Home | Business News | Browse by Publication | I | Industrial Management

Who goes and who stays?

Article Excerpt
EXECUTIVE SUMMARY

Downsizing remains a widely used business strategy in America because it's seen as a quick way to realize cost savings in an organization's labor force. But a key question often remains unanswered in popular literature: How do managers decide exactly who will be let go? The authors offer research findings that shed light on common practices.

Economist Audrey Freeman called downsizing the medicine of choice for U.S. corporations. And for many it is, in part because it is often quickly executed and it involves variables that are under the direct control of the organization. For executives and workers alike, downsizing has simply become a part of how America does business. In the manufacturing and service sectors of the economy, cutting labor costs is substantially easier than generating more revenues or growing market share for many organizations. Consequently, downsizing is a tempting strategic option when corporate executives want to increase short-term profitability and earnings per share or stay within budget constraints in trying times.

Open up the business section of any major U.S. newspaper on any day and it is not unusual to see downsizing decisions still making headline news. Some of the more notable recent downsizing efforts: General Motors eliminates 20,000 white collar jobs; IBM trims 10,000 people from its technical work force; Ford Motors cuts 30,000 staff employees; and the airline industry reduces its head count by 30,000 to contain costs. Some U.S. economists estimate that organizational America is cutting more than 2,000 jobs a day, with no end in sight. Downsizing in its various forms is having a profound effect on organizations, managers, and employees whose jobs are at stake, but there is still much to know and understand about this process.

Three strategies

While downsizing may not always be an ideal strategic option, it is a tempting one for many executives and managers. Downsizing strategies are being used as managers at every organizational level are under increasing pressure to cut labor costs in response to a host of economic and competitive pressures. In the words of one senior human resource executive, "There was a time when nobody wanted to talk about work force reduction because it suggested your organization was slipping. Now if you are not exploring all your options people think you are foolish because of the opportunity to pump up your bottom line with reduced labor costs."

There is a wide body of research and practice designed to help organizations implement downsizing strategies. Several recent studies have identified three primary downsizing strategies being used in organizational America at present: work force reduction, organizational redesign, and systemic employment.

Work force reduction strategies are actions that eliminate individual jobs in organizations. Layoffs, buyouts, early retirement incentives, transfers, and attrition are all examples of downsizing implemented on a short-term basis with the intent of reducing the size of an organization's work force. This strategy is possibly one of the most frequently used in organizational America at present because it produces...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!