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Downsizing. Downsizing: Why?. Domestic competition Foreign competition Technological change Change in firm strategy Too often… Bad Management. Sources: Cascio, 2002; Fox & Bernasek, 2003. Downsizing Trends. Source: DoL, Bureau of Labor Statistics. Downsizing: Cases For and Against. - PowerPoint PPT Presentation
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Downsizing
Fall 2008MGMT 412 | DownsizingPage 2
Downsizing: Why?
• Domestic competition• Foreign competition• Technological change• Change in firm strategy
• Too often…Bad Management
Sources: Cascio, 2002; Fox & Bernasek, 2003
Fall 2008MGMT 412 | DownsizingPage 3
Downsizing Trends
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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Source: DoL, Bureau of Labor Statistics
Fall 2008MGMT 412 | DownsizingPage 4
Downsizing: Cases For and Against
• Benefits of downsizing• Reduced costs• Symbolism of cutting jobs
• Costs of downsizing• Costs associated with downsizing• Potential lawsuits• Public image of firm• Decreased loyalty of current employees• Danger of losing the wrong people• Difficulties in recruitment
Fall 2008MGMT 412 | DownsizingPage 5
Alternatives to Pure Downsizing
• Prevent the need…• Staff with contingent workers
• Treat employees as assets…• Reassign workers to different jobs within firm• Retrain workers in new technologies• Shorten hours / pay cuts
• When there’s no alternative….some less painful options• Attrition• Early retirements• Layoffs (temporary)• Voluntary severance
Fall 2008MGMT 412 | DownsizingPage 6
Attrition
• How and where• First, a hiring freeze, then reduce workforce as
employees quit or retire on their own• Usually, the first step in most firms
• Advantages• Managers not forced to make difficult decisions• Employees leave voluntarily
• Disadvantages• May not work quickly enough• No control over which workers leave
Fall 2008MGMT 412 | DownsizingPage 7
Early Retirement
• How and where• Financial incentives to retire• FedEx
• Advantages• Less painful
• Older and/or more senior workers are often paid more than younger workers, so fewer people affected
• Older workers may not have skills needed for new technologies
• Disadvantages• Cost• Lack of control• May not attract enough people• May attract too many people
Fall 2008MGMT 412 | DownsizingPage 8
Temporary Layoffs
• How and where• Workers placed on furlough• Seasonal industries (i.e., agricultural workers, IRS)• Heavy industry (automobiles, steel)• Temporary downturns (airlines...)
• Advantages• Firm can decide which jobs to eliminate• Laid-off workers can be recalled if needed
• Disadvantages• Decreased loyalty and commitment• Workforce may look for permanent work
Source: Zimmerman, 2001
Fall 2008MGMT 412 | DownsizingPage 9
Voluntary Severance
• How and where:• Generous severance packages offered to employees
who voluntarily leave the company• More and more, today (in Memphis, at FedEx)
• Pro:• Less painful
• Con:• Cost• Lack of control• Too many people may accept• Not enough may accept
Source: Cascio, 2002
Fall 2008MGMT 412 | DownsizingPage 10
Responsible Downsizing
• Think through what you’re doing and why• Weigh the long-term advantage of keeping
people, versus short-term benefits of layoffs• Seek employee input • It’s not a quick fix• Make the process fair• Communicate• Give survivors hope• Assist employees to cope with change• Examine HR policies
Sources: Barnes, 2003, Cascio, 2002
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