Downsizing refers to the lasting cutback of a company's human workforce and is usually associated with corporate restructuring. Corporate restructuring results from both declining economic conditions and making company corporate decision to eliminate part of the workforce in order to cut down costs and uphold definite levels of profitability (Menn, 2005). Companies may lay off a fraction of their workforce in response to such inevitable changes as a slowed economy, mergers and acquisition with other companies, the cutting down of product lines, distributors forcing value concessions from their given suppliers and many other events that may have a negative impact on the performance of the organization (Marks & DeMeuse, 2004). In addition, downsizing may involve switching the company’s information and technology systems which may be requiring less number of employees to perform operations. Since the business world is usually dynamic given the changing levels of technology, such restructuring is inevitable (Hammer & Champy, 2004).
Companies have a role to play in cushioning their employees from unexpected unemployment as a result of changes in information systems and technologies. One way of doing this is to train the staff in skills that can be transferred to other places as a result of introduction of new systems. Employees should also be paid benefit accruing from loss of employment and these should be done in line with the law and contract they signed. Thus companies may not be responsible for the laying off of employees in case such restructuring is done. However, due to the rising need for corporate social responsibility in today’s business world, companies need to take care of the employees. Such corporate care is taken by ensuring great measures to cater for the outgoing employees.
Measures Taken by Companies towards the Employees during Restructuring
Companies should ensure profound social responsibility to the employees when they are both part of the company and when they are moving out of the company especially during layoffs caused by restructuring. There are several measures that can be employed during restructuring. Drafting employment contracts is one of them. Employers should bargain for flexible employment contracts that are not long-term. Such may not be haunting to the employees if they are not renewed by the company. Another method is through constructive dismissal. Constructive dismissal of employees may occur when the employer makes a significant transformation to fundamental terms and conditions of an employment contract without the actual or implied consent of the employee. Constructive dismissal may also occur in circumstances where the employer gives a strict ultimatum to the employees to quit for good or be fired (Menn, 2005). In response to such ultimatum, the employee may resign so that such resignation acts as a lawful termination of employment for purposes of the existing authorities
Besides, Engaging employees in making layoffs and restructuring decisions could lead to proper restructuring. This may be done by asking employees to bring forward their input towards ways of achieving the company’s vision and mission (Marks & DeMeuse, 2004). In making such contributions, employees are assured of their future in their relationship with the company especially when they receive their after-employment benefits. As such, it is usually vital for the companies to work together with their employees in order to mitigate layoffs. Mitigation of layoffs in general may not be avoided since companies will always require a change in their workforce combination. However, layoffs caused by restructuring result from conditions within the organisation and may be mitigated by proportionately restructuring the company’s range of operations and product lines to accommodate any employees who may be laid off in case of such downsizing. Organisations and the employees should thus work together to prevent such layoffs.
Measures by Companies to Mitigate Layoffs
There are several mitigation measures that can be put in place to deal with layoffs. The first one is through direct cost cutting. Two main possible ways in which companies can cut down their costs directly without layoffs are by reducing overtime and cutting down wages and benefits to the employees (Marks & DeMeuse, 2004). Another way is through increasing the product lines. A company may increase its size by increasing the range of products it deals with. This will go hand in hand with creation of more jobs which raises the need for more employees. In turn, the employees are retained in the firm even in case of restructuring.
Conclusion
Downsizing and restructuring a firm appears to be an ongoing practice in many businesses for the foreseeable future. This is mainly attributed to the increase in the levels of technology and changes in information systems in firms. Top managers in companies who are burdened with the responsibility of making decisions dealing with downsizing are in a difficult predicament since it’s a practice that is not embraced by many. Given that this practice is inevitable in today’s dynamic world, it still remains a profound truth to say that companies are not responsible for layoffs caused by restructuring. Failure to downsize the firm may result in inefficiencies in its operations, while downsizing obviously has a number of potentially harmful effects on employees and the communities they live in. Coming up with the balance between these outcomes by the different parties affected by layoffs is the primary challenge facing managers in today’s business world.
References
Hammer, S & Champy, J (2004). Reengineering the Corporation: A Manifesto for Business Revolution. Harper Business Publications.
Mandel, F & Michael, J (2004). "Jobs: The Lull Will Linger." Business Week, 25 October 2004, 38–42.
Marks, M & DeMeuse, K (2004). "Resizing the Organization: Maximizing the Gain While Minimizing the Pain of Layoffs, Divestitures, and Closings." Organizational Dynamics 34, no. 1 (2004): 19–35.
Menn, J (2005). "Series of Layoffs Begins at PeopleSoft." Los Angeles Times, 15 January 2005, D1.
