Autor: Antonio 23 November 2009
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Companies that faced a decrease in sales, market share, or profits in the 1980s and early 1990s began to realize that their human resources were expensive and underutilized. To become more competitive, companies made strategic decision to gradually lower their payroll numbers. (Anthony, Kacmar & Perrewe al, 2002:434) Downsizing has become a critical issue around the world. Downsizing and mass lay-offs are happening not only on US companies but also organizations in the entire industrial world. The number of organizations and jobs affected by downsizing has been staggering. In 1993, in an unending quest for lower costs, higher productivity, and fatter profits, American firms announced 615,000 jobs cut, and all-time record. Many of these actions reached into the ranks of white-collar and middle management positions. Earlier, layoffs were generally limited to low-level, unskilled, or blue-collar labour. (Hitt et. al., 1994) (Internet Material #1) Making staff redundant is still a process many companies are forced to go through even in times of economic stability and modest growth. Why does it becoming a popular as a strategy used by the organizations? Why is it viewed as important issues on todayÐŽÐ‡s competitive world? In theory, downsizing is presumed to have positive outcome for the organization. In many situations, downsizing did accomplish what management had intended. However, there are many critiques on the manager views where unintended and negative consequences of downsizing resulted. It is important to point out that downsizing can be approached from at least three different perspectives: a global or industry level, a micro or individual level, and an organization or strategy level (Cameron, 1994). From a global or industry point of view, discussions of downsizing include mergers and acquisitions, joint ventures, and market strategies. From a micro or individual point of view, discussions of downsizing focus on individual stress associated with job loss, psychological coping strategies, and the attitudinal effects of downsizing. (Internet Material #2) In this paper, I will focus on the downsizing strategies and the respective effects of these approached on organizational performance and effectiveness. Not only focusing on the strategies, its impact and consequences on effectiveness and employees in term of culture, motivation and survivor syndrome will also be discussed later.
What is Downsizing?
Downsizing simply means ÐŽÂ®reducing in sizeÐŽÐ‡ by cutting the number of workers. Downsizing can also be interchangeable with other words such as ÐŽÂ®restructuringÐŽÐ‡, ÐŽÂ®de-layeringÐŽÐ‡, ÐŽÂ®de-selectedÐŽÐ‡, ÐŽÂ®re-sizingÐŽÐ‡, de-recruitÐŽÐ‡, ÐŽÂ®de-hiredÐŽÐ‡, transitionalÐŽÐ‡ and etc. According to Kozlowski (1993), downsizing has been defined as a deliberate organizational decision to reduce the workforce that is intended to improve organizational performance. (Kozlowski et. al., 1993:257 as cited in Thornhill & Saunders, 1998:273) Cappelli argues that downsizing refers to reduction in employment that is not accompanied by a reduction in output. (Cappelli, 1995:577 as cited in Collins, 2000:286) More recently, Thornhill and Saunders (1998) contend that downsizing is a form of organizational restructuring which aims to improve a companyÐŽÐ‡s overall performance by creating effectiveness, efficiency, productivity, and competitiveness. (Internet Material #3)
Cameron defines downsizing as a positive and purposive strategy. It thus falls into the category of management tools for achieving desired change, much like "rightsizing" and "reengineering". Downsizing is defined in this effort simply as a reduction in the size of the work force. (Internet Material #4) According to Cameron et al., although this literature has emerged from several disciplines and draws on a range of management and organizational theories, organizational downsizing is still regarded by many academic scholars as the most pervasive, yet understudied phenomenon in the business world. (Internet Material #3)
Shaw and Barrett-Power (1997) recognize that measures typically used to assess the effectiveness of downsizing from a corporate perspective are clearly inadequate as a means to understand and manage the impact of this process on stakeholders such as work groups and individuals who survive this event. Such corporate measures will be related to profitability, productivity, investment returns, customer satisfaction ratings, etc. While these measures may suggest that a downsizing process has had a negative impact on those who survive as employees in the organization, they can only serve to highlight the presence of psychological and behavioural consequences for survivors. (Thornhill, Saunders, 1998:273-4)
Why do firm downsize?
A diversity of reasons can be lead to the decision of downsize. Organization and employees are being force to adapt to an environment characterized by augmented competition, government deregulation and technological evolution. (Internet Material #7) (Refer to Appendix 1 for most common reasons of restructuring) It can increase productivity, the value of the companiesÐŽÐ‡ shares and the profits by reducing the number of employees per unit. Companies downsize to cut cost, improve efficiency and to maintain a profit level acceptable to their shareholders. Other reasons include reorganization, minimizing bureaucracy, eliminating excess, business downturns, mergers, and acquisitions. (Makawatsukul & Kleiner, 2003:52) Downsizing has become strategic decision by systematically reduce workforce to become more cost efficient and competitive. For example, when Boeing CEO Frank Shrontz predicted 1993 price wars and increase competition, the company targeted 25%-30% cost reduction goals. Shrontz focused on the Defense and Space Group, eliminating 16,000 of 53,000 workers through attrition and transfer to other units. (Daft, 1997:416-417) The economic downturn that began in 2000 has again made the downsizing a common practice in AmericaÐŽÐ‡s corporations. In addition, downsizing is part of many change initiatives in todayÐŽÐ‡s organizations. Reengineering projects, mergers and acquisitions, global competition, and the trend toward outsourcing have all led to job reduction. (Daft, 2004:346)
Downsizing and lay-offs are almost always a necessary as a response to dramatic change. General Motors began downsizing after years of losing market share to Japanese automakers. As for Sears, it has had to shed 50,000 of its employees in response to competitors such as WalMart. In the majority of downsizing cases, the changes were painful yet necessary for the survivor of the company and for its ability to compete in the new global economy. (Beylerian & Kleiner, 2003:97) Firms that were performing well began to downsize as a way to convince the market that were worthy of a substantial jump in market capitalism. During 1980s, General Electric released 104,000 of its 402,000 workers in a move to stay competitive. (Internet Material #4) GE is credited with being the first of the western multi-nationals to see the need for a radical restructuring of their operation in order to meet the threat of international competition and retain a leading position in the developing global marketplace (C.Collins,1999:73 as cited in Collins, 2000:290)
As for the emergence of technology and automation, they have resulted in the replacing for formerly irreplaceable individual such as human phone operators, for instance. Downsizing, according to a large number of analysts, is a side effect of todayÐŽÐ‡s information revolution. Twenty-five years ago, many scholars accurately described many of the components and characteristics of out current techno-economic transition from ÐClabour-intensive to information-intensive production and management, complete with institutional realignments, displacement of workers, major social disruption, and political turbulence, etc. (Beylerian & Kleiner, 2003:97)
Downsizing usually results following an acquisition or merger. Duplicate and redundant functions are eliminated in an attempt to consolidate all operations in order to achieve synergies. The resulting new organization is then expected to operate efficiently and effectively and to achieve the strategic objectives of the new organization (Appelbaum, Simpson & Shapiro, 1987 as cited in Internet Material #2) Referring to The Economist (30/01/99) notes that, there were merger booms in 1998, where the 10 largest mergers in U.S. history took place in this year and had resulted 677,795 American employees lost their jobs in 1998. (David Collins, 2000:291)
As a result of globalization and the breaking down of trade barriers among nations, competition has become hasher and deadlier. Global competition is showing every sign of intensifying. Equipment or products, which were once routinely made in U.S., are now being manufactured in places such as Malaysia, China and India. (Beylerian & Kleiner, 2003:97) The hit of outsourcing to reduce cost is the major reason of downsizing. Boeing has laid off 5,000 engineers since 2001 as struggling to reduce costs to cope with the sharp falloff in orders from the ailing airlines industry. Boeing started recruiting out-of-work Russian aerospace engineers to collaborate on space and commercial-airplane projects which only cost for US$5,400 a year. (Engardio, Bernstein & Kripalani, 3/2/03:42) (Refer to Appendix 2 for full article)
Ex Bank of America (BofA) managers and contractors say one-third of those jobs are headed to Indian, where work that cost $100 an hour in U.S. gets done for $20. Moreover, they also acknowledge that it will outsource up to 1,100 jobs to Indian companies. (Engardio, Bernstein & Kripalani, 3/2/03:36-7) On the other hand, 2,500 young college-educated men and women who have been placed in a company named Wipro Spectramind Ltd in New Delhi and are working during the midnight for the U.S. They are processing claims for a major U.S. insurance company and providing help-desk support for a big U.S. Internet service provider-all at cost up to 60% lower than in U.S. They have been train on how to speak American English. U.S. customers like a familiar accent on the other end on the line. (Engardio, Bernstein & Kripalani, 3/2/03:38) The rise of a globally integrated knowledge economy is a blessing for developing nations. What it means for the U.S. skilled labour force is less clear. At the least, many white-collar workers may be headed for a tough readjustment. The unprecedented hiring binge in Asia, Eastern Europe, and Latin America comes at a time when companies from Wall Street to Silicon Valley are downsizing at home. In Silicon Valley, employment in the IT sector is down by 20% since early 2001, according to the nonprofit group Joint Venture Silicon Valley. (Engardio, Bernstein & Kripalani, 3/2/03:38
Downsizing strategy selection is largely prescriptive and is oriented toward minimizing the effects of downsizing on terminated personnel. (Kozlowski, 1993) Downsizing strategies refer to the methods used by managers to accomplish the reduction. These strategies may range from those offers less organizational control, slower reductions, and fewer negative effects on employees, to those that are under high control, are quick and have more negative effects on personnel such as permanent layoffs, without assistance. (Greenhalgh et al, 1998 as cited Internet Material #1) Approaching downsizing from an organizational strategy perspective has allowed a number of analytical typologies to be advanced which permit individual downsizing programs to be categorized and evaluates. The most well-known are the analytical typologies of Cameron (1994), Freeman and Cameron (1993) and Kozlowski (1993).
Kozlowski et. al (1993) advance an analytical typology which reflects the distinction between a proactive and reactive approach to downsizing. Proactivity in this context implies the following characteristics: integration with business strategy; selective targeting of organizational areas and competencies for downsizing; and recognition of potential consequences from both organizational and individual perspectives. This approach includes the development of managerial tactics to alleviate potential consequences or for their management where they become evident. However, the use of a reactive approach to downsizing is more likely to lead to a failure to achieve the organizational objectives which this strategy is intended to produce, and to the creation of other, unintended negative consequences in relation to remaining employees. Yet the North American literature suggests that a reactive approach to downsizing may be more frequently used (Cameron et al., 1991; Kozlowski et al., 1993; McCune et al., 1988 as cited in Thornhill, Saunders, 1998:276-7)
Cameron and Freeman (1993) argue that the forms of downsizing can be classified as either convergence downsizing or reorientation downsizing. A convergence strategy is one in which the main focus is on efficiency. Freeman and Cameron (1993) and Tushman and Romanelli (1985) argue that a workforce reduction strategy with its emphasis on cost-cutting measures may be termed ÐŽÂ®convergence downsizingÐŽÐ‡. Conversely, downsizing that is associated with altering the fundamental functions and processes in the organization, such as a work redesign or a systemic strategy, may be termed a ÐŽÂ®reorientation downsizingÐŽÐ‡. (Internet Material #5) Convergent downsizing tends to decrease the organizational commitment of survivors. In essence, survivors may feel let down by their employers, less devoted and loyal, and display negative attitude towards their employer. In short, convergent downsizing has a negative effect on commitment. Conversely, reorientation downsizing simplifies the structure of the organization, and focuses on focuses on changing the organizationÐŽÐ‡s culture, attitudes and values of employees. This strategy is part of an ongoing basis for continuous improvement and the focus is on effectiveness. (Mishra Mishra 1994, Mone 1997 as cited in Internet Material #5)
Cameron et. al. (1993) have conducted one of the most extensive and systematic study of corporate workforce downsizing which as appeared in the downsizing literature. The successful companies in their study did not only reduce the work force, but also engaged in organizational redesign and systematic efforts at quality improvement. Successful companies engaged in downsizing as a purposeful and proactive strategy. Interestingly, only a handful of companies in their study were found to have improved organizational performance. (Internet Material #6) There are three types of downsizing strategies which Cameron and his partners suggested.
Workforce Reduction Strategy
With referring to Cameron et al study, this approach to downsizing was the most common strategy used by all the organization. It often referred to as the ÐŽÂ®layoff strategyÐŽÐ‡ (Ryan & Macky, 1998) concentrates primarily upon the elimination of head-count or the reduction of the number of employees in the workforce. It is most often done by top-down directives, and almost always implemented across-the-board since the goal is to reduce headcount numbers quickly. (Internet Material #2)
From the managerial point of view, this strategy is implemented frequently in a reactive manner as a cost-cutting, and may serve as a short-term response to declining profits. (Ryan & Macky 1998 as cited in Internet Material #3). This type of strategy provides immediate reduction, captures the attention of the members of the organization to the seriousness of conditions, motivates cost savings, and creates readiness in the organization for further change. (Internet Material #3) Significantly, Cameron (1993) found that exclusive use of a workforce reduction strategy led to a reduction in organizational performance. In addition, Mishra Mishra (1994) found that organizational performance was adversely affected in relation to both cost and quality where this strategy was used exclusively. (Thornhill, Saunders, 1998:275) Cameron (1994) argued that its benefits are seen to be short-term whereas the attendant costs remain into the longer term as the organization attempts to overcome the loss of required competence and negative survivor reaction. This strategy tends to be largely negative in their consequences. For instance, the amount of relevant knowledge, institutional memory, and other critical skills, that may be lost to the organization upon implementation of an across-the-board, quick-hit approach, is difficult to determine. On the other hand, such radical ÐŽÂ°cut-and-burn strategiesÐŽÂ± (Zamke, 1990:27) focus upon short-term payoffs (Luthans & Sommer 1999), are likely to result in immediate reductions in size and cost. (Cameron, Freeman & Mishra 1993 as cited in Internet Material #3)
Organizational Redesign Strategy
This approach focuses predominantly upon the elimination of work, rather then reducing the number of employees. (Luthans & Sommer 1999 as cited in Internet Material #3) It encompasses activities such as abolishing functions, eliminating hierarchical levels (delayering), groups, division and products, and redesigning tasks, consolidating and merging units, and reducing overall work hours. This approach aims at cutting out work in addition to or in place of eliminating workers. These are medium term strategies that require advanced analysis of the areas that should be consolidated or redesigned. The focus is on work reduction over manpower reduction. (Internet Material #2)
These strategies are commonly regarded as being difficult to implement quickly, due to the fact that the organization ought to be redesigned to some degree. Cameron, Freeman and Mishra (1993) suggest that this, in turn, requires some advanced analysis of the areas concerned. Conversely, empirical evidence has also revealed that the downsized organization appears to be able to achieve a greater degree of efficiency due to its downsized structure. (Internet Material #3)
The Systemic Strategy
Cameron (1993) suggest that this kind of strategy is intended to promote a more fundamental change which affects the culture of the organization through promotion of employee involvement and adherence to a continuous improvement strategy. (Cameron, Freeman & Mishra1993; Luthans & Sommer 1999 as cited in Internet Material #3) This was recognized to be a long-term strategy with one-third of the organizations that he studied attempting to implement it. Systemic strategy attempts to focus primarily upon changing the organizationÐŽÐ‡s intrinsic culture and the attitudes and values of its employees. It focuses on systems in two ways. First, on internal systems, such as values, and communication etc. Secondly, on external systems, such as the production chain and customers. This strategy involves redefining downsizing as a way of life, as an ongoing process, as a basis for continual improvement instead of a program or target. Downsizing is equated with simplification of all aspects of the organization. Instead of being the first target for elimination, employees are defined as resources to help generate and implement downsizing ideas in other areas. All employees are held accountable for reducing costs and finding improvements. Serving customers, meeting their needs, and exceeding their expectations remain a core goal of downsizing activity, not just size reduction. This strategy is the most compatible with principles of Total Quality Management. (Internet Material #2)
Impact of Downsizing on Organization and Individual level
The widespread practice of downsizing has had a major impact on the organizations themselves, the surviving employees. (Internet Material #2) Shaw and Barrett-Power (1997:113) recognize the relationship between strategy, implementation and survivors' reactions and believe there is a need to find a measure of downsizing effectiveness which includes survivor reactions. (Thornhill, Saunders, 1998:281)
There are many benefits of downsizing, however, the hidden costs of this strategy are enormous and, more often than not, undervalued. In fact, the costs often eliminate all of the anticipated benefits. Unfortunately, massive downsizing very often seems to generate more problems than it solves, and only rarely does it achieve its original financial objectives. (Bourque, 1995, Gosselin, 1994) Employee uncertainty and fear can paralyze operations and lead to a significant decline in trust and motivation, affecting the companyÐŽÐ‡s overall productivity. (Internet Material #2)
A major finding in Cameron and Freeman (1994) study, most organizations do not accomplish the desired improvements, but instead experience an escalation in negative consequences. According to Watt Company, a survey of 1005 firms shows that downsized firms between 1986 and 1991 found that only 46% actually reduced expenses, only 32% actually increased profits, only 22% actually increased productivity and only 17% actually reduced bureaucracy, although each of these goals was intended. (Internet Material #1) In addition, Burke and Nelson state that Murray Axmith, a Canadian consulting firm survey in 1995 conducting questions on downsizing, considering effects on remaining employees, 61% decrease morale, 50% reported decreased company loyalty, and 37% reported decreased job satisfaction. (Makawatsakul & Kleiner, 2003:26) Another survey, conducted by the Wall Street Journal, tracking results to objectives, further revealed the failures of downsizing programs. (Refer to Appendix 3) Perceptible, downsizing have unintended negative consequences for individuals and organizations.
Bluel (2001) reports that instead of revitalizing the organization, downsizing created a phenomenon identified by Leonard Schlesinger and James Heskett as ÐŽÂ°the cycle of failureÐŽÂ±. The cycle involves a chain of consequences beginning with employee dissatisfaction and ending with organizational inefficiency, poor service quality, high customer turnover and decreased profitability. (Makawatsakul & Kleiner, 2003:26) Brockner et. al. state that some managers report that layoffs have a decidedly negative effect on their subordinatesÐŽÐ‡ productivity, morale, and overall commitment to the organization. While other managers report that their subordinates respond very differently even within the same organization or work group. (Internet Material #1)
Employees may respond with reduced trust and organizational commitment when the organization breaks its ÐŽÂ®psychological contractÐŽÐ‡ with them. A survey found that 74% of senior managers in downsized companies said that morale, trust, and productivity suffered after downsizing. (Henkoff, 1990 as cited in Internet Material #1) Low morale also tends to spill over to other areas and activities in the corporation. Motivation generally is affected. The sense of loss and alienation, a sense of chaos and a strong sense of uncertainty may occur among the employees. This site effects tend to disrupt the entrepreneurial spirit of many middle managers. With an obvious sense of loss and a decrease in loyalty, these middle managers reduce their level of enthusiasm and the innovativeness with which they conduct their activities and with which they move to shake the companyÐŽÐ‡s business. Such effects contribute to a decline in performance. (Makawatsakul & Kleiner, 2003:26)
Motivation theories help to explain this problem driven by downsizing. "Expectancy theory" suggests that an individual will perform and expend only as much effort as is necessary to reach a desired outcomes and the extent of the effort depends on the value of that outcome to them. In this context, if employees perceive that performance is not a criterion for job survival, or even for reward, they will have no incentive to perform. This conclusion is also supported by "reinforcement theory" that people will perform well when there have been immediate positive consequences for good performance. This implies that, when they perceive negative consequences to high performance, such as terminations, demotions, or salary cuts, they will not be motivated to perform well. Appelbaum et. al, 1997:278)
Hickok argues that, ultimately, the most prominent effects of downsizing will be in relation to culture change, not in relation to saved costs or short-term productivity gains. From a broader cultural perspective, downsizing can be seen as the embodiment of the "creative destruction" inherent in capitalism. As Schumpeter (1950) wrote about capitalism, downsizing may not be pretty to watch and people will get hurt for sure, but this is the way the market takes care of itself. Brockner and colleagues have studied the "fairness" of layoffs from a procedural justice perspective and have shown a link between perceived fairness of the layoffs and survivor commitment to the organization. Among the fairness factors which Brockner examines is the connection with existing corporate culture. Organizations such as IBM and Digital Equipment which have traditionally had a policy of averting layoffs are likely to be perceived by employees as violating the psychological contract and therefore as more unfair when they do resort to layoffs. (Internet Material #6)
Does downsizing really work? According to Hamel and Prahalad, downsizing is a form of corporate anorexia in that it can make a company thinner but not necessary healthier. They argue that downsizing is merely an inefficient attempt to overcome bad management. In this view it results from a firmÐŽÐ‡s failure to recognize its core competencies, the firmÐŽÐ‡s key skills and resources and to leverage them to the greatest extent possible. To bolster their argument, Hamel and Prahalad also argue that downsizing results in immediate labour savings as well as skill shortages and increased workloads for the employees let to do the work. Although employees are happy to have a job, they are also unhappy because of the increase workload and uncertainty surrounding their jobs. (Anthony, Kacmar & Perrewe al, 2002:670)
The people who lose their jobs because of downsizing are not the only ones deeply affected. Those who keep their job, tend to exhibit what had become known as survivor syndrome. According to Brockner (1998) the term survival syndrome refers to a set of shared reactions common to those who experience downsizing as an adverse event, yet remain within the organization to tell the tale. (Collins, 2000:311) There would be a connection between ÐŽÂ®survivor syndromeÐŽÐ‡ and declines in service quality and organizational performance. Survivor reaction towards downsizing include guilt, anxiety, fear, job insecurity, job dissatisfaction, anger, and in more severe cases, depression or other emotional and physical ailments. Moreover, Baumohl (1993) also states that some survivors feel relieved; and still others feel anxious, wondering if they will be next to lose their jobs. (Internet Material #1) According to Kozlowski (1993), survivor reactions of fear, rigidity loss of commitment, loss of motivation, and failure to innovate may occur at the very time when organization is most in need of employee support. The other possible reactions of the survivor could be absenteeism, intention to leave, reduced risk taking, resistance to change and reduced performance. Greenhalgh and RosenblattÐŽÐ‡s (1984) model of job insecurity illustrate how this psychological state may manifest itself in terms of negative behavioural survivor reactions at work. Job insecurity is shown to be related to lower work effort, intention to leave and resistance to change. The also argue that such relationships will adversely affect organizational effectiveness. (Thornhill, Saunders, 1998:281)
The symptoms and feelings described earlier are particularly acute in survivors of organizations that have traditionally made the welfare of their employees a priority and in which there is a firmly established culture. It has been observed that the symptoms are in no way related to the hierarchical level of the affected individual. (Internet Material #8) Indeed, all survivors are susceptible to the same emotions; the intensity depends on the individual.
According to Latack (1989), the survivors of the transition experience has been viewed as a stressful life event As to Brockner et al., survivors have seen their co-workers "disappear", leaving them to wonder who is next, struggle to ascertain how to survive in hopes that they will not be next, and engage in efforts to secure another position without the knowledge of their current employer. As a result, morale, organizational commitment, and productivity are negatively affected (Hitt, Keats, Harback & Nixon, 1994 as cited in Internet Material #2).
Greeberg, Canzoneri, & DiCostanzo, (1994) suggest that after an organizational restructuring such as downsizing, survivorÐŽÐ‡s job attitudes such as job satisfaction, organizational commitment, job involvement and intentions to turnover become less favorable. Allen et. al. cite a recent American Management Association report indicating that 86 percent of the companies studied identified decreased morale as the most probable after-effect of downsizing In their finding, they also state that the fact that employees would report decreased morale following a restructuring is well-documented and intuitively obvious. (Internet Material #2)
Managers often overlook the need to provide surviving employees with the tools, training, and resources needed to complete these unfamiliar tasks and meet these ambitious targets. Instead, managers expect to get more output simply by demanding more output. (Lewin & Johnston, 2000:45) Thus, it is important for the management to provide program to help those remaining. These programs focused mainly on work-related skills, coaching and counseling skills for managers. Further more, focusing on counseling the individual on personal change and career orientation is also very important.
In the 1980s and early 1990s, a substantial number of U.S. companies announced major restructuring and downsizing. It becomes pervasive during that period. Downsizing happens not only during recession, it has become a popular strategy used by most of the companies in restructuring and improving organization effectiveness. Improving efficiency, productivity and competitiveness, which leads to organizational performance is the central aim of downsizing. It seems that downsizing brings a lot of benefits to the organizations; however, most of the research literature on downsizing has addressed its significant negative impacts, especially for individuals. There are different strategies used in implementing downsizing. Strategy selection is largely prescriptive and is oriented toward minimizing the effects of downsizing on terminated personnel. Poorly implemented strategies have led to decrease in productivity, quality, and employee well-being than to increases. Significantly, well understand and carefully plan for downsizing is crucial towards meeting the organizationÐŽÐ‡s objective. Manager and Human Resource Management represent the main role in the process of downsizing. Organizations that have experienced this process, should consider implementing a team-based culture, which help surviving employees deal with the emotional impact of loss as well as refocus their attention on the future success of the organization. Without strategic leadership, and vision companies are in for a rough ride down the road toward the 21st century
Table 1: Cost control which most common reason firms undertake a restructuring program
Source: People Trends, September 1993, p2 taken from Anthony, Kacmar & Perrewe, 2002:648
Source: Business Week, 03/02/2003
Table 2: Failures of downsizing programs
Desired Outcome Percent of Firms That Achieved Desired Results
Reduced 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 sale 13%
Increased market share 12%
Improved product quality 9%
Technological advances 9%
Increased innovation 7%
Avoidance of a takeover 6%
Source: Wall Street Journal, 6/6/91 taken from Literature Review on Corporate Downsizing, http://pages.infinit.net/rodrigo/downsizing.html