DOWNSIZING

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DOWNSIZING

• Zack Fentross
• Chris Gloria
• Mike Warren
• William Traver
• Brooke Sullivan
• Kaitlyn Doherty

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Downsizing?
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What is Downsizing

• Downsizing can be defined as when managers
  strategically reconstruct a business by
  outsourcing and reducing the number of employees
  within a firm

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Effects of Downsizing on the Economy

• Restructuring of businesses
• Unemployment rates increase
• Less job opportunities

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Current Trends
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Effect of downsizing on workersThe Negative

• Laid off

• Survivors (Remaining)

• Loss of income and benefits
• Loss of self worth
• Hard to find a new job
• Especially in times of economic downturn
• Potentially leave on bad terms
• Wont return to be rehired
• Hurts community and local economies

• Loss of three types of organizational commitment
• Can you recall them?
• Uncertainty about future for employees
• Causes distractions from work
• More work per person
• Can cause conflict
• Work life balance
• Balancing two roles
• Usually family and work
• Role overload
• Overall decrease in productivity

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Effects on CompaniesThe Negative

• Loss of Productivity due to distractions
• Due to the loss of organizational commitment
• Distractions due to uncertainty
• Loss of innovation and creativity
• Due to relationships being destroyed across depts
• People become self serving to preserve their job
• Increased absenteeism and turnover
• Employees leave on their one who were not meant
  to be let go
• Dont agree with new direction of company
• Will find work elsewhere usually competition

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Effects on CompanyThe Negative

• Loss of trust in management and executives
• Loss of trust can also lead to dysfunctional
  conflict.
• Severance pay to those leaving
• Can be continued benefits or help finding new
  work
• Loss in customer service
• Caused by the distractions- shift from external
  focus to internal focus
• Companies lay off the wrong jobs and need to
  rehire
• Usually have to offer bonuses to bring people
  back
• Loss of respect and support from locals

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Effects on EmployeesThe Silver Lining

• Laid Off

• Survivors (Remaining)

• Attain new jobs for better pay
• Unable to otherwise overcome org. commitment
• Come back as a subcontractor
• Usually make more money
• Can go back to school
• Come out with better skills
• Rehired - bonuses usually included

• Simpler operations Procedures
• Easier to comply
• More resources available
• Employees will sharpen skills
• Become more versatile and flexible
• Sometimes further education
• Take on better positions
• Leave for better jobs
• More satisfying or better pay
• Take on new responsibilities
• Enhances work and makes it more satisfying or
  meaningful

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Effects on CompaniesThe Silver Lining

• Stand to receive the most benefit
• Cut costs but not lose market share or
  productivity
• Better technology or organizational culture
• Flexible employees
• More versatile workforce
• Streamline operations
• Quicker throughput time, less hands involved
• Dismiss unnecessary jobs/ unqualified workers
• Increased productivity by simply reallocating
  resources
• Can increase its positive image with community
• Showing it is fairly treating victims of the
  downsize
• Continue to have good relationships with them to
  benefit in the future

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Even when downsizing done correctlyNegatives are
inevitable

• Usually done by clear cut guidelines of who and
  why
• Clearly communicated to employees
• Relationships hurt or destroyed entirely
• Between employees or employees and management
• Employees leave because they dont agree with new
  direction
• High performing employees end up with
  competition
• Always some uncertainty in the work environment
• Early stages of downsizing
• Role overload (imbalance on one role)
• Work overload
• Consequences can last up to two years after
  restructuring
• No matter what not every employee will see it as
  fair
• Loss of organizational commitment or at least
  some reduction

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Mergers and Acquisitions

• Not only economic downturn causes downsizing
• Caused by two joining workforces labor surplus
• Usually one is bigger or both are large
• One can usually sustain the integration of the
  new company
• Able to handle the added business of the
  geographic areas already
• Only retains the best employees
• Technology obtained
• Usually one company will have technology that the
  other does not which can cut human employment
• People will leave on their own
• Again dont agree with new direction or arent
  buying in

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Mergers and Acquisitions Continued

• If people dont leave on their own company will
  dismiss them
• Usually those who resist the change or dont buy
  in
• Hinder cohesiveness
• Outsourcing overseas with no loss of quality
• Lose workers before the merger who feel they will
  be targeted
• Usually believe they wont fit well with new
  organizational culture
• Can end up again with competition- companys do
  not want this

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Who Gets Laid Off, and Why

• Individuals with lower education
• Those whose productivity is low
• Poor relationships
• Individuals with low enthusiasm
• Early retirement and normal retirement
• Have to pay close attention to potential legal
  issues.

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The Right Way to Downsize

• Evaluate Business Goals
• Inform Human Resources
• Number of people being let go.
• Create criteria
• Watch for discrimination issues
• Compensation
• Assign a single person to be in charge
• For media coverage, simplicity, etc.

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The Right Way to Downsize, cont.

• Distribute duties that the laid-off were
  responsible for
• Make sure managers are available for questions
• Keep in contact with those who were laid off

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Euphemisms

• Positive
• Rightsizing
• Restructuring
• Negative
• Trimming Fat
• Horizontal Flattening
• Adding Value
• A word that should not be used interchangeably
• Outsourcing

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Surviving Downsizing

• Companies/Managers
• Provide counseling/advice
• Be truthful and realistic
• Recommendations/References
• Employees
• Be prepared
• Utilize resources
• Set goals

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S.M.A.R.T Goals

• Specific
• Measurable
• Action-Oriented
• Realistic
• Timely

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Examples of downsizing
Ineffective General Motors

• Sudden economic disaster within company resulted
  in need for thousands of layoffs
• Downsizing was not strategic, was out of
  necessity to prevent bankruptcy
• Communities in parts of Michigan were based
  around GM and suffered from layoffs
• Drastic, sudden cuts resulted in spike in
  unemployment and hurt company and economy
• Layoffs were systematic based strictly on length
  of time with company and hurt many qualified
  workers

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Example of Downsizing
Effective Ameriquest Mortgage

• Faced economic struggles in mortgage market
• Became apparent that downsizing was necessary
• Decided on strategic change in company structure
• Shifted from salesperson based to more focused on
  internet and phone service
• This change did not have large effect on
  companys success but necessary downsizing was
  accomplished

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Activity

• Survivor- downsizing edition