HRM / OB Case Study

Merge Healthcare Incorporated’s Accounting Scandal: Was the Rightsizing Right?

OR

Abstract:
The case analyses the ethics of rightsizing decisions and the general rightsizing practices in business corporations. It specifically looks into the issues of accounting scandal and rightsizing at Merge Healthcare Incorporated (Merge).

With its humble beginning in 1987 as a medical imaging technology company, Merge’s initial growth was dull. Soon, recognising the increasing interests of investors in healthcare organisations and the possibilities, it became a public company in 1998. Merge’s share value reached an all time high during 2002–2005. This led to speculations among the investors about the unfair accounting practices in the company. Merge struggled over many class action lawsuits and an independent investigation forcing the top executives to resign and the company took a deep plunge in the share market. Merge’s hard earned image deteriorated and losses started haunting the business. Merge had to cut costs and they decided to reduce the workforce. During 2006–2008, the company cut jobs thrice as part of its rightsizing programme. It was only after the third rightsizing that the company started to recover. Soon the company came out of blues, started expansion, made new acquisitions and of course started hiring. Although the company recovered, the question remains – does a company really have to undergo rightsizing to come out of the financial trouble?

Pedagogical Objectives:

• To understand the difference between the concepts of rightsizing and downsizing and to examine the situations that lead to rightsizing
• To understand the rightsizing of Merge Healthcare and its immediate after-effects
• To analyse the ethical side of rightsizing decisions.

Keywords : Merge Healthcare, Right Sizing, Downsizing, Layoffs, Restructuring, Accounting Scandal, Ethics, Alternative for rightsizing, Talent Management, Post-Dismissal Syndrome, Loss0Responce Curve, Employee Morale, Prodictivity, effect of rightsizing