DOWNSIZING

AND
RESTRUCTURING
 Learning Objectives

After reading this chapter, you should

be able to:
• Concept of Downsizing

• Downsizing Strategies

• Needs for Downsizing

• Perception of Justice in Downsizing

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 DOWNSIZING

Downsizing is a set of activities undertaken on the

part of management and designed to improve
organizational efficiency, productivity, and/or
competitiveness.

It represents a strategy implemented by managers

that affects the size of the firm’s workforce, the costs,
and the work processes.
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 Definitions

• Survivor – an employee remaining with an

organization after a downsizing

• Job insecurity - feelings of concern about the

continuing existence of a job

• Psychological contract – an unwritten commitment

between employers and their employees that
historically guaranteed job security and rewards for
loyal service
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 WHY DOWNSIZING ?

1. Declining profits
2. Business downturn or increased pressure from
competitors
3. Merging with another organization, resulting in
duplication of efforts
4. Introduction of new technology
5. The need to reduce operating costs
6. The desire to decrease levels of management
7. Getting rid of employee “deadwood”
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 DOWNSIZING
STRATEGIES

1. Work-force Reduction

2. Work Redesign

3. Systematic Change

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 DOWNSIZING
STRATEGIES
1. Work-force a short-term strategy to cut the number
Reduction
of employees through attrition, early
retirement or voluntary severance
2. Work packages, and layoffs or terminations etc.
Redesign

3. Systematic
Change 7
 DOWNSIZING
STRATEGIES
1. Work-force a medium-term strategy in which
Reduction
organizations focus on work processes
and assess whether specific functions,
2. Work products, and/or services should be
Redesign
changed or eliminated.

3. Systematic
Change 8
 DOWNSIZING
STRATEGIES
1. Work-force a long-term strategy that changes the
Reduction
organization’s culture, attitudes, and
employees’ values with the goal of
2. Work reducing costs and enhancing quality.
Redesign

3. Systematic
Change 9
 JUSTICE
Perceptions of fairness and equity plays a key role in
understanding how survivors of a downsizing react to
the experience.

There are 3 TYPES OF JUSTICE.

1. Procedural
2. Interactional
3. Distributive
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 JUSTICE
1. Procedural procedures or rules used to determine
which employees will be downsized

2. Interactional

3. Distributive
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 JUSTICE
1. Procedural the interpersonal treatment employees
receive during the implementation of the
downsizing decision

2. Interactional

3. Distributive
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 JUSTICE
1. Procedural the fairness of the downsizing decision

2. Interactional

3. Distributive
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End of Session

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