Downsizing in an Organization
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Scott Wheeler, the human resources director of International Forest Products Company, has to make the difficult decision to cut 30% of the workforce due to the economic recession. He must consider the interests of the union, surrounding community, competitors, and shareholders. While protecting shareholder interests is important, Scott also needs to balance the impact on employees and the local economy. Downsizing through voluntary retirement and cutting costs instead of layoffs would minimize harm.
Downsizing in an Organization
- 1. Ideas for today and tomorrow Downsizing Group Members: Roll No: 1- Abdul Quoduos Rahimi A-21 2- Vankadara Venkata Vaibhav A-22 3- Anushka Singh A-23 4- Kashish Bansal A-24 5- Shreya Gupta A-25
- 3. Contents
- 4. Downsizing refers to the process of reducing the overall size and operation cost of a company most directly through a reduction in the total number of employees. when the market is tight, downsizing is extremely common when the company fight to survive in a hostile climate while competing with other companies in the same sector. There are several reason to engage in downsizing. The primary reason is to make daily operation of a business more efficient. The secondary reason for downsizing is technology improvements that allow fewer workers to do the same amount of work. Downsizing is intend to be permanent and downscaling and layoff is intend to be temporary in which the employees may in later rehire. Introduction to
- 6. Economic Crisis Change in Management
- 9. As the largest employer in Ouachita country, Arkansas, International Forest Products Company (IFP) is an important part of the local economy. Scott Wheeler, the human resource director at IFP, tells of a difficult decision he once had to make. According to Scott, everything was going along pretty well despite the economic recession , but he knew that sooner or later the company would effected. I got the word at private meeting with president, Janet Deason, that we would have to cut the workforce by 30 % on a crash basis. First, I thought about how the union would react. Certainly, workers would have to be let go in order of seniority. The union try to protect as many jobs as possible. I also knew that all of management's actions during this period would be intensely scrutinized. We had to make sure that we had our act together. Then there was the impact on the surrounding community to consider. The economy of Ouachita country had not been in good shape recently. Aside from the influence on the individual workers who were laid off I knew that our cutbacks would further depress the area’s economy and there would be a number of government officials and civic leaders who would want to know how we were trying to minimize the harm done to the public in the area. Case Summary
- 10. We really had no choice but to make the cuts, I believed. First of all, I had no choice because Ms. Deason said we were going to do it. Also, I had recently read a news account that one of the competitors, Johns Manville Corporation in west Monre, Louisiana, had laid off several hundred workers in a cost-cutting move. To keep our sales from being further depressed, we had to ensure that our costs were just a low as those of our competitors. The wood products market is very competitive and a cost advantage of even 2-3 % would allow competitors to take many of our customers. Finally a major reason for the cutbacks was to protect the interest of our shareholders. Certain antipollution n changes. In general , though, the share holders seem to be more concerned with the return o their investments than with social responsibility. At our meeting, the president reminded me that, just like every other manager in the company, I should place the shareholders’ interests above all else I really was quite overwhelmed as I began to work up a human resource plan that would balance all of these conflicting interests. Continue…
- 11. As the employee of IFP are not members of the union, How to identify those who will be laid-off nonunion and unionized employees ? Ans: In the union environment workers will be laid-off based on seniority as defined in the labor management agreement . Non-union employees will likely be laid-off based on the results of their performance appraisal and the needs of the company. Scotts’s office will likely go through the file of all Non-union employees and recommend to management those who will be fire out. Questions & Answers
- 12. List the elements in the company’s environment that will affect Scott’s suggested plan. How legitimate is the interest of each of these ? Ans: Of course all the elements are legitimate . The local government has a right to consideration , not only because it represent the public, but because it can affect the company future. The union must represent the employees but also has right to try to sustain itself . The surrounding community is already in difficult and this layoff will increase the unemployment . In tough situation if the company do not downsize the competitors will cut-off their prices and this will lead decrease in market share and interest of the company for sustaining in the market they must do lay-off. Questions & Answers
- 13. Is it true that Scott should be concerned first and foremost with protecting the interests of shareholders ? Ans: Scott has been told by Ms. Janet Deason that we should cut-off 30 percent of workforce. The first concern was cut the costs because recession situation in the economy of the country. The lay-off of workers by competitors company which they will reduce the prices of the wood products which was a major problem for the company’s future. The last and important concern was to protect the shareholders interest . Shareholders were in concern about future of the company. Questions & Answers
- 14. 1) The best way for the company was to identify those workers who voluntary want to retired and those who are in seniority age should be retired it is a good way to downsize the employees in an organization. 2) The organization should not make focus on government from the future action taken by the government. 3) As the human resource director the main focus should not be on interest of the company they should focus on social responsibility. 4) Instead of laying off and turning them out of the job the company can cut the bonus promotion , salary and extra charges. 5) When an employee is recruited in a company the company should open an accoun for pension for retirement . Suggestions