Academic journal article Journal of Management and Organization

Reduction-in-Force (RIF) - New Developments and a Brief Historical Analysis of a Business Strategy

Academic journal article Journal of Management and Organization

Reduction-in-Force (RIF) - New Developments and a Brief Historical Analysis of a Business Strategy

Article excerpt

ABSTRACT

After nearly three decades of corporate restructurings and reorganizations, the modern firm has continued to resort to reduction-in-force (RIF) strategies. This article presents an overview and a brief historical analysis of some of the most popular RIF concepts that have been adopted by companies and governmental agencies on a global scale since the late 1970s. The research found that most RIF tools have their root in the core-periphery model. While some of the more 'classic' RIF strategies have remained popular, the paper showcases two contemporary practices, the traditional (non-selective) layoffs and stealth layoffs, that currently impact the corporate landscape. A discussion of modern-day restructuring and RIF practices is timely given the high levels of layoffs currently occurring in the global automotive, retail, and finance-related industries. In this paper, a particular focus is placed on presenting practical implications of the conduct of RIF for the firm, the managers, and the individual employees.

Keywords: reduction-in-force, layoff, strategy, restructuring

INTRODUCTION

Research on the concept of reduction-in-force (RIF) as a business strategy has been closely associated with the mainstream downsizing literature, holding implications for both organizational and individual outcomes (Gandolfi, 2006; Littler, 1998; Macky, 2004). At a broad scope, an RIF situation exists when an organizational entity permanently or temporarily releases an employee from his or her position in order to improve the organization's levels of efficiency, productivity, and/or competitiveness (Cameron, 1994; Cascio, 1993).

Various technical terms and euphemisms have appeared in the human resource management (HRM) literature and popular press in order to 'soften the blow' in the employee termination process, including downsizing, re-engineering, re-sizing, and rightsizing (Gandolfi, 2006). Historically speaking, while the term layoff used to refer exclusively to a temporary interruption in work, the concept now applies to the permanent elimination of jobs and positions as a cost-cutting measure (Cascio, 1993). A review of the existing literature reveals that management scholars and HRM professionals have long debated the technical differences between the various concepts. Nonetheless, it remains clear from an individual employee's perspective they all result in permanent separation from the firm.

Employee layoffs are not a new phenomenon. Indeed, organizations have always been forced to adjust their workforce levels to anticipated and/ or actual changes in labor demand. While reactive RIF practices were prevalent among bluecollar and semi-skilled employees in response to changed manufacturing demands up until the 1980s (Littler, 1998), the strategic layoffs popularized since the mid-1980s affect all employees, at all hierarchical levels, and in all industries (Macky, 2004). Currently, there is increased recognition that the utilization of RIF is not confined to a particular phase within a firm's business cycle, but is fashionable even if the economy is expanding. Thus, the business community has witnessed a distinct de-coupling of RIF strategies from economic cycles over the past decade (Littler & Gandolfi, 2008).

What is driving RIF? Over the past 30 years or so, the world of commerce has experienced an unprecedented amount of major change deeply impacting the global business landscape. Some of the most profound changes include technological developments and breakthroughs, the deregulation and privatization of entire industries, and various industry- and firm-specific changes (Alkafaji, 2001; Drew, 1994). Some of the transformations have been revolutionary and given rise to the emergence of a globally interconnected economy (Macky, 2004). Consistent with the corporate mantras of 'profit maximization' and 'shareholder value', firms are continually trying to improve their overall efficiency, productivity, profitability, effectiveness, and competitiveness, often by reducing their workforces (Cascio, 2002; Cravotta & Kleiner, 2001). …

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