Downsizing is a complicated and painful process of reducing the manpower in an organization in response to hostile financial circumstances. Downsizing involves a great deal of negative publicity and deals a blow to employee morale. The management executives, often, have to struggle with feelings of guilt. Hence, downsizing is often the last thing that is considered in a re-engineering process. The adverse situation the organization is in, determines the degree and the nature of the downsizing operation. Typically, the management calculates a certain amount of money that needs to be saved. Relatively non-critical functions such as training and modes of transport are the first to face the axe. If the workforce needs to be reduced, the management will have to decide the positions which need to be scrapped. In certain situations, an “across-the-board” downsizing is considered. The employees in the upper rungs of the management will be asked to take a certain percentage of reduction in their payroll expenses. Sometimes, senior employees may be encouraged to opt for an early retirement with a severance package. Besides, other employees can be offered employment on a contract basis as consultants. As mentioned earlier, downsizing causes a great deal of negative publicity and demoralizes the employees. It can be extremely stressful for those who are laid off. Lay-offs often entail great trauma and distress for the employees and their families. Hence, the whole exercise of reducing the workforce should be undertaken with great prudence and sensitivity. Besides, a downsizing procedure done carelessly will give room for accusations of favoritism and discrimination on the basis of gender, race, age etc. Some of the things that should be borne in mind while undertaking downsizing are: 1.Use of objective criteria: Using objective criteria to determine the posts that need to be downsized helps the management to avoid subjective conclusions which may be biased and based on superficial opinions and notions. 2.Transparency about the criteria: Being transparent about the criteria and the processes avoids misconceptions and safeguards the company against unfavorable allegations. 3.Involvement of the employees: Taking the employees on board the decision making panel gives them a sense of “ownership” and understanding. 4.Downsize positions and not employees: Always decide on which posts need to go, never on which need employees to be axed. Keep sending the message that downsizing is about positions and not about employees. 5.Independence of the evaluating team: Independence of the evaluating team gives a sense of credibility and objectivity. When the evaluation is done by a person close to the management, there is scope for nepotism and bias. 6.Assistance in seeking unemployment benefits: Ensure that the laid off employees receive immediate unemployment assistance from the government. Prompt intimation of the lay-off to the concerned authorities is necessary to achieve this. Information pertaining to the employee such as address, date of layoff and the reasons etc should be provided to the authorities. 7.Giving severance benefits: Though not made mandatory by law, severance packages are sometimes customary in companies due to established policy. These packages can be decided on ad hoc criteria such as duration of tenure, classification of job profile and the level of wage.
As said earlier, use of objective criteria is critical to an effective downsizing process. Some of the steps leading to a set of consistent downsizing criteria are:- - Identification of the vital skills which are necessary for the survival of the company should be carried out. The people who possess these skills should be retained, since, they are hard to replace.
- Retain employees who are not easy to replace and who will affect the company if they started to work for a competitor.
- Identification of the top performers
- The areas and divisions which are non essential can be outsourced.
- Identifications of poor performers.
- The concerns of diversity and adverse publicity should be borne in mind.