Downsizing : A Essay On The Negative Effects Of Downsizing On Employess

1146 words - 5 pages

Downsizing of staff consists of these elements: it is intentional; it leads to reductions in personnel; it attempts to increase the efficiency of the organization; and it affects work processes (Atwood, p.1, citing a 1993 study by Huber & Glick). Downsizing of staff is often undertaken when an organization needs to quickly improve its profits: a company under siege (or claiming to be) takes a look at its largest expense typically payroll and benefits and starts slashing. According to a 1997 survey by the American Management Association (AMA), the most often claimed reasons for downsizing are "organizational restructuring," "business downturn," and "reengineering of business processes." Also according to that survey, downsizing is a decreasing trend: 19% of the 1,200 companies surveyed actually downsized staff in 1996/1997 a number that is down from 27% the previous 12 months, and down from a high of 43.2% in 1990/1991.Proponents of staff downsizing claim that the process increases company profits without sacrifising productivity, that it makes lean machines out of bloated organizations. Downsizing is sometimes justified as a necessary measure to protect an organization from bankruptcy. "The very things that make capitalism seem so harsh and even unfair are also what make it so vital. It may not feel that way when you're in a downsizing company, but that is history's lesson," says one proponent (Nocera, p.71).Downsizing does indeed increase profits for the organization that undertakes it -- but these profits are short-lived. A survey by Wyatt Associates of Canadian downsized businesses found that "40 percent reported that downsizing did not result in reduced expenses and more than 60 percent did not experience higher profits after cutting staff" (Estok, p. 28). These and other studies show that at least half of all eliminated positions are refilled within a year after a major downsizing effort. The AMA study also indicates that "data show no correlation between lower operating expenses and higher profits" and "companies that decrease their costs and companies that increase them are equally likely to report improved profits." The Wall Street Journal reports the following downsizing results (Atwood):Desired Outcome Percent of Firms That Achieved Desired ResultsReduced Expenses 46%Increased Profits 32%Improved Cash Flow 24%Increased Productivity 22%Increased ROI 21%Increased Competitive Advantage 19%Reduced Bureaucracy 17%Improved Decision Making 14%Increased Customer Satisfaction 14%Increased Sales 13%Increased Market Share 12%Improved Product Quality 9%Technological Advances 9%Increased Innovation 7%Avoidance of a Takeover 6%Proponents of downsizing believe that a reduced staff can be made productive enough to compensate for the work done by downsized staff. The survivors of downsizing are at best, encouraged to improve their productivity, and at worst, threatened and live in a state of fear of losing their jobs, too. The survivors are...

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