Employee Downsizing

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Case Details:

Case Code : HROB016
Case Length : 09 Pages
Period : 1990 - 2001
Pub Date : 2001
Teaching Note : Available
Organization : Varied
Industry : Varied
Countries : USA, India, etc...

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The First Phase

Till the late-1980s, the number of firms that adopted downsizing was rather limited, but the situation changed in the early-1990s. Companies such as General Electric (GE) and General Motors (GM) downsized to increase productivity and efficiency, optimize resources and survive competition and eliminate duplication of work after M&As.

Some other organizations that made major job cuts during this period were Boeing (due to its merger with McDonnell Douglas), Mobil (due to the acquisition of Exxon), Deutsche Bank (due to its merger with Bankers Trust) and Hoechst AG (due to its merger with Rhone-Poulenc SA)...

The Second Phase

By the mid-1990s, factors such as increased investor awareness, stronger economies, fall in inflation, increasing national incomes, decrease in level of unemployment, and high profits, reduced the need for downsizing across the globe. However, just as the downsizing trend seemed to be on a decline, it picked up momentum again in the late-1990s, this time spreading to developing countries as well...

Tackling the Evils of Downsizing

During the early 21st century, many companies began offering flexible work arrangements to their employees in an attempt to avoid the negative impact of downsizing. Such an arrangement was reported to be beneficial for both employees as well as the organization. A flexible working arrangement resulted in increased morale and productivity; decreased absenteeism and employee turnover, reduced stress on employees; increased ability to recruit and retain superior quality employees improved service to clients in various time zones; and better use of office equipment and space...

Lessons from the 'Downsizing Best Practices Companies

In the late 1990s, the US government conducted a study on the downsizing practices of firms (including major companies in the country). The study provided many interesting insights into the practice and the associated problems. It was found that the formulation and communication of a proper planning and downsizing strategy, the support of senior leaders, incentive and compensation planning and effective monitoring systems were the key factors for successful downsizing (Refer Exhibit II for highlights of this study)...

Exhibits

Exhibit I: Guidelines to Tide Over the Downsizing Phase
Exhibit II: Highlights of the Downsizing Study
Exhibit III: Assistance Offered to Downsized Employees & Survivors