Downsizing in an Organization

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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

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

Economic Crisis Change in Management

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

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…

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

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

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

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 .
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Downsizing in an Organization

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