Select and summarize an article from the Time, Fortune, or Forbes magazine’s on the impact of downsizing on organizational culture and commitment. What role has globalization of the workforce played in the need for industries to downsize? How does the latest trend of sending higher-level service sector jobs, such as computer programming and loan analysis, to foreign countries impact U.S. workers? Discuss both positive and negative impact. Provide a definition of downsizing based upon the content of the article. Identify the relationship between downsizing and organizational culture. Discuss how downsizing can have both positive and negative affects on organizational culture and commitment.
In the article “Managing A Downsized Team”, Jenna Goudreau highlights the difficulty associated with managing a team which is left out after the downsizing. It talks about the ill effects of downsizing or layoff and manager’s dilemma after the layoffs. The kind of distrust and suspicion that downsizing generates among employees make the task pretty tough for manager in terms of making right communication to employees and bringing back the lost faith and team spirit among the employees. This article also suggests ways to dispel rumour and fear among employees by right communication, setting up goals for them and engaging employees into direct conversation.
Downsizing also helps firms to remain competitive, especially in an ever increasingly global environment. The competition generated by globalization and rapid technological changes accompanied by shorter product life have, while destroying countless jobs in industrialized countries, created opportunities for multi-skilled and easily trainable workers, and for the most significant group of emerging employees. Knowledge and skills have become the most important determinants of investment, employment opportunities, productivity and quality and of flexibility. The impact globalization and information technology have had on each other has made work more mobile, capable of being performed in different parts of the world without the need to actually set up physical facilities in other countries. Globalization has necessitated moving production overseas to reduce costs and to facilitate sensitivity to local and regional market requirements. Outsourcing is defined as a decision to move work to outside domestic entities (e.g., contractor organizations, consultants), resulting in job loss within the company. Contracting out and out-sourcing enables an enterprise to concentrate on its core competencies, and on the other hand, it makes service work more productive. Kodak downsized four times between 1982 and 1992, Honeywell twice in four years, and Xerox, IBM and Digital Equipment have experienced several cutbacks throughout the 1990s.
Cost cutting and improved technology have led more and more U.S. companies to send skilled work like computer programming overseas. The most direct effect of off shoring jobs is to create unemployment in the domestic economy. Rising unemployment is bad from an economic, corporate and financial position as people who are not working, especially older workers, may struggle to find gainful employment. This is especially true as it is normally similar jobs across all sectors which move overseas. For example, experienced telemarketers may struggle to find work in the U.S. because many of these jobs are now moving abroad. The other effect of unemployment is rising welfare costs. People who lose their jobs are automatically entitled to benefits while they look for a new job. This costs the taxpayers money and as these people may struggle to find suitable employment.
Maintaining workforce commitment during downsizing is particularly important for organizations that rely on human capital for competitive advantage. Downsizing can increase employee turnover (Trevor & Nyberg, 2008) and damage the employee-organization relationship (Cascio & Wynn, 2004). Downsizing sends a contradictory message to employees about their relative worth to the organization. It can have negative effects on the organization’s ability to maintain a productive workforce (Zatzick & Iverson, 2006). Downsizing reduces the organization’s human capital by dismissing employees in which the organization has previously invested. Downsizing may lead to increased voluntary turnover because employees are motivated to withdraw from the negative work environment (Trevor & Nyberg, 2008). These negative experiences can harm the social exchange relationship in terms of decreased trust and support. Changes in employee relationships after a downsizing bring altered attitudes and behaviours.
A culture of mistrust, knowledge hoarding, and rushing gets developed after the downsizing initiative. At the time of downsizing, workers become less inclined to share information and knowledge to help others do their job as they were concerned that by doing so, they might lose their own jobs. Reduced resources resulting from the restructure leads to employees constantly being short of time and a time-challenged culture develops as a result. In addition, sometimes it creates thinly veiled individualistic culture where people have their own personal agendas. One such deleterious effect of downsizing is that many managers become too focused on the needs of laid off employees, at the expense of the surviving ones. Downsizing demands a lot of work on the part of managers, who have to distribute the duties and responsibilities of laid off employees among those who remain and managers are directed to provide support services such as counselling to laid off employees. Moreover, laying off of employees sometimes lead to an organizational down cycle which refers to a long-term process whereby the members of the organization feel depressed and the organization loses its momentum. The employees lose trust and enthusiasm in favour of the company and the company’s performance suffers. Finally, downsizing causes culture change. The members of the organization lose familial feelings within the organization and replace it with competitiveness. The employees also change their relationship with their employer from long-term and stable in the direction of short-term and contingent. Thus, while downsizing may provide an immediate and short-term solution to an organization’s problems, it can also cause long-term effects that can hinder the organization’s growth.
Bacal, R. Downsizing – The Long Term Effects. Retrieved from http//www.work911.com /articles/downsizinglongterm.htm.
Cascio, W. F., & Wynn, P. (2004). Managing a downsizing process. Human Resource Management Journal, 43(4), 425-436.
Cascio, W.F. (1993), “Downsizing: what do we know? What have we learned?”, Academy of Management Executive, Vol. 7 No. 1, pp. 95-104.
Gandolfi, F. (2006), Corporate Downsizing Demystified: A Scholarly Analysis of a Business Phenomenon, The ICFAI University Press, Hyderabad, India.
Goudreau, J. “Managing A Downsized Team”. Retrieved from http://www.forbes.com/2009/12/10/layoff-survivor-employees-forbes-woman-leadership-management.html#
Hickok, T. A. (1993). Downsizing And Organizational Culture. Retrieved from http///www.pamij.com /hickok.html.
Trevor, C. & Nyberg, A. J. (2008). Keeping your headcount when all about you are losing theirs: Downsizing, voluntary turnover rates, and the moderating role of HR practices. Academy of Management Journal, 51(2), 259-276.
Zatzick, C. D., & Iverson, R. D. (2006). High-commitment management and workforce reduction: Competitive advantage or disadvantage? Academy of Management Journal, 49(5), 999-1015.