Strategic Downsizing: A Human Resources Perspective

By Labib, Nadia; Appelbaum, Steven H. | Human Resource Planning, December 1993 | Go to article overview

Strategic Downsizing: A Human Resources Perspective


Labib, Nadia, Appelbaum, Steven H., Human Resource Planning


Introduction

Downsizing is an extremely relevant issue to organizations today in that it has become the most prevalent dilemma in recent years. The current tendency of organizations to restructure and ultimately to downsize has a major negative impact on the organizations themselves, on their surviving and terminated employees, on the government, and on society as a whole. In fact, it is everyone's problem, and it seems to have become more the rule than the exception that it used to be in the not too distant past. The current adverse economic climate has been persistent and long-lasting. As a result, many organizations that were operating inefficiently have been driven out of business, and most of those that have survived were forced to restructure in order to streamline their operations and achieve operating cost savings that would ensure their continued competitiveness both on the local and global markets. More often than not, this meant downsizing the organization and, in many cases, the downsizing was conducted in multiple phases or on an on-going basis. The direct result on the organization was a marked drop in employee morale and productivity which prevented organizations from realizing their strategic objectives.

Beyond the organization, the overall effect of these cost-cutting measures, has been the loss of a very significant number of jobs in the North American economy. Specifically, in Canada, unemployment rose in November, 1992 to 11.8%, with approximately 1.6 million Canadians unemployed.(1) In Ontario and Quebec, the numbers were 10.9% and 14.3% respectively.(2) These numbers do not include unemployed persons who: (1) have given up looking for jobs and have been transferred to the Welfare system, (2) have decided to pursue further education, or, (3) have simply decided to lower their standard of living and live on one income. There are no statistics available on these groups.

The involuntary job loss experienced by terminated employees also has a number of psychological, social, and financial effects not only on themselves, but on their families as well. Furthermore, downsizing has a major impact on surviving employees as well as on the organization itself, both strategically and operationally.

This paper addresses downsizing as a "problem" because, as will be seen, it is a painful process for all stakeholders, and its success or failure has major implications for all concerned. More especially concerned, are the organizations who must bear the consequences of the decision to downsize. The responsibility primarily falls on them to mitigate the negative effects on all involved. It is of paramount importance for them to succeed in this endeavour in order to maintain a positive corporate image both locally and globally; namely, wherever they market their products and services. The purpose of this article, therefore, is to investigate the effects of current downsizing practices on all human resources and on the organization, and to propose methods by which organizations can mitigate these effects and successfully achieve their restructuring goals.

For these reasons, the results of this research should be of interest to all stakeholders: executive and operational level management, human resources managers, surviving and terminated employees, and society at large.

Upon initial investigation into the literature on downsizing, it was found that there was a very limited amount of research which addresses the effects of downsizing from the strategic organizational perspective. Most of the existing literature deals with the subject from the pycho-social perspective of the surviving and terminated employees only. This paper, therefore, attempts to fill this gap by addressing the pertinent strategic issues and drawing a balance between them and human resources issues. In fact, it is an exhaustive study that brings together the perspectives and interests of all the constituents affected by downsizing and incorporates them in one process model. …

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