GROUP PRESENTATION

WEEK 8

TOPIC: COULD DOWNSIZING BE A GOOD THING?

NAME STUDENT ID
Ruci B Colata s11184128
Kartik Pillay S11186179
Harsith Harish Chand s11183705
Joy Filolita Smith s11188977
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 OUTLINE
1.0 INTRODUCTION
2.0 OVERVIEW
3.0 QUESTIONS
4.0 ORGANISATIONAL RESTRUCTURE
5.0 RISKS FOR RESTRUCTURING FURTHER
6.0 RECOMMENDATIONS
7.0 CONCLUSIONS
8.0 REFERENCE

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 1.0 INTRODUCTION
Downsizing is the permanent reduction of a company's labor force through the elimination of unproductive
employees or workers. It is typically not due to any conduct on the part of the employee, but rather business
conditions as a whole.
In fact, it is a restructuring process to meet the challenges of the environment.
Downsizing is not always positive and can have an adverse long-term impact on a company's bottom line.
How does downsizing works?
During a downsizing, the company will usually notify certain employees that they are being laid off.
Usually, these are permanent layoffs; however, sometimes the employees may be rehired after a restructuring
period.
There may also be changes in the day-to-day work of the remaining employees after a company downsizes.
Because there are fewer employees, many workers will have to take up new responsibilities.
Sometimes the added stress of losing coworkers and being tasked with more responsibilities results in the
loss of morale for the remaining staff.
.

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 Reasons for downsizing
• Reduce cost-The retained earnings of a company are affected by the amount it pays out in payroll, and
removing this obligation is one way to cut costs.
• Streamlining- Downsizing can also occur when a company wants to “streamline” itself through
corporate restructuring in order to increase profit and maximize efficiency.
• Excessive workforce- Companies downsize the employees when the demand is low or in less growth. In
that case, some companies stop hiring new staff and only believe to retain their existing.

Effects of Downsizing
• Increased Workloads and Pressure on Remaining Employees
• Loss of Trust and Security
• Loss of Knowledge and Experience
• Client Relations

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 2.0 OVERVIEW
 In the case study, Hewlett Packard Enterprise(HP) provides an organizational example where deliberate
downsizing might be good for the future of a company.
 HP was founded by Bill Hewlett and Dave Packard in 1939 in a Palo Alto garage in California.
 Despite the ongoing moves to downsize, the company is still very successful
 In 2014 ,the CEO Meg Whitman announced that HP would separate its computer and printer business
from its corporate hardware and services operation.
 In dividing the company, each unit was able to invest in and focus on developing their products and
services.
 The focus on shrinking for strategic impact led Meg Whitman in 2016 to shrink Hewlett Packard
Enterprise even further.
 She believes that having fewer people to involve in decisions can lead to better outcomes.
 In fact the workforce lost a total of 5000 staffs and decreasing demand of product occur even though they
retain their position in the market.

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 PERFORMNACE OF A DOWNSIZING COMPANY
VERSUS NON-DOWNSIZED COMPANY

9
Companies Performance
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7
6
5
4
3
2
1
0
Year 1 Year 2 Year 3 Year 4

Non-Downsized Company Downsized company

 Studies have tracked the performance of downsizing firms versus non-downsizing firms for as long as nine
years and as a group the downsizers never outperform the non-downsizers.
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 3.0 QUESTIONS
Organizational restructuring sometimes takes place in an environment where a company sees itself as losing
its competitive position as well as losing money. What do you see as the risks of restructuring further when
the company is still doing well competitively?

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 4.0 ORGANISATIONAL RESTRUCTURE

• Business restructuring (or organizational restructuring) is a process that can address a company’s
unsatisfactory status quo in the constantly evolving market.
• Change and restructuring often provide opportunities to improve work organization and the content of
jobs and for changes in roles and responsibilities which may enhance skills and career development while
leading to better and more efficient use of staff resources as well as other resources
• Positive restructuring could result in a growth spurt for the company as this is when effective HR
structures are put in place and the correct skills are allocated to the correct departments.
• Negative Restructuring is often a result of poor HR management and can create a downward spiral or
stagnant growth.

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 WHY DO ORGANISATIONS RESTRUCTURE THEIR BUSINESS?
 In most cases, it can be when a company is struggling to survive a massive blow or looking to maximize
its already profitable business.
 For example , in HP Enterprise they had a huge restructuring because the CEO felt these restructuring
activities will enable a more competitive, sustainable cost structure for the new HP Enterprise.
 Other minor reasons of restructuring business includes;
• Unclear roles & responsibilities,
• Lack of leadership
• Bad design of processes
• Poor internal communication

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 RELATIONSHIP BETWEEN DOWNSIZING AND
ORGANISATIONAL RESTRUCTURING
• Downsizing occurs during the process of restructuring a business, if restructuring is done first then
downsizing may follow if employment redundancies are the result of structural and process change.
• In recent years, hospitals have radically restructured their operations while significantly downsizing their
workforces.
• The research reported here sets out to separate and isolate the independent and combined effect of
organizational restructuring and downsizing on hospital performance
• Do hospitals which undergo significant organizational restructuring while maintaining their workforce
complement perform any better than hospitals that institute significant restructuring while heavily
downsizing, and any better than hospitals which heavily downsize but undertake little or no organizational
restructuring?
• According the result, Hospitals which undertook significant organizational restructuring while heavily
downsizing were perceived to perform better than hospitals that heavily downsized but conducted little or
no organizational restructuring, but performed worse than hospitals that undertook significant
restructuring while maintaining their workforce complement

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 5.0 RISKS FOR RESTRUCTURING FURTHER
1. Unemployment
 Organizational restructuring forces employees to leave the organization because all the decisions are
decided by the leaders of the organization.
 For instance, The HP Enterprise dropped 5000 staffs based on the costs related to the restructuring that
were disclosed and it includes both layoffs and voluntary early retirement.

2. Impact on Rate of investments(ROI)

 One of the dangers in changing an organization is that the company may experience an impact on ROI.
 Customers may not be informed with all the new changes, and chaos may ensue when a company is
unable to recalibrate their business practices in an efficient manner.
 HP Enterprise said it lost $612 million, or 37 cents a share, due in part to charges and taxes associated
with the company’s sale of it services and consulting business to Computer Sciences

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 3. Morale Demotivation
 periods of change can often bring a heavier workload for the company, leaving team members feeling
overwhelmed and confused in the efforts towards restructuring .
 Team members may not understand what their new roles are in the process, which can cause confusion
and a disruption to a unified workflow.
 For these reasons, businesses will need to be aware of the morale in the company to ensure a strong effort
in the work behind the business changes.

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 6.0 RECOMMENDATIONS

How To Manage A Workforce During Organizational Restructuring?

 Understanding the current workforce-It means understanding the employees skills and personality for
the job. For understanding the skills, you can hold meetings with the employees and go through their
performance previews.
 Organizational structure-important to have a definitive structure to have a clear understanding of
everyone’s work.
 Redesigning the jobs- compare the new job roles to old ones to understand similarities and differences in
them and consider having employee training and development to upgrade the workforce instead of
acquiring a new work staff.

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 7.0 CONCLUSION
A final thought on “key person syndrome” – there may ultimately be a need to modify the best design based
on current talent realities, but only go there as a backup plan.
Organizational restructuring risks are significant. Yet, as a leader it is tempting to see organizational
restructuring, or changes in organization design, as the solution to under-performance or the key to
implementing a new strategic direction. Therefore, leaders need to look into other issues related to business
restructuring before making a final decisions.

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 REFERENCE
• John R. Schermerhorn, Jr., Paul Davidson, Peter Woods, Aharon Factor, Fatima Junaid, Ellen McBarron J
ohn Wiley & Sons, 21 Jan 2020 - MANAGEMENT TEXTBOOK Business & Economics - 608 pages
• https://blog.vantagecircle.com/organizational-restructuring/
• Https://www.marketwatch.com/story/with-yet-another-restructuring-hp-wakes-up-to-the-realities-of-its-st
ruggling-cash-cow-2019-10-03

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