Downsizing and Organizational Performance

Question: Discuss about the Downsizing and Organizational Performance. Answer: Introduction: The business environment is currently characterized by high competition that has caught organizations in a quagmire of struggle for survival, forcing them to reconsider the traditional ways of conducting business. Most organizations have realized that they must work very hard to reduce costs so as to remain competitive given dynamic turbulence in the current markets. Some of the efforts that have been adopted include layoffs, restructuring, downsizing, delayering, and rightsizing among others. However, downsizing seems to be gaining more impetus than the rest of the strategies. The effective of downsizing as a business tool for improving organizational performance depends on the strategies and approaches adopted by the management during the process of implementation. Downsizing has impact on the work process of an organization since it reduces the number of workers available for specific tasks. The aftermaths of downsizing can be both positive and negative to the organization and per sons affected. The two categories that results from downsizing as the victims (those laid off) and the survivors (those remaining) (Van Dierendonck , Jacobs, 2012). In their article, Cheruiyot Kinanga (2015) found out that effective employee reduction can indeed improve the performance of an organization. When effectively implemented, downsizing can be an effective business tool for enhancing organizational performance. This paper seeks to add to knowledge on the relationship between downsizing and organizational performance. Downsizing can be defined as intentionally designed set of activities aimed at improving the efficiency, productivity, and performance of an organizations and it affects the size of the work force, work processes, and operating costs (Reihman Naeem (2011). Downsizing is one of the ways organizations can improve productivity and profitability at minimal costs. Even though it was specific to America companies, it has also been adopted global corporations as a vital business tool. Different organizations give different reasons for downsizing as well as adopt different strategies to the same. An organization can either gain or suffer from downsizing depending on the approaches adopted and strategies put in place to curb the aftermaths. This is because downsizing affects the operating costs, the size of the workforce, and the work processes. Economically, organizations have resorted to downsizing as a means of enhancing future productivity as well as economic performance. When the management of an organization realizes that the organization is not operating optimally, they often look for ways to increase the productivity. One of the ways to achieve this is through downsizing which entails reducing the organizations size and operating costs (Bhattacharyya, Chatterjee, 2005). Apart from cutting costs, financial-well organizations opt for downsizing for the purpose of gaining strategic flexibility. Given the rapid technological advancements in business arena, most of the products are becoming obsolete. Organizations are forced to figure out how to keep in pace with such changes or risk being phased out of the market. As a result, organizations have had to do away with some of products they produced initially and come up with totally new products. In the process, some employees have to be laid off since their work becomes irrelevant to the organization. Coupled with this is the need to remain lean and competitive. Organizations downsize for process improvement. So when an employees task has changed and he or she lacks the required skills to perform the new task, he gets laid off. Downsizing impacts both the employees and the organization. The two categories of employees that results from downsizing is the victims and the survivors. Victims are the employees who were laid off and survivors are those that remained in the organization. Obviously, the victims often suffer the impacts of losing a job. On a positive look, it is a chance for them to further their career elsewhere which could ultimately be better for their lives. The survivors are often the central focus when determining organizational performance following downsizing (Rai, Lakshman, 2014). Survivors can be impacted both positively and negatively. Downsizing may harm the feelings of the survived employees since it creates job insecurity to an extent that a once committed and dedicated worker can become demoralized and even resign from the organizations (Maertz, Wiley, Lerouge, Campion, 2010). Survivor may exhibit dissatisfaction, stress, and increased absenteeism. However, when the internal culture and external environment are kept suitable, wages enough to meet their needs, and chances for career advancement are assured, the survivor can remain loyal and even improve their commitment. Following, a downsizing, there is always a perceived reduction in the bond between survivors and the organization and efforts to maintain the loyalty from the management may not yield any much fruits (Reihman Naeem, 2011; Iverson Zatzick, 2007). To the organization, downsizing affects the work processes which may lead to overworking of employees thus substandard productivity. Few employees left to do the same work affects the amount of work being done and how it is done (Cheruiyot, Kinanga, 2015). On the other hand, when downsizing is targeted at redesigning work strategies, the organization is capable of achieving high level of efficiency because of the lean (simplified) structure. Following downsizing, organization can lose many more workers due job insecurity. The survivors may also start feeling not part and parcel of the organization and start looking out for other opportunities (De Meuse, Bergmann, Vanderheiden, Roraff, 2004). The success or failure of a downsizing process depends on several implementation strategies. One of these strategies includes communication and participation of employees. The reason and plan of downsizing should be openly and honestly communicated to all employees. If this is not done, the organizations risk experiencing negative ripple effects from both victims and survivors. In order to succeed, the management should also be ready to listen to the employees and offer necessary comfort and assurance so as to keep the morale of the surviving workers. When suggestions on improvement are solicited from employees on what and how the downsizing should be done as well as guidance is provided on implementing the downsizing success is guaranteed. One of the dangerous methods that would yield failure and impact negatively on organizational performance is attrition. This involves forceful implementation of hiring freezes and not replacing the fired workers in time. As a result, the survivors are often left scared Proper planning and implementation: Downsizing should not be done abruptly rather gradually and incrementally so as to avoid interfering with the normal operations of the firm. This will also help eliminated unnecessary fear and anxiety among workers and administered the pain gradually to the victims. There is need to invest time and resources in analyzing personnel skills, process redundancies and inefficiencies. This enables the organization to eliminate unnecessary processes, positions, and work as well as identify areas of deficiency. Downsizing is important in monitoring the performance of an organization. It helps the organization to get rid of processes, positions and work that are no longer relevant for the success of its operations. The three main strategies for downsizing are employee reduction, work design alterations and systematic changes. Organizations should opt to adopt the latter two which is often accepted faster than the former (Muoz-Bullon Snchez-Bueno, 2008). Work design strategies aims are reducing work instead of reducing workers. This approach involves removing hierarchical levels, functions, groups, and products. It may also entail redesigning work, merging units, and reducing the hours of work. The work design strategies require time to implement but it helps in avoiding the problem of piling more work on fewer workers which can derail their morale. The strategy also helps the employees to know that the changes are targeted at work processes and not individuals. Lastly, an organization can also adopt systematic strategies. This involves alterations in the organization culture and values (Rai, Lakshman, 2014). It tends to define downsizing as a way of life and not an occasional act targeting employees. The employees are made aware that the downsizing is for the purpose of simplifying various aspects of the organization for the benefit of everyone and not only the management (Muoz-Bullon, Snchez-Bueno, 2008). References Bhattacharyya, S. Chatterjee, L. (2005). Organizational Downsizing: From Concepts to Practices. VIKALPA, Vol.30, No. 3. Cheruiyot, A.C. Kinanga, R. (2015). Does Downsizing Strategy affect the Retained Employees Performance? 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