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Employee Downsizing

            

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The Downsizing Phenomenon Worldwide Contd...

Other negative effects of downsizing included depression, anxiety, frustration, anger and bitterness in the downsized employees. The harmful effects of downsizing could be seen in 'survivors' as well. They experienced low morale and high stress and had to cope with an increase in workload. In addition, they felt and downsizing syndrome marked with frustration, anger, depression, envy and guilt. The very thought of downsizing created anxiety in both the downsized employees and those who survived. They were concerned about possible job loss, relations with new superiors, revised performance expectations and uncertainties regarding career advancement (Refer Exhibit I for guidelines to tide over the downsizing phase).

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). According to analysts, most of these successful companies undertook downsizing as a purposeful and proactive strategy.

These companies not only reduced their workforce, they also redesigned their organizations and implemented quality improvement programs. During the early and mid-1990s, companies across the world (and especially in the US), began focusing on enhancing the value of the organization as a whole. According to Jack Welch, the then GE CEO, "The ultimate test of leadership is enhancing the long-term value of the organization. For leaders of a publicly held corporation, this means long-term shareholder value." In line with this approach to leadership, GE abandoned policy of lifetime employment and introduced the concept of contingent employment. Simultaneously, it began offering employees the best training and development opportunities to constantly enhance their skills and performance and keep pace with the changing needs of the workplace.

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Case Details

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

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