Employee Downsizing

Tackling the Evils of Downsizing Contd...

According to some analysts, the contingent employment arrangement was not beneficial to contingent employees. Under the terms of the contract, they were not eligible for health, retirement, or overtime benefits. Discrimination against contingent employees at the workplace was reported in many organizations. The increasing number of contingent employees in an organization was found to have a negative effect on the morale of regular employees.

Their presence made the company's regular employees apprehensive about their job security. In many cases regular employees were afraid to ask for a raise or other benefits as they feared they might lose their jobs. Though contingent employment seemed to have emerged as one of the solutions to the ills of downsizing, it attracted criticism similar to those that downsizing did. As a result, issues regarding employee welfare and the plight of employees, who were subject to constant uncertainty and insecurity regarding their future, remained unaddressed. Given these circumstances, the best option for companies seemed to be to learn from those organizations that had been comparatively successful at downsizing.

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).

In many organizations where downsizing was successfully implemented and yielded positive results, it was found that senior leaders had been actively involved in the downsizing process.

Though the downsizing methods used varied from organization to organization, the active involvement of senior employees helped achieve downsizing goals and objectives with little loss in quality or quantity of service. The presence and accessibility of senior leaders had a positive impact on employees – those who were downsized as well as the survivors. According to a best practice company source, "Managers at all levels need to be held accountable for – and need to be committed to – managing their surplus employees in a humane, objective, and appropriate manner. While HR is perceived to have provided outstanding service, it is the managers' behavior that will have the most impact."

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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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