Week 4 Project: Downsizing
Downsizing in organizations has never gone away; it has been present all this time. Companies insist that downsizing is needed to realize significant changes in the company structures. As such, companies give various reasons for downsizing the employee workforce. One of the reasons for downsizing is cost reduction (Redman & Wilkinson, 2006). For this reason, it seems viable for the interests of the company. With fewer employees, the company has less liability in terms of employee payroll. Another reason for downsizing is to attain productivity (Redman & Wilkinson, 2006). In most of these cases, the company decides to downsize employees and replace them with complex machines that do the same jobs. Downsizing for productivity seems a somewhat unethical move giving less consideration for the employees. Another reason for downsizing is outsourcing the same services. The company decides to outsource specific activities carried out by several employees for productivity and reduction in cost. Again, this reason for downsizing is only fair to the interests of the company. It seems unfair to let employees go just because the services they offer can are available from another company.
An evaluation of the reasons for downsizing indicates that it helps companies attain their set objectives. All the reasons given for implementing drawdown means the company is the sole beneficiary (Sahdev, Vinnicombe, & Tyson, 1999). With cost reduction as a reason for downsizing, companies have the assurance of an increase in the equity of the company owners. Downsizing employees because of cost reduction means that the company wants to get rid of the liability of the huge employee payroll. Another example can is from downsizing to outsource. Many reasons can lead a company to choose to outsource their in-house services. By downsizing to outsource, companies can get what they want, with increased productivity and reduced costs (Sahdev, Vinnicombe, & Tyson, 1999). If anything, downsizing employees is a way of these companies acting selfishly. Downsizing serves to benefit their interests and make sure that they get what they intend to.
Downsizing is legal as long as it is within the anti-discrimination regulations and individual requirements. There are laws put in place to ensure that employees are only let off work legally. An example is the Federal Worker Adjustment and Retraining Notification (WARN) Act (John & Foley & Lardner, 2020). This regulation comes to the employees’ aid in the case of a mass layoff of more than 50 people. These employees are supposed to have at least 60 working days’ notice before the downsizing happens. However, this does not mean that reduction can’t be unethical. When a company does downsizing, the managers at the top get applause for making the right decisions to keep the company afloat in stock prices. While this is happening, the employees suffer the loss of jobs and a decrease in morale from the downsizing. The fact that top management is applauded for reduction while the employees at the bottom suffer from it makes the practice unethical.
Downsizing has both positive and negative effects that are faced by employees and organizations alike. For employees, downsizing means demotivation and a decrease in self-esteem. The demotivation and lack of self-esteem affect both those that get laid off and those that are left to work in the company (Schiro & Baker, 2011). The company is affected through improvement in stock prices and less liability form employee payroll. In essence, the adverse effects are faced by the employees, while the company and its management experience positive results.