Corporate Downsizing example essay topic

OUTLINE I. An introduction to corporate downsizing. II. The reasons behind a company downsizing. A. Cash flow, profits, and profit margins. B. Organizational structure and procedures.. Planning the downsizing. A. Pro and con factors. B. Identifying the options. IV. Implementing the downsizing. A. Announcing the action. B. Communicate. C. Staff Stability. V. Conclusion Corporate Downsizing: A Profitable Benefit Or An Unprofitable Disaster The unemployment level is at an all-time low.

The economy is strong. The stock market is breaking new records. Investors are buying stocks by the handful. Corporations are making extremely high profits.

So, why is it that corporations are laying-off and firing people by the hundreds? The reason is corporate downsizing. The main objective of a corporation is to be profitable and survive in the ever changing times and economy. Corporate downsizing plays a big role in the profitability and survival techniques of a company. There are many reasons why a company would downsize. Management makes a decision to reduce the entire workforce in order to cause a buying frenzy with investors, which results in more capital for the company.

It also creates more compensation for management when the company gains more equity. When companies merge together, many times they do not need the vast majority of workers from the merging companies to perform the jobs. Therefore, they would implement a downsizing. Un-collectable accounts will cause a lack of cash flow. A company always needs some form of cash flow in order to pay bills and make payroll.

The lack of it could cause downsizing because of payroll issues. Technology is always changing, and some companies do not have the time or money to update their equipment. This will result in losing some customers, and without customers there is no inflow of money. Also with the changing technology comes more competition. Many new companies are trying to break into the business barriers.

A lot of these factors affect the company's profits and profit margins. One of the biggest reasons to downsize is a change in organizational structure or procedures. This can come internally from the company or it can come from mergers and buyouts. While many factors greatly influence downsizing at a greater level, recession still plays a part in the decision. When the economy goes through a recession, it will always affect companies in some way. To the extent it affects them varies on the company.

The products manufactured by companies can become non-useful or not as in-demand as they were before. The lack of productivity is another reason for downsizing. A last few deciding factors are the government deregulating certain industries and excessive overhead costs. Based on a 1997 survey by the American Management Association, the most often claimed reasons for downsizing are "organizational restructuring, business downturn, and re engineering of business processes".

However, downsizing basically comes down to one issue that all of these factors stem from, money. When a company does not have any money or not enough, it causes problems in the company. In Downsizing Without Disaster, Lynn Tylczak states that everything takes money, and without it a company cannot survive (4-7). A corporation needs to have a strategic plan in place in order for them to be able to implement a downsizing. There are many pros and cons to downsizing and it has a ripple effect on everyone in the corporation. Depending on the planning of the downsizing, one of the big issues to decide on is how to choose who will be terminated.

For example, do you go by seniority, a percentage from all departments, an entire department, or by job level or position? These are major options that need to be addressed before anything happens. Most corporations today exist less for the well being of employees than they once did. According to the American Management Association "successful planning and innovating for the future requires staff that is well-trained, willing to take risks, physically healthy, and committed to the organization". Good strategic planning includes close attention to capital costs and increased revenue.

A successful downsizing cannot happen without knowing where the company was in the beginning and where it should be in the future. Without successful planning, a disaster is bound to happen. A company has to go through the questions of when to let the employees go and when to let them know. What are the downsizing options available? How to identify the most appropriate downsizing options available, and who will receive monetary assistance for the downsizing. Once these questions are answered then the company can go forth with implementing the downsizing.

During the implementation of the downsizing there are three basic steps that need to be followed to help the action to go smoothly. The first is announcing the action. The best way to terminate employees is to do it on a one-to-one basis. When you have a mass firing, it affects a lot of people and can cause extreme conflict if they are told all at the same time. The employees want to know the honest truth on a clear basis. They want the whole story not bits and pieces to protect their feelings.

They are already going to be hurt, so they want all the reasons. Employees also want to know if they are going to get some type of severance pay and other forms of benefits from the downsizing. When they are provided with all of this in writing, it makes the transition go along a lot smoother. The second step is to make sure there is always communication.

With a downsizing there is always going to be negative reactions. The only way to help this is to make sure there is always someone for the employees to talk to. They are going to want more information than what they have been given, and someone needs to be a facilitator over all of this. The third step is to make sure the staff maintains some sort of stability. As well as having communication with the terminated employees, the employees chosen to stay need to be communicated with also.

Going through a big change like this could harm the employees still with the company so their moral needs to be kept as high as possible. New job positions and job descriptions are going to have to be developed so the workload is spread evenly over the remaining employees. This is where a successful downsizing can become a disaster. There needs to be a stable management to help employees cope with their new jobs and the lack of people to perform other jobs. Looking to the future needs to be continually stressed.

Usually when a company downsizes, the results end up exactly the opposite of what they wanted, and it is usually because of the lack of planning. There are many issues involved in a corporate downsizing and with appropriate planning these issues can usually be resolved. While employees terminated usually get all the downfalls of a downsizing, the corporation had to downsize for a reason. This reason most often leaves the corporation with a better ground to stand on.

Bibliography

AMA Survey: Corporate Job Creation, Job Elimination, and Downsizing. AMA: Library, 1998.
Can dell, and Matthew B. K repps. Industrial Inefficiency and Downsizing: A Study of Layoff and Plant Closures. New York and London: Garland Publishing, Inc., 1997.
Gene en, and Brent Bowers. The Synergy Myth and Other Ailments of Business Today. New York: St. Martin's Press, 1997.
Rudolph, Barbara. Disconnected. The Free Press, 1998.
Tylzak, Lynn. Downsizing Without Disaster: A Thoughtful Approach to Planned Workforce Reduction. Los Altos, California: Crisp Publications, Inc., 1991.