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Article
Publication date: 17 October 2018

Michael Carriger

Given a growing literature indicating that downsizing is not an effective way to address financial decline, having either little impact or negative impact on the financial…

Abstract

Purpose

Given a growing literature indicating that downsizing is not an effective way to address financial decline, having either little impact or negative impact on the financial health or market valuation of financially troubled companies, what is the alternative for those companies in financial trouble? Three sets of alternatives to downsizing are available to companies suffering financial trouble: strategies addressing personnel/fix costs, strategies focused on addressing cost cutting/variable costs and strategies addressing strategic planning/revenue. Although alternatives to downsizing have been identified, little research has been conducted comparing the impact of downsizing vs alternatives to downsizing on firm performance. The paper aims to discuss this issue.

Design/methodology/approach

This present study looked solely at strategies focused on addressing personnel/fix costs. Focusing primarily on forced attrition (downsizing) vs temporary attrition and/or natural attrition, this research attempts to determine whether specific groupings of alternatives to downsizing are more effective at addressing financial decline that companies find themselves in as compared to downsizing. This included relying on temporary attrition, natural attrition or doing nothing at all.

Findings

The research presented here indicates that various alternatives to downsizing have an immediate positive impact on measures of profitability and a positive long-term impact on one measure of efficiency: revenue per employee. Evidence shows that temporary attrition leads to better financial outcomes than natural attrition than forced attrition or downsizing.

Originality/value

The research presented here indicates that various alternatives to downsizing have an immediate positive impact on measures of profitability and a positive long-term impact on one measure of efficiency: revenue per employee. This has implications for managers put in the position of having to make a decision whether to downsize or not.

Details

Journal of Strategy and Management, vol. 11 no. 4
Type: Research Article
ISSN: 1755-425X

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Article
Publication date: 3 September 2019

Agnes Zdaniuk and Nita Chhinzer

The purpose of this paper is to examine whether the type of explanation (excuses, justifications, apologies and denials) provided for downsizing and the source of the…

Abstract

Purpose

The purpose of this paper is to examine whether the type of explanation (excuses, justifications, apologies and denials) provided for downsizing and the source of the announcement (CEO vs other organizational members) influences shareholders’ market reactions to downsizing announcements.

Design/methodology/approach

In total, 388 media-based downsizing announcements from 2006–2015 were coded for explanation type and source of message. Cumulative average return was used to assess the impact of downsizing on market reactions the day after the announcement.

Findings

As predicted, and consistent with predictions drawn from fairness theory, excuses triggered positive market reactions, whereas justifications, apologies and denials triggered negative reactions. Additionally, shareholders reacted more negatively to excuses and apologies when the announcement came from CEOs vs other organizational members.

Research limitations/implications

The current research bridges the literature on market reactions to downsizing with the organizational psychology literature to advance a novel theoretical framework for predicting shareholders’ reactions to downsizing announcements. In doing so, the authors provide a more refined understanding of why different types of explanations may differentially influence shareholders’ reactions. The current research also sheds light on when the presence of the CEO in downsizing announcements may have potentially negative consequences for organizations.

Originality/value

The findings contribute to the sparse literature examining variations in the content of downsizing announcements on shareholders’ reactions. The present research is also the first to examine whether shareholders would react less negatively if downsizing explanations came from top organizational leaders (e.g. CEOs).

Details

Journal of Organizational Change Management, vol. 32 no. 4
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 1 August 1998

Adrian Thornhill and Mark N.K. Saunders

Review paper which draws together the various theoretical and disciplinary strands used in the literature to evaluate downsizing and redundancy. Defines downsizing and…

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19768

Abstract

Review paper which draws together the various theoretical and disciplinary strands used in the literature to evaluate downsizing and redundancy. Defines downsizing and redundancy within the organisational context. Explores complexity of the relationships with performance and effectiveness at both organisation and sub‐organisation levels. Evaluates downsizing strategies and implementation methods that organisations may use. Utilises the individual perspective to examine and discuss the consequences of downsizing relative to survivors. Considers the implications of this for managers. Relates theories of equity, organisational justice, job insecurity, job redesign and organisational stress to approaches which may mitigate negative responses to downsizing that impact on organisations’ performance and effectiveness.

Details

Personnel Review, vol. 27 no. 4
Type: Research Article
ISSN: 0048-3486

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Article
Publication date: 28 October 2021

Yeongjoon Yoon

Studies comparing the consequences of payroll cost reduction methods (i.e. cutting pay and downsizing) have been limited, with no studies comparing these methods' impact…

Abstract

Purpose

Studies comparing the consequences of payroll cost reduction methods (i.e. cutting pay and downsizing) have been limited, with no studies comparing these methods' impact on job-seeker attraction. The current research tries to close this gap by comparing the effects of cutting pay and downsizing on job-seeker attraction outcomes.

Design/methodology/approach

Two studies are conducted. The first study compares the effects of the two payroll cost reduction methods (i.e. cutting pay vs downsizing) on job-seeker attraction through a within-subject design experiment of people in the United States. The second study analyzes secondary data in South Korea to compare the two methods' effects on the number of job applicants applying for job openings.

Findings

The results demonstrate that organizations with a history of pay cuts yield more favorable job-seeker attraction outcomes than organizations with a history of downsizing.

Practical implications

Although firms that choose to downsize may better maintain the morale of surviving employees, the decision of downsizing can have long-term costs, such as having a worse capability to attract job-applicants than firms that choose to cut pay and share the pain as a group.

Originality/value

The research provides an insight into which payroll cost reduction method yields better outcomes in terms of job-seeker attraction. The research responds to the call in the payroll cost reduction method literature of identifying a feasible alternative to downsizing in terms of various outcomes other than the morale of current (or remaining) employees.

Details

Employee Relations: The International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0142-5455

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Article
Publication date: 1 September 1999

Steven H. Appelbaum, Andrea Everard and Loretta T. S. Hung

Aims to review the literature pertaining to downsizing with an emphasis on the organization level, and establish the critical success factors of downsizing, that is…

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11711

Abstract

Aims to review the literature pertaining to downsizing with an emphasis on the organization level, and establish the critical success factors of downsizing, that is, guidelines to the successful implementation of downsizing activities. Addresses these objectives by examining first, how downsizing is defined in the literature reviewed, then discusses the different ways in which or measures by which organizations carry out downsizing activities and the reasons that prompt companies to downsize. Addresses the rationale utilized by firms to downsize, the expected outcomes in terms of economic and human consequences, the approaches to downsizing (reorientation and convergence) and specific strategies such as workforce reduction, work redesign and systemic strategy. Also downsizing tactics, human resources as assets vs costs, planning, participation, leadership, communications, and support to victims/survivors are examined. Both laboratory experiments and empirical research concerning survivors’ reactions are explored. The role of trust as well as the human resource professional in the process are included. Conclusions and recommendations complete the article.

Details

Management Decision, vol. 37 no. 7
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 February 1999

J. Michael Rayburn and L. Gayle Rayburn

Since 1980 U.S. companies have cut more than 43 million jobs through downsizing. That represents layoffs affecting nearly three‐quarters of all U.S. households. Unlike the…

Abstract

Since 1980 U.S. companies have cut more than 43 million jobs through downsizing. That represents layoffs affecting nearly three‐quarters of all U.S. households. Unlike the layoffs of 20 years ago, these cuts are permanent. Historically, layoffs tended to affect line manufacturing workers, but since the mid‐1980s, white‐collar and managerial jobs have been hardest hit. In the largest U.S. firms, 77 percent of the jobs lost since 1989 have been white‐collar jobs (Anfuso, 1996 & Laabs, 1996).

Details

Competitiveness Review: An International Business Journal, vol. 9 no. 2
Type: Research Article
ISSN: 1059-5422

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Article
Publication date: 1 June 1999

Steven H. Appelbaum, Tamara G. Close and Sandy Klasa

Focuses on downsizing and reviews selected research on organizational change and downsizing. Addresses the issues of “survivors”, and also covers the strategic concerns in…

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6468

Abstract

Focuses on downsizing and reviews selected research on organizational change and downsizing. Addresses the issues of “survivors”, and also covers the strategic concerns in planning a downsizing operation and attempts to determine some specific reasons why some companies succeed at downsizing while others do not. Discusses an organization’s context, composed of culture, level of trust and level of leadership, since it has a profound effect on a company’s downsizing strategy. Examines case studies of Compaq Computer, the State of Oregon, and Patagonia and supports the need for the concerns of the surviving employees to be listened to. In the case of these downsizings, the surviving employees were successfully shown that they should not feel victimized by the downsizing process, but instead should see this process as an opportunity for personal growth.

Details

Management Decision, vol. 37 no. 5
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 February 2003

Steven H. Appelbaum, Eric Patton and Barbara Shapiro

The literature on downsizing and downsizing through early retirement programs lead to a clear conclusion: managers must take a very thoughtful approach to downsizing. Poor…

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4275

Abstract

The literature on downsizing and downsizing through early retirement programs lead to a clear conclusion: managers must take a very thoughtful approach to downsizing. Poor planning, knee‐jerk reactions, miscommunication with employees and the mishandling of remaining employees can lead to failure. Despite all the benefits, early retirement incentive programs have received harsh criticism on a number of fronts. The legal, societal, and individual implications of early retirement incentive programs are numerous. The key to reducing this uncertainty and potential negative outcomes is the ability to predict beforehand which employees will accept the early retirement packages. Many factors influence the decision to retire and are examined. Predicting who or why someone will retire is extremely difficult. One of the missing ingredients for the success of these programs can be found in the Human Resources Department and its activities. This is the linking pin for all training, development and education efforts intended to socialize the existing management team responsible for this activity and its success as well as failures to deal with the new changes and culture of a downsized organization. Attention is given to the role and major issues of this intervention.

Details

Journal of European Industrial Training, vol. 27 no. 1
Type: Research Article
ISSN: 0309-0590

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Article
Publication date: 1 February 1991

Steven H. Appelbaum

A model for managing “downsizing” in twoorganisations (one public sector and one private sector)which carried out programmes which substantiallyreduced personnel numbers…

Abstract

A model for managing “downsizing” in two organisations (one public sector and one private sector) which carried out programmes which substantially reduced personnel numbers is examined. The cases are also studied for general guidelines in such exercises; human resource management and strategic planning should take into account the needs of affected individuals and of the proposed slimmer organisation.

Details

Leadership & Organization Development Journal, vol. 12 no. 2
Type: Research Article
ISSN: 0143-7739

Keywords

Open Access
Article
Publication date: 3 October 2019

Manal Elsayed Shabat

The purpose of this paper is to analyze the conceptual framework about human resources downsizing and restructuring and how organizations of the public sector can do that…

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8927

Abstract

Purpose

The purpose of this paper is to analyze the conceptual framework about human resources downsizing and restructuring and how organizations of the public sector can do that effectively and efficiently. These facts drive to the conclusion that the implementation of early retirement incentives requires the most elaborate planning and execution to be effective, predictable and safe in the long term.

Design/methodology/approach

This paper adopts an analytical, descriptive methodology approach to describe the basic features of the data by using the descriptive research design. Data have been collected through different sources, which include secondary data, to introduce the theoretical literature of the subject as books, journals, articles, published working papers and referred previous studies related to the same subject.

Findings

Downsizing process is a deliberate administrative process that includes, but is not limited to, workforce reduction and is primarily aimed at achieving efficiency in public organizations. The definition of workforce downsizing may be narrowed to reducing the number of workers, or more likely to refer to general efforts to restructuring human resources in public organizations, Early Retirement Incentive Programs (ERIP) represents a viable alternative for organizations seeking to reduce staff. For the ERIP to be successful, the program coordinator must understand the business objectives and goals that the organization is trying to obtain.

Originality/value

Human resources strategies concerning downsizing public administration workforce should be more appropriate to those who leave the organization and those who stay at work, reducing the negative psychological, administrative and economical effects. This could be achieved through a strategy called early retirement incentive programs.

Details

Review of Economics and Political Science, vol. 5 no. 1
Type: Research Article
ISSN: 2356-9980

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