Reasons for Downsizing contd.....

Downsizing due to Financial Crisis

Until Dec. 2011, Kingfisher Airlines had the second largest share in India's domestic air travel market.

But due to several financial crisis faced by airlines at the beginning of 2012, it has lowest market share since April,2012.

Kingfisher Airlines has cut 300 jobs and Kingfisher Airlines has cut 300 jobs and returned 2 aircrafts to lessors.returned 2 aircrafts to lessors.

Reasons for Downsizing contd..

Strategy ChangesStrategy Changes:- When companies want to concentrate on projects with high returns and put an end to those that are not so profitable, workforce reduction happen.

Excessive workforceExcessive workforce:- In a period of high growth, a company hires excess staff, to meet the needs of a growing business . However, in times of recession; the in times of recession; the business opportunity decreases, leading to business opportunity decreases, leading to workforce reductions.workforce reductions.

ComputerizationComputerization:-Computerization has compelled many

companies to loop off unwanted hands. Efficient machines eating away the jobs Efficient machines eating away the jobs handled by too many inefficient hands handled by too many inefficient hands consuming a huge amount of time.consuming a huge amount of time. If a company want to reduce its operating cost, companies have to show the door to surplus staff.

Reasons for Downsizing contd...

Downsizing

HSBC holdings[HONGKONG and SHANGAI BANKING CORPORATION][HONGKONG and SHANGAI BANKING CORPORATION]

IN 2012, HSBC was the world's Largest bank in terms of assets & Sixth largest public company.

HSBC holdings, an International Bank, Laid off 5000 people in 2011 and has Plans to lay off 25000 more.

HSBC holdings already shut down its Operations in Russia and Poland And closed 195 branches, many in NEW YORK.

Reasons for this downsizing : Company plans to bring down the operating Company plans to bring down the operating expenses through restructuring and contraction of its global business.expenses through restructuring and contraction of its global business.

Downsizing and HR Employee involvementEmployee involvement:-

HR should take all affected employees into confidence and explain the purpose of confidence and explain the purpose of downsizing.downsizing. The severance packageseverance packages should be designed in a fair way.

CommunicationCommunication:-

Employees do not want to be kept dark on the issues affecting their livelihood. Two-way communication exercise would help in explaining why downsizing is taking place, what would happen to those who are asked what would happen to those who are asked to leave, how it benefits the organization.to leave, how it benefits the organization.

Supports programmes and selection processesSupports programmes and selection processes:- The organization must help separating employees

find their feet in the market-especially in their search for new search for new employmentemployment.

The supportive effort may cover career counseling, stress management and financial planning before and after downsizing.

HR Management tools & system alignment HR Management tools & system alignment :- During a downsizing initiative, HR managers should also focus on aligning HR programmes, policies and systems with a lean and healthy looking outfit.

In an attempt to build confidence and earn the trust of attempt to build confidence and earn the trust of survivors, new initiative in the form of profit sharing plans survivors, new initiative in the form of profit sharing plans could be introduced.could be introduced.

WORK-LIFE BALANCE

WORK-LIFE BALANCE DEFINED Work-life balance is a concept that supports the efforts of employees to split their time and energy between work and other aspects of their lives. It implies a daily effort to devote time for family, friends, community participation, spiritually, personal growth, self care and other personal activities. In addition to the demands of the workplace.

ISSUES OF WORK-LIFE BALANCE Hectic schedules- with hectic schedules,

high pressure work assignments and deadly targets. You have to race against time to get noticed and be in the reckoning. Otherwise you will be labeled a ‘poor performer’.

Intense competition- In recent years, the lives of executives have been thrown out of gear completely, thanks to the intense competitive environment, the proliferation of information technology and instant 24x7 connectivity.

Very little time to relax- The 50-70 hour weeks have become common these days. Not only that, it’s simply not sufficient to work, you need to work hard and work smart to get ahead of others, and executives are burning their candles of energies too soon.

Weekend parents- in case of dual career couples- a common phenomenon in the 21st century- parents are unable to devote their time to children, and are reduced to what popularly known as ‘weekend parents’.

Mental wrecks- workaholics who are unable to strike a fine between work pressures and personal and family issues often go on to suffer from heart ailments, cardiovascular problems, sleep disorders, depression, irritability, and even nervous breakdowns.

Stress and burnouts- executive stress and burnouts would lead to a lot of problems on the behavioral front. The race for grabbing space, facilities, opportunities and media attentions does not end usually with high performance. It actually breeds anger, frustration and resentment among colleagues leading to a kind of tug of war for everything.

SOLUTIONS

TIME MANAGEMENT

Time management is one of the best solutions which can help to reduce the imbalance between personal and work life of employees. Prioritizing the tasks and planning the activities can help to take out some free time which can be utilized for other purposes.

Taking some time out for hobbies and

leisure activities, spending time with loved ones can help to beat the stress.

Learn to say “no” if required.

Sharing the responsibilities will help and don't commit for something which is practically impossible.

Utilizing the practical working hours option of the organizations to get some free time.

CREATING FUN AT WORKPLACE Set up a fun and laughter committee.

Develop a practice among workforce to look for humor in all working conditions

Distribute and pin snaps of co-workers and family members.

Have a theme day and motivate people to dress up accordingly.

VOLUNTARY RETIREMENT SCHEME(VRS)

The voluntary retirement scheme (VRS) is a way of reducing excess manpower through an agreement between the employer and the employee. It helps to improve the performance of the organization by trimming the workforce employed in the industrial unit. It is a generous, tax-free severance payment to persuade the employees to voluntarily retire from the company. It is also known as “GOLDEN HANDSHAKE” programme as it is the golden route to retrenchment.

In India, the Industrial Disputes Act,1947 puts restrictions on employers in the matter of reducing excess staff by retrenchment, by closures of establishment and the retrenchment process involved lot of legalities and complex procedures. Also, any plans of retrenchment and reduction of staff and workforce are subjected to strong opposition by trade unions. Hence, VRS was introduced as an alternative legal solution to solve this problem. It allowed employers including those in the government undertakings, to offer voluntary retirement schemes to off-load the surplus manpower no pressure is put on any employee to exit. It was introduced in both the public and private sectors. Public sector undertakings, however, have to obtain prior approval of the government before offering and implementing the VRS.

Some companies offers very attractive package of benefits to the employees who opt for VRS. For example, the VRS scheme may also include providing counseling to employees about their future; managing of funds received under the scheme; offering rehabilitation facilities to them,etc.

Distinction between VRS and DownsizingBasis VRS Downsizing • Nature Employees retire voluntarily. Employees lose jobs in a

restriction exercise.

2. Initiated by Employees enticed by attractive severance package.

Employers show the door to exercise staff.

3. Possible benefits Attractive tax-free severance package plus some pension benefits if the employees fulfils the legal criteria.

Negligible compensation being paid, as laid down by law.

4. Primary reason Bloated staffs. Economic downturn.

5. Consequences Employees opting for VRS might be sure of getting a job elsewhere or are pretty comfortable with the attractive package received.

A shattering experience to both employees who lose their jobs and those who remain on ranks.

Complicating Issues in VRS

• Need for VRS: Every employers should explore all possible options before undertaking any voluntary retirement scheme. VRS should be used as the last resort and not to be used as a weapon to show the door to workers who prove to be a nuisance to the management.

• Do not rub people on the wrong side: The worker undertaking VRS would lose his job, and may instigate others to turn the tables against management. Other workers may fear losing their jobs and leave the company in alarm. Thus, VRS could easily prove to be a liability for the employers unless handled properly.

• Modalities of the scheme: The scheme that is worked out to please the workers who decide to quit the field should be in sync with laws of the land.

I. Compensation package

II. Discuss criteria and severance package

III. Company’s workers should be assured that such a step has been undertaken in order to keep the company lean & fit.

Merits of VRS

• There is no legal obstacle in implementing VRS.

• It offers to the employee an attractive financial compensation than what is permitted under retrenchment under the law.

• Voluntary nature of the schemes precludes the need for enforcement, which may give rise to conflicts and disputes.

• It allows flexibility and can be applied only to certain divisions, departments where there is excess manpower.

• It allows overall savings in the employee costs thus lowering the overall costs.

Demerits of VRS

• To certain extent it creates fear, a sense of uncertainty among employees.

• Sometimes the severance costs are’ heavy and outweigh the possible gains.

• Trade unions generally protest the operation of such schemes and may cause disturbance in normal operations.

• Some of the good, capable and competent employees may also apply for separation which may cause embarrassment to the managements.

An employee whose offer for Voluntary Retirement under the Scheme is accepted will be eligible, apart from the ex-Gratia defined above, to any benefit that would have been available to him upon superannuation as per the policy extant in the PSU prior to the date of notification of this scheme. It is clarified, however, that an employee shall not be eligible for both retrenchment compensation and ex-Gratia under this scheme but shall have to opt for one of the two.

Other Benefits