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HR Planning - Chapter 10.docx

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York University
Human Resources Management
HRM 3430

Chapter 10 Downsizing and Restructuring The Downsizing Strategy Downsizing - Strategies to improve an organization’s efficiency by reducing the workforce, redesigning the work, or changing the systems of the organization - Sign of a sick relationship within the organization between management and employees Survivor - An employee remaining with an organization after a downsizing - They are worried about the people who did not survive the downsizing Three Types of Downsizing Strategies Cameron identifies three types of downsizing strategies: 1. Workforce reduction – must happen - A short-term strategy to cut the number of employees through attrition, early retirement or voluntary severance packages, and layoffs or terminations 2. Work redesign – strategic change in the work organization - A medium-term strategy in which organization focus on work processes and assess whether specific functions, products and/or services should be changed or eliminated 3. Systematic change Why do Organizations Downsize? - Declining profits - Business downturn or increased pressure from competitors - Merging with another organization, resulting in duplication of efforts - Introduction of new technology - The need to reduce operating costs - The desire to decrease levels of management - Getting rid of employee ‘deadwood’ - Dead man’s curve – yearly cycle of letting go of the bottom 3% - Jack Welsh Human Costs of Downsizing - As Cascio suggests, most workforce reduction programs fail to meet their objectives: - “Study after study shows that following a downsizing, surviving employees become narrow- minded, self-absorbed, and risk averse. Morale sinks, productivity drops, and survivors distrust management” Ethical Considerations - Downsizing may infringe on principles of distributive, procedural and interactional justice - Communication during a downsizing may be mismanaged - Managers may use and abuse information as a source of power - Managers may choose to conceal or distort information regarding the financial status of the business Downsizing Alternative 1. Cutting nonpersonnel costs 2. Cutting personnel cost 3. Providing incentives for voluntary resignation or early retirement Inplacement and Outplacement Issues Outplacement – providing a program of counselling and job-search assistance for workers who had been terminated Inplacement – reabsorbing excess or inappropriately placed workers into a restructured organization Medium-term - Extending reduction in salaries - Voluntary sabbatical Planning for Downsizing - Determining how many people will lose their jobs - Who will be let go - How the reduction will be
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