Downsizing Strategies and Its Effects
Introduction
Companies that faced a decrease in sales, market share, or profits in the 1980s and early 1990s began to realize that their human resources were expensive and underutilized. To become more competitive, companies made strategic decision to gradually lower their payroll numbers. (Anthony, Kacmar & Perrewe al, 2002:434) Downsizing has become a critical issue around the world. Downsizing and mass lay-offs are happening not only on US companies but also organizations in the entire industrial world. The number of organizations and jobs affected by downsizing has been staggering. In 1993, in an unending quest for lower costs, higher productivity, and fatter profits, American firms announced 615,000 jobs cut, and all-time record. Many of these actions reached into the ranks of white-collar and middle management positions. Earlier, layoffs were generally limited to low-level, unskilled, or blue-collar labour. (Hitt et. al., 1994) (Internet Material #1) Making staff redundant is still a process many companies are forced to go through even in times of economic stability and modest growth. Why does it becoming a popular as a strategy used by the organizations? Why is it viewed as important issues on today¡¯s competitive world? In theory, downsizing is presumed to have positive outcome for the organization. In many situations, downsizing did accomplish what management had intended. However, there are many critiques on the manager views where unintended and negative consequences of downsizing resulted. It is important to point out that downsizing can be approached from at least three different perspectives: a global or industry level, a micro or individual level, and an organization or strategy level (Cameron, 1994). From a global or industry point of view, discussions of downsizing include mergers and acquisitions, joint ventures, and market strategies. From a micro or individual point of view, discussions of downsizing focus on individual stress associated
Companies that faced a decrease in sales, market share, or profits in the 1980s and early 1990s began to realize that their human resources were expensive and underutilized. To become more competitive, companies made strategic decision to gradually lower their payroll numbers. (Anthony, Kacmar & Perrewe al, 2002:434) Downsizing has become a critical issue around the world. Downsizing and mass lay-offs are happening not only on US companies but also organizations in the entire industrial world. The number of organizations and jobs affected by downsizing has been staggering. In 1993, in an unending quest for lower costs, higher productivity, and fatter profits, American firms announced 615,000 jobs cut, and all-time record. Many of these actions reached into the ranks of white-collar and middle management positions. Earlier, layoffs were generally limited to low-level, unskilled, or blue-collar labour. (Hitt et. al., 1994) (Internet Material #1) Making staff redundant is still a process many companies are forced to go through even in times of economic stability and modest growth. Why does it becoming a popular as a strategy used by the organizations? Why is it viewed as important issues on today¡¯s competitive world? In theory, downsizing is presumed to have positive outcome for the organization. In many situations, downsizing did accomplish what management had intended. However, there are many critiques on the manager views where unintended and negative consequences of downsizing resulted. It is important to point out that downsizing can be approached from at least three different perspectives: a global or industry level, a micro or individual level, and an organization or strategy level (Cameron, 1994). From a global or industry point of view, discussions of downsizing include mergers and acquisitions, joint ventures, and market strategies. From a micro or individual point of view, discussions of downsizing focus on individual stress associated