Restructuring & Downsizing Essay
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Human resource management has evolved from a largely administrative and operational role to one that plays an important part in strategic planning. This shift is more evident in its role towards downsizing. The decision to downsize is a decision that requires careful planning and consideration. It is critical to consider the long-term effects that short-term cost cutting measures can bring. Downsizing creates disruptions in the organization’s relationships with customers, suppliers and employees, organization’s structure, culture and climate.
As Wayne F. Cascio says “if you must downsize, do it right, that no class of employee can be disproportionately affected. ” Finding the best way to downsize is crucial, because the success of organisations that have downsized in the past has not been particularly laudable. Downsize Decision The downsizing decision is the most demoralizing and stressful aspect of the emerging Human resource managerial role. Downsizing is viewed as having a profound effect on the organization and the personnel including those who are terminated and those who survive.
Yet it is the integral part of any workforce management decision. It involves understanding the tangible pitfalls of a reduction in workforce and analyzing the emotional and practical ramifications. Downsizing may occur intentionally as a strategic, proactive response designed to improve organizational effectiveness, increase productivity and cost cutting strategy. This response may involve mergers, acquisitions, sell-offs, or restructuring to better enable the organization to meet its mission or fill an environmental niche.
It may involve reduction in personnel through transfers, outplacement, retirement incentives, buyout packages, layoffs, attrition, and so on or may occur in which new products added, new sources of revenue are opened up, etc. It affects work processes. Fewer employees may be left to do the same amount of work and the quality may suffer. Downsizing activities may include discounting functions, abolishing hierarchical levels, merging units, or redesigning tasks.
Downsizing can impact financial well-being, health, personal attitudes, and family relationships. Before downsizing HR need to explore possible alternatives such as reducing hours across the board, introducing forced vacation, asking for layoff volunteers, compressed workweek, hiring freeze, and early retirement or implementing other cost-cutting measures. Human resource managers should weigh in on several factors that influence downsizing decisions.
They need to identify the specific problems downsizing is expected to solve, consider overall financial health of the company, fiscal operating policies, and industry benchmarks before proceeding, and review all legal implications. Managing Process One key to a successful downsizing plan lies in management’s ability to clearly convey to employees the purpose behind the cost-cutting efforts. Secondly, consider any oral or implied contracts of employment, review employee files, plan for the contingencies, know the stakeholders, clearly define criteria for selection factors on which downsizing decisions will be made.
Downsizing may have variety of adverse effects on layoff individuals, survivors and organizations such as loss of morale, distrust, anxiety, feelings of job insecurity, anger, job stress, physical ailments, poor mental health, decreased loyalty, lowered motivation and productivity, increased resistance to change, crisis mentality, politicised special interest groups, occupational violence, lack of teamwork, perception of unfairness, lack of leadership and overall commitment to the organization.
Downsizing decision has to be a prudent one because it deals with lives of people. The managers will be faced with a work force at least partly staffed with survivors of downsizing. Providing information regarding the type of severance packages or outplacement benefits will be given to those displaced will alleviate some fears and let those who remain will know that their colleagues are being taken care of. The personnel attribute of downsizing usually involves reductions in personnel. However, downsizing is not limited entirely to personnel reductions.
In some downsizing situations new products are added, new sources of revenue opened up, and/or additional work acquired. Even though some people may be added, the overall process results in fewer numbers of workers employed per unit of output as compared to some previous level of employment. Human resources must also position the company to be able to respond quickly and effectively when the economy recovers. The approach taken by the organization to the downsizing process can have an ongoing impact on the company’s reputation with clients and potential future recruits.
An inability to recruit critical talent later can mean an inability to rebound, so human resources must provide information openly and promptly to manage perceptions and rumors — both internal and external — about the fairness of any reductions and the need for additional downsizing in the future. Job placement services, employee assistance programs and financial counseling are all services that human resources should consider offering to affected employees. In the aftermath of a mass downsizing, employee morale will undoubtedly be affected.
Employers should strive to be as open as possible during the process. Information should not come as a surprise to employees. If the company repeatedly assured workers everything was fine before announcing an unexpected layoff, it will be difficult to regain the trust of the workers who remain. Similarly, if the company focus has always been on meeting the needs of employees and taking active steps to motivate and encourage staff, a forced layoff may actually be more detrimental because it is so contrary to employees’ expectations of the organization.
Management and human resources should meet regularly with employees to keep them informed, answer questions and respond to concerns. Any downsizing of the workforce is likely to result in the loss of key knowledge and critical skills. In the case of a voluntary separation program or early retirement initiative, Because turnover increases in the wake of a layoff, human resources must connect with key workers to outline their importance to the organization and provide information about how the company plans to recover.
HR should also detail future career opportunities that can be realized by remaining with the business. Clear documentation, particularly regarding the layoff process itself, is important. Therefore it is vital that HR management weigh the relative costs and benefits against the negative impact downsizing has on employees and identify hazards, undertake risk assessment, consult with employee representatives, pursue compliance with legislative duties and take appropriate steps to manage any significant hazards that are identified, including psychosocial hazards.
Downsizing refers to activities undertaken by management to improve the efficiency, productivity, and competitiveness of the organization by reducing the workforce size. Implications of Organisational Restructuring to HR Planning Restructuring: A Perspective Organizations and businesses today are faced with increased demands to become leaner due to global competition and rapid technology change. Many organizations have responded by corporate restructuring and downsizing or streamlining their operations and often outsourcing many functions originally assigned to permanent employees.
Restructuring can lead to changes of ownership, radical changes in the internal management structure, mergers, acquisitions and significant downsizing or hiring trends. Internal factors can also include the addition or removal of a major product or service, addition or loss of a major client or the restructuring of departments. Restructuring is not a quick fix. Before restructuring we need to spell out the expectations and objectives and effectively communicate with the all the stakeholders to improve organization’s ability to move through change effectively.
Restructuring is a formal system of re-aligning tasks and reporting relationships that controls, coordinates, communicates, decides and motivates employees so that they cooperate to achieve an organization’s goals. Restructuring may be carried out to expand and create new departments to serve growing markets or to downsize or eliminate departments to conserve overhead. Depending on the size of the organisation and type of business one may adopt a flat or tall structure and model it according to functional, divisional (product, market or geographic) or adaptive lines.
Implications of Organisational Restructuring to HR Planning In the event of restructuring HR planning becomes critical because HR is typically responsible for handling all aspects of an organization’s restructuring. HR departments provide or support announcements to employees regarding restructuring. HR is typically present when employees are informed of layoffs or permanent downsizing related to restructuring. Changes in employment policies, organizational structure, workforce, and location and job descriptions are announced to employees by human resources and management.
HR also calculates changes in compensation and benefits resulting from reorganization. Organizations rely on human resources to provide a smooth transition during restructuring while retaining desired employees and integrating new employees into the new organizational plan. Restructuring leads to a new organization chart and HR need to reassess and alter their existing roles and responsibilities to better reflect the dynamics of the shifting workplace environment.
HR departments also fulfil staffing recruitment needs including preparing job descriptions, posting and publishing available jobs, screening and interviewing candidates for employment and integrating new staff members into their assigned work areas. HR will often be called on to act in an advisory capacity salary ranges and often making changes to benefits, profit-sharing and other corporate perks. HR also institute training and educational programs and seminars and assist employees with transitions in and out of positions and in and out of the company.
It may provide information, updates and job seeking resources for employees displaced from their jobs due to restructuring. HR departments are responsible for researching, recommending and implanting employee retention strategies during restructuring. Restructuring brings in changes to corporate cultures, which directly affects employees and may result in loss of identity, shrinkage in compensation, distrust, stress and conflict. HR has to ensure the internal processes accommodate the changes and the communication base is prepared to sensitize the various stakeholders.