EFFECT OF DOWNSIZING ON ORGANISATION

Effect of Downsizing on Organisation

Abstract

The main purpose of this research paper is to make an analysis on the effects of downsizing on the organisation on the individual, group and organisational level. The economy is going down; therefore, as a medium of cost cutting many companies are going for the options of downsizing. Every thing has both positive and negative impacts. Just like the other factors, there are also different positive and negative effects of downsizing. Downsizing has severe positive effects on the individuals, groups and organisations. Although the negative effects of downsizing have also been discussed in this research paper.

Table of Content

Introduction4

Literature Review5

The Positive Effects of Downsizing for Innovation6

The Negative Effects of Downsizing for Innovation8

Critical factors for downsizing successfully11

Analysis13

Conclusion17

References18

Effects of Downsizing on Organisations

Introduction

According to Isaksson (2000) downsizing “constitutes a set of activities undertaken on the part of the management of an organisation designed to improve organisation efficiency, productivity and competitiveness (Isaksson, 2000, p. 241). It represents a strategy implemented by managers that affects the size of the firm's workforce and work processes used (Isaksson, 2000, p. 241).” Reasons for decline range from increased competition, reduction in market share, stagnation, to an overall fall in performance levels. Decline is related to inefficiency as the costs of overheads do not match productivity levels (Bailey, 1988, p. 8). Downsizing as a technique can be used in companies that are thriving, especially when it is applied as part of a pro-active strategy to improve and enhance corporate effectiveness (Tzafrir, 2006, p. 125). For example, the five clearing banks in the UK have experienced significant downsizing in some parts and growth in others Downsizing can also be used to revive the decline phenomenon. Further, Isaksson (2000) propose that organisation decline can be “measured independently of any managerial action”, whereas downsizing cannot be implemented without considering outcomes, aims and “intentionality” (Isaksson, 2000, p. 241). Downsizing has been identified for long as a restructuring strategy for organizations intent for new levels of competitiveness. In the mid-1970, Charles Handy had identified that technological advancements would transform millions of individuals through a process he called “down-sizing”. Though at that time, the concept was not fully appreciated, it has became an all pervasive phenomena now. Thus, the paper discusses the different effects of downsizing on the organisational effectiveness (Bailey, 1988, p. 8). It discusses its impact on the individual, group and organisational level.

Literature Review

Iverson (2000) has described the survivor syndrome as a “generic term that describes a set of attitudes, feelings and perceptions that occur in employees who remain in organisational systems following involuntary employee reductions (Iverson, 2000, p. 977). Words commonly used to describe layoff survivor sickness are anger, depression, fear, distrust and hurt.” Downsizing leading to layoffs can have a significant adverse effect on the survivors depending upon how they perceive the layoffs. Organisations pay a great deal of attention to the redundant employees, survivors on the other hand, is the ones who are “lucky to have a job” (Iverson, 2000, ...