The following presentation explains you about downsizing alternative, positive and negative effects, examples of downsizing, lessons learnt from downsizing.
2. What is Downsizing ?
• Downsizing can be said to be intentionally designed set of activities taken
up to improve organisational efficiency and performance which affect the
size of th eorganisation's workforce, costs and work processes.
• Downsizing means a reduction in the number of employees, levels of
management and overall size of the company in order to increase
profitability or reduce costs.
•a strategy which reduces the scale and scope of a business to improve its
fiancial performance.
3. PHASE 1
• During the early 1990s, downsizing was undertaken by successful
compnies as a purposeful strategy : not only the companies
reduced their workforce, but also redesigned their organisations and
implemented quality improvement programs.
• Focus on enhancing the value of the organisation as a whole.
• Companies taking up downsizing to :
• reduce costs
• become more competetive
• optimise resources
• improving decision making
• increasing the speed and responsiveness
• improve productivity
4. GLOBAL SCENARIO
•People losing their jobs at very short or no notice.
•Others living in state of uncertainty for their jobs.
•Worldwide economic slowdown during late-1990s.
•Measures implemented to cut costs, optimize resources and survive the
slump.
•Low morale of retained employees, loss of employee loyalty & expertise.
•Negative affect on the quality of work produced.
• Downsizing in all major industries like banking, automobiles, chemical,
information technology, fabrics, FMCG, air transportation and petroleum.
•Downsizing practised in developing countries as well such as India,
Indonesia, Thailand, Malayasia and South Korea.
• Downsizing being taken up more as a 'me-too' strategy of firms.
5. PHASE 2
Downsizing was on the rise in the early 21st Century due to :
1. Worldwide economic recession
2. Increase in the global competetion
3. Dynamc changes in technology
4.increase in the availability of temporary employee base
(lean manufacturing and outsourcing)
1. wage reduction
7. ALTERNATIVES TO DOWNSIZING :
ATTRITION
Refers to the gradual reduction of the size of workforce by not replacing
the personnel lost through retirement or resignation.
GOLDEN HANDSHAKE
it is a clause in an executive employment contract with a significant
severance package (ay and benefits an employee recieves while leaving
employment in a company) in case that executive loses his/her job through
firing, restructuring or even retirement, can be in the form of cash, equity
or other benefits.
VOLUNTARY TIME OFF
Refers to a situation wherein employees
have the option to take unpaid time away
from work without employment status.
8. ALTERNATIVES CONTD.
TEMPORARY STAFFING
it is an all paid short term (less than a fiscal year) based assignment, for
which a talent is hired.
CONTINGENT EMPLOYMENT
refers to workers who do not have any explicit or implicit contract for long
term employment.
SHORTENED WORK WEEKS
the week of working days were shortened as the workers who were paid
daily or weekly would get less money than usual.
FURLOUGH
Temporary leave of some employees due to special needs of a company
(economic condition of a specific employer or the whole economy)
9. POSITIVE ASPECT OF DOWNSIZING.....
• Mutual Effect : This mutual downsizing effect allows the owner to
create a balanced plan, so each department gets the proper resources
to perform as required.
• Better Management : Downsizing gives an owner more control of the
management team, of the individual projects and creates more
opportunities for the owner to interact with employees at all levels.
• Cost Saving: The greatest benefit to downsizing is the financial
benefit. Money is saved when there are less people to pay, less
resources costing the company money and just less of everything
overall.
• Less Duplication of work : All companies have some level of
repetition, be it among different departments or the people within them.
However, when a company has to downsize, repetition becomes less of
an issue, as there are fewer people to do the jobs which could be similar
to someone else's job.
10. NEGATIVE ASPECTS OF DOWNSIZING...
• Loss of skilled employees
• excess workload on survivors
• resistance to change from the survivors
•low employee morale
•reduced productivity and fall in the quality of work
• heavy expenses incurred on overtime pay
• massive cuts on executive remuneration
• negative corporate image
• employment of temporary and contract workers
11. LESSONS TO BE LEARNED.....
KEYS TO SUCCESSFUL DOWNSIZING:
• Planning, formulation and communication of a proper downsizing
strategy.
•support of senior leaders and their active involvement
• incentive and compensation planning
• effective monitoring systems
• encourageing employee participation
• continuous motivation to boost employee morale
12. SOME MORE LESSONS .....
identification of skills needed by employees to take new responsibilities.
Balanced use of Formal & Informal Communication.
Consideration of employee inputs for betterment.
Efficient handling of Internal & External Sources of Information.
Formulating the ‘Shared Pain’ Approach
13.
14. SOME RECENT EXAMPLES :
BARCLAYS
With cuts of 1,400 employees already in 2011, Barclays announced, it will
layoff a total of 3,000 staffers by the end of the year2012.
HSBC
Since 2011, HSBC has already laid off 5,000 people, but announced thst plans
are still in place to slash approximately 25,000 more in near future.
CITI BANK GROUP
Citi has announced plans to trim its securities division as it focuses on its retail
banking side. Recently, the bank said it was considering cutting head count by
an additional 350 people.
PEPSI
The company said layoffs would be spread over 30 countries, with the U.S.
workforce likely 3 percent smaller by the end of the restructuring.
IBM
Labor groups in Germany announced that the company was planning to cut as
many as 8,000 employees this year. That came on top of reports that IBM had
fired 3,000 U.S. and Canadian workers
