Corporate Downsizing

Corporate Downsizing Corporate Downsizing Organizations in every segment of business, industry, government, and education are downsizing. Downsizing is and has been a controversial phenomenon in the last few years. The controversy that surrounds downsizing may be better described as a debate in organizational theory about whether change is adaptive or disruptive. The issues which establish the outcome of the controversy include why the downsizing is taking affect, how it is implemented, and what steps are taken to enhance its effects on organizational performance. The reasons for corporate downsizing are presented in many forms. Some companies downsize due to technological changes such as automation, which brings about the need for a reduction in the production workforce. Others may feel that competitiveness with other companies warrants the need for a reduction in the workforce. Financial setbacks due to customer demand, market shares, and loss of revenue could also initiate the need for downsizing.

When will it end? Experts say it won’t. For instance, the North American Free Trade Agreement (NAFTA) was established as a universal trade agreement between the US, Cannada, and Mexico to allow free imports and exports. It was also established with the intent to help poor countries, like Mexico, export their products for economic reasons. In my opinion, it has strongly contributed to America’s massive downsizing phenomenon. Companies that have experienced financial setbacks and losses seem to relish the idea that they can downsize the workforce here in the states, move operations into places like Mexico, hire cheap labor, and export their product back to the states, while making bigger profits.

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The sad part about this is that it is true, and NAFTA is largely responsible for this type of downsizing. Is this ethical? That remains to be seen. The truth is that unless an organization was designed expressly for the purpose, it is not in business to provide employment. Jobs are the by-product of successful organizational endeavors, not their intended output. If the decision to downsize is a response to competitive pressures, it will appear impatient or premature to those who must leave.

If it is perceived as anything less than a well developed strategic response to demands on the organization, then it fails to show employees need for the criteria. Downsizing can sometimes seem to be about creating victims and displacing blame rather than accepting responsibility and choosing moral and ethical ways to implement the outcome. Management wants a quick cut that protects he company’s assets, yet it wants to be gentle and compassionate to those who are let go. These two objectives are self-canceling, and to accomplish the first requires considerable compromise on the second. Many companies wait until the day of the lay-off to inform its employees. They are concerned about sabotage and productivity.

They seem to think that if they retain the bad news until the last moment that the employees will leave and the rest will get back to business. However, this method of a lay-off is the least favorable for the employees. If the company gives the employees notice of the cutback in the workforce, they will have time to plan for the financial problems, look for other work, and make other necessary arrangements to prepare them for the loss. It would be in the best interest of the company to give this notice to its workers. Being a survivor of downsizing can have its own ethical issues. Those who are left after the downsizing has occurred, may share perceptions about the ethics of the decisions leading up to the dismissal of those who left.

They may experience feelings such as anger, guilt, fear, and even depression. These feelings could be brought on by having to take up the slack and doing more work. They could also be asked to learn new tasks and for the same or maybe even less money than before the downsizing. Asking people to do more for less money can seem unfair. In my opinion, companies and organizations sometimes put too much pressure on surviving employees. This can cause the decision-makers to seem insensitive to the reality that employees are people with full lives and responsibility outside the workplace.

Call it outsourcing with a heart. DuPont on December 11, tentatively agreed to outsource its computer and telecommunications operations, but it will do so without cutting jobs. Instead, some 3,100 DuPont staffers will be given the chance to switch employers with 2,600 spots slated for Computer Sciences Corp. and 500 for Andersen Consulting. An additional 1,100 information technology staffers are expected to stay with DuPont.

The outsourcing pact is one of the biggest ever. It will be worth more than $4 billion over 10 years, with CSC taking the lion’s share. CSC will handle DuPont’s global mainframe, mid-range, and PC hardware needs, and worldwide telecom network, while Andersen takes care of software applications. The parties have signed a letter of intent and are now hammering out the final terms. The flip-side to downsizing could be a more positive result or experience.

When companies have their employees economic survival at heart when planning their downsizing tactics, an adaptive approach as well as a positive outcome can be expected. Most managers seem to understand the hard side of downsizing such as the cost of inventory, shipping, severance packages, and plant capacities. I’m sure DuPont considered all of these issues. However, they took the issues one step further and considered the softer issues such as morale, loyalty, and the role of the corporate environment on employee motivation and productivity. These issues should be addressed to keep a downsized company alive and well.

As history would have it, more companies suffer from downsizing rather than prosper. Why is this the case? Most companies or organizations fail to focus on the entire picture. For instance, they see the need for cutbacks in money and finance, yet they often pay more attention to the people they let go than the ones they keep. They may provide the laid-off workers with outplacement counseling, resume writing assistance, and other sources for potential job leads. Some companies even extend their health benefits, offer early retirement incentives, and often give severance packages.

But, where’s the generosity for those who remain to do the work? The blow of staying with a company that has downsized needs to be softened too. Employees often feel threatened that their own jobs may be in jeopardy, they may have a growing mistrust of the company, and they have little understanding of what management is doing or what their role will be in the company’s future. Managers must pay attention to the survivors too. I suppose that honest and sensitive communication is the most prominent challenge in every downsizing. Executives and managers are trained to think they should have all the answers before they talk to employees.

In my own experience with my own company, ITT Automotive, this was the case. For many months we heard rumors about the sale of the new Henderson plant, the sale of the Morganton plant, and the closure of the Asheville plant. Monthly employee meetings were postponed, and employees went fishing for answers, the wrong ones I might add. Rumors flourished and expanded as they passed from employee to employee and from plant to plant. ITT should have given us the information as soon as they received it.

(E.g. jobs will be lost but we haven’t finalized which ones yet.) They should have held the regularly monthly meetings and promised to get back to us with answers to questions that they didn’t have answers too. They created a great mistrust among the workforce by withholding information. They made us feel as though …


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