Workforce Reductions
Workforce Reductions
Workforce reduction is considered a downsizing strategy that directly affects the workers and employees of the company. The strategy is used as a result of slump in demand or to improve the operational efficiency of the company. The key reasons of workforce reduction include heightened competition, changing markets and gaps in the employment laws. In addition, improvement in the cash-flow, stakeholder expectations and overcapacity/poor management lead to massive layoffs to gain short-term profits and value (Rogovsky, 2005). The workforce reduction as a strategy of the company has both positive and negative impacts.
Positive Consequences of Reduction in Workforce
There are some positive consequences of reduction in workforce along with negative. However, the benefits of workforce reduction are gained in shorter-run. For example, cost savings is one of the key advantages of workforce reduction. But, the cost savings are obtained for shorter time period as layoffs in longer run lead to increase in costs. Another advantage is that the companies through reduction in workforce can get rid of underperformers (Martin & Davis, 2013). In case, the employees are of no use with respect to their performance monitoring they can be laid off. Increase in productivity is another advantage of the workforce reduction. It means laying off underperformers encourage high performing employees to work hard and valuable. In addition, workforce reduction decreases the decision time as a result of elimination of layers of middle management. Moreover, the downsizing strategy enables the management to communicate employees the seriousness of the situation of the company. Last but not the least; combination of last two benefits contribute to lack of resistance to change (Shein, 2011).
Negative Consequences of Reduction in Workforce
Reduction in workforce most of time is not beneficial for the companies due to the disadvantages linked to it. One of the key disadvantages is that key personnel might be lost as a result of layoffs. Reduction in the workforce also facilitates reduction in research and development that ultimately reduces the product innovation and decreased productivity because of low morale. It is due to the fact that the survivors are not provided with the needed support to take on extra work due to layoffs (Martin & Davis, 2013). Moreover, various physical and mental conditions like stress are linked to the reduction in workforce. It is also referred as survivor’s syndrome. The conditions involve anxiety, lack of morale, low level productivity, high level of distrust and cautiousness. The disadvantages of the reduction in workforce are associated with the financial losses as the companies have to invest in restructuring and redesigning and low productivity also leads to losses. Another disadvantage/negative consequence of the workforce reduction is the job insecurity as survivors feel they can also be terminated. The times when the company needs open communication between management and employees, employees move to hoarding information. They do so to secure their position (Rogovsky, 2005).
Alternatives to Reduction in Workforce
There are various alternatives to reduction in workforce. For example, the company instead of downsizing can move to redeployment. Redeployment is linked to the redeployment of as many employees as possible through full-time or temporary job placements across company, according to their skills and personality. Another alternative is the freezing recruitment to overcome the issue of overstaffing. One of the alternatives is the reduction in working hours to spread the soreness of costs of reduction of workforce across whole organization. Other alternatives include flexible working hours, job sharing, wage cuts and increase in labor productivity (York, 2010). Another alternative is to develop a job database. The example of this is the Canadian-based NOVA Chemicals Corporation, who faced a downturn in relation to its ethylene, chemical and energy products. In turn, its human resource department developed a job database with the focus on internal and external job opportunities and provided jobs to 6,000 employees. Another alternative is to develop a spin-off business. For example, Bell Labs instead of layoffs developed a new business unit spinoff. Early retirement plans and salary reductions are also the alternatives of reduction in workforce that can be used by the companies (Marchington & Wilkinson, 2005).
References
Marchington, M., & Wilkinson, A. (2005). Human resource management at work: People management and development. USA: CIPD Publishing.
Martin, W. M., & Davis, A. C. (2013). Alternatives to downsizing: An organizational innovation approach. International Journal of Business and Social Research, 3(7), 19-27.
Rogovsky, N. (2005). Restructuring for corporate success: A socially sensitive approach. USA: International Labour Organization.
Shein, J. B. (2011). Reversing the slide: A strategic guide to turnarounds and corporate renewal. USA: John Wiley & Sons.
York, K. M. (2010). Applied human resource management: Strategic issues and experiential exercises. UK: Sage.
