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CHANGE MANAGEMENT@ICICI
Case Code-HROB008
Published-2002
"What role am I supposed to play in this ever-changing entity? Has anyone
worked out the basis on which roles are being allocated today?"
- A middle level ICICI manager, in 1998.
"We do put people under stress by raising the bar constantly. That is the only
way to ensure that performers lead the change process."
- K. V. Kamath, MD & CEO, ICICI, in 1998.
THE CHANGE LEADER
In May 1996, K.V. Kamath (Kamath) replaced Narayan Vaghul (Vaghul),
CEO of India's leading financial services company Industrial Credit and
Investment Corporation of India (ICICI). Immediately after taking charge,
Kamath introduced massive changes in the organizational structure and the
emphasis of the organization changed - from a development bank [1]mode to
that of a market-driven financial conglomerate.
Kamath's moves were prompted by his decision to create new divisions to
tap new markets and to introduce flexibility in the organization to increase
its ability to respond to market changes. Necessitated because of the
organization's new-found aim of becoming a financial powerhouse, the
large-scale changes caused enormous tension within the organization. The
systems within the company soon were in a state of stress. Employees were
finding the changes unacceptable as learning new skills and adapting to the
process orientation was proving difficult.
The changes also brought in a lot of confusion among the employees, with
media reports frequently carrying quotes from disgruntled ICICI employees.
According to analysts, a large section of employees began feeling alienated.
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The discontentment among employees further increased, when Kamath
formed specialist groups within ICICI like the 'structured projects' and
'infrastructure' group.
Doubts were soon raised regarding whether Kamath had gone 'too fast too
soon,' and more importantly, whether he would be able to steer the
employees and the organization through the changes he had initiated.
BACKGROUND NOTE
ICICI was established by the Government of India in 1955 as a public
limited company to promote industrial development in India. The major
institutional shareholders were the Unit Trust of India (UTI), the Life
Insurance Corporation of India (LIC) and the General Insurance Corporation
of India (GIC) and its subsidiaries. The equity of the corporation was
supplemented by borrowings from the Government of India, the World
Bank, the Development Loan Fund (now merged with the Agency for
International Development), Kreditanstalt fur Wiederaufbau (an agency of
the Government of Germany), the UK government and the Industrial
Development Bank of India (IDBI).
The basic objectives of the ICICI were to
• assist in creation, expansion and modernization of enterprises
• encourage and promote the participation of private capital, both
internal and external
• take up the ownership of industrial investment; and
• expand the investment markets.
Since the mid 1980s, ICICI diversified rapidly into areas like merchant
banking and retailing. In 1987, ICICI co-promoted India's first credit rating
agency, Credit Rating and Information Services of India Limited (CRISIL),
to rate debt obligations of Indian companies. In 1988, ICICI promoted
India's first venture capital company - Technology Development and
Information Company of India Limited (TDICI) - to provide venture capital
for indigenous technology-oriented ventures.
In the 1990s, ICICI diversified into different forms of asset financing such as
leasing, asset credit and deferred credit, as well as financing for non-project
activities. In 1991, ICICI and the Unit Trust of India set up India's first
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screen-based securities market, the over-the-counter Exchange of India
(OCTEI). In 1992 ICICI tied up with J P Morgan of the US to form an
investment banking company, ICICI Securities Limited.
In line with its vision of becoming a universal bank, ICICI restructured its
business based on the recommendations of consultants McKinsey & Co in
1998. In the late 1990s, ICICI concentrated on building up its retail business
through acquisitions and mergers. It took over ITC Classic, Anagram
Finance and merged the Shipping Credit Investment Corporation of India
(SCICI) with itself. ICICI also entered the insurance business with
Prudential plc of UK.
ICICI was reported to be one of the few Indian companies known for its
quick responsiveness to the changing circumstances. While its development
bank counterpart IDBI was reportedly not doing very well in late 2001,
ICICI had major plans of expanding on the anvil. This was expected to bring
with it further challenges as well as potential change management issues.
However, the organization did not seem to much perturbed by this,
considering that it had successfully managed to handle the employee unrest
following Kamath's appointment.
CHANGE CHALLENGES - PART II
ICICI had to face change resistance once again in December 2000, when
ICICI Bank was merged with Bank of Madura (BoM)[1] . Though ICICI
Bank was nearly three times the size of BoM, its staff strength was only
1,400 as against BoM's 2,500. Half of BoM's personnel were clerks and
around 350 were subordinate staff.
There were large differences in profiles, grades, designations and salaries of
personnel in the two entities. It was also reported that there was uneasiness
among the staff of BoM as they felt that ICICI would push up the
productivity per employee, to match the levels of ICICI [2]. BoM employees
feared that their positions would come in for a closer scrutiny. They were
not sure whether the rural branches would continue or not as ICICI's
business was largely urban-oriented.
The apprehensions of the BoM employees seemed to be justified as the
working culture at ICICI and BoM were quite different and the emphasis of
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the respective management was also different. While BoM management
concentrated on the overall profitability of the Bank, ICICI management
turned all its departments into individual profit centers and bonus for
employees was given on the performance of individual profit center rather
than profits of whole organization.
ICICI not only put in place a host of measures to technologically upgrade
the BoM branches to ICICI's standards, but also paid special attention to
facilitate a smooth cultural integration. The company appointed consultants
Hewitt Associates[3]to help in working out a uniform compensation and
work culture and to take care of any change management problems.
ICICI conducted an employee behavioral pattern study to assess the various
fears and apprehensions that employees typically went through during a
merger. (Refer Table I).
TABLE I
'POST-MERGER' EMPLOYEE BEHAVIORAL PATTERN
PERIOD EMPLOYEE BEHAVIOR
Day 1 Denial, fear, no improvement
After a month Sadness, slight improvement
After a Year Acceptance, significant improvement
After 2 Years Relief, liking, enjoyment, business development activities
Source:www.sibm.edu
Based on the above findings, ICICI established systems to take care of the
employee resistance with action rather than words. The 'fear of the unknown'
was tackled with adept communication and the 'fear of inability to function'
was addressed by adequate training. The company also formulated a 'HR
blue print' to ensure smooth integration of the human resources. (Refer Table
II).
TABLE II
MANAGING HR DURING THE ICICI-BoM MERGER
AREAS OF HR INTEGRATION
THE HR BLUEPRINT
FOCUSSED ON
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• A data base of the entire HR • Employee communication
structure • Cultural integration
• Road map of career • Organization structuring
• Determining the blue print of HR • Recruitment &
moves Compensation
• Communication of milestones • Performance management
• Training
• IT Integration - People Integration
- Business Integration. • Employee relations
Source:www.sibm.edu
EMPLOYEE DOWNSIZING
Case Code- HROB016
Publication Date -2002
"Next to the death of a relative or friend, there's nothing more traumatic than
losing a job. Corporate cutbacks threaten the security and self-esteem of
survivors and victims alike. They cause turmoil and shatter morale inside
organizations and they confirm the view that profits always come before
people."
- Laura Rubach, Industry Analyst, in 1994.
"The market is going to determine where we stop with the layoffs."
- Tom Ryan, a Boeing spokesman, in August 2002
DOWNSIZING BLUES ALL OVER THE WORLD
The job markets across the world looked very gloomy in the early 21st
century, with many companies having downsized a considerable part of their
employee base and many more revealing plans to do so in the near future.
Companies on the Forbes 500 and Forbes International 800 lists had laid off
over 460,000 employees' altogether, during early 2001 itself.
This trend created havoc in the lives of millions of employees across the
world, Many people lost their jobs at a very short or no advance notice, and
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many others lived in a state of uncertainty regarding their jobs. Companies
claimed that worldwide economic slowdown during the late-1990s had had
forced them to downsize, cut costs, optimize resources and survive the
slump. Though the concept of downsizing had existed for a long time, its use
had increased only recently, since the late-1990s. (Refer Table I for
information on downsizing by major companies).
Analysts commented that downsizing did more damage than good to the
companies as it resulted in low morale of retained employees, loss of
employee loyalty and loss of expertise as key personnel/experts left to find
more secure jobs. Moreover, the uncertain job environment created by
downsizing negatively effected the quality of the work produced. Analysts
also felt that most companies adopted downsizing just as a 'me-too' strategy
even when it was not required.
However, despite these concerns, the number of companies that chose to
downsize their employee base increased in the early 21st century.
Downsizing strategy was adopted by almost all major industries such as
banking, automobiles, chemical, information technology, fabrics, FMCG, air
transportation and petroleum. In mid-2002, some of the major companies
that announced downsizing plans involving a large number of employees
included Jaguar (UK), Boeing (US), Charles Schwab (US), Alactel (France),
Dresdner (Germany), Lucent Technologies (US), Ciena Corp. (US) and
Goldman Sachs Group (US). Even in companies' developing countries such
as India, Indonesia, Thailand, Malaysia and South Korea were going in for
downsizing.
TABLE I
DOWNSIZING BY MAJOR COMPANIES (1998-2001)
No. of
YEAR COMPANY INDUSTRY Employees
Downsized
1998 Boeing Aerospace 20,000
1998 CitiCorp Banking 7,500
1998 Chase Manhattan Bank Banking 2,250
1998 Kellogs FMCG 1,00
1998 BF Goodrich Tyres 1,200
1998 Deere & Company Farm Equipment 2,400
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1998 AT&T Telecommunications 18,000
1998 Compaq IT 6,500
1998 Intel IT 3,000
1998 Seagate IT 10,000
1999 Chase Manhattan Bank Banking 2,250
1999 Boeing Aerospace 28,000
1999 Exxon-Mobil Petroleum 9,000
2000 Lucent Technologies IT 68,000
2000 Charles Schwab IT 2,000
2001 Xerox Copiers 4,000
2001 Hewlett Packard IT 3,000
2001 AOL Time Warner Entertainment 2,400
THE FIRST PHASE
Till the late-1980s, the number of firms that adopted downsizing was rather
limited, but the situation changed in the early-1990s. Companies such as
General Electric (GE) and General Motors (GM) downsized to increase
productivity and efficiency, optimize resources and survive competition and
eliminate duplication of work after M&As. Some other organizations that
made major job cuts during this period were Boeing (due to its merger with
McDonnell Douglas), Mobil (due to the acquisition of Exxon), Deutsche
Bank (due to its merger with Bankers Trust) and Hoechst AG (due to its
merger with Rhone-Poulenc SA).
According to analysts, most of these successful companies undertook
downsizing as a purposeful and proactive strategy. These companies not
only reduced their workforce, they also redesigned their organizations and
implemented quality improvement programs. During the early and mid-
1990s, companies across the world (and especially in the US), began
focusing on enhancing the value of the organization as a whole. According
to Jack Welch, the then GE CEO, "The ultimate test of leadership is
enhancing the long-term value of the organization. For leaders of a publicly
held corporation, this means long-term shareholder value." In line with this
approach to leadership, GE abandoned policy of lifetime employment and
introduced the concept of contingent employment. Simultaneously, it began
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offering employees the best training and development opportunities to
constantly enhance their skills and performance and keep pace with the
changing needs of the workplace.
During this period, many companies started downsizing their workforce to
improve the image of the firm among the stockholders or investors and to
become more competitive. The chemical industry came out strongly in favor
of the downsizing concept in the early 1990s. Most chemical and drug
companies restricted their organizations and cut down their employee base
to reduce costs and optimize resources.
As the perceived value of the downsized company was more than its actual
value, managers adopted downsizing even though it was not warranted by
the situation. A few analysts blamed the changes in the compensation system
for executive management for the increase in the number of companies
downsizing their workforce in 1990s. In the new compensation system,
managers were compensated in stock options instead of cash. Since
downsizing increased the equity value (investors buy the downsizing
company's stocks in hope of future profitability) of the company, managers
sought to increase their wealth through downsizing. Thus, despite positive
economic growth during the early 1990s, over 600,000 employees were
downsized in the US in 1993.
However, most companies did not achieve their objectives and, instead,
suffered the negative effects of downsizing. A survey conducted by the
American Management Association revealed that less than half of the
companies that downsized in the 1990s saw an increase in profits during that
period. The survey also revealed that a majority of these companies failed to
report any improvements in productivity.
One company that suffered greatly was Delta Airlines, which had laid off
over 18,000 employees during the early 1990s. Delta Airlines realized in a
very short time that it was running short of people for its baggage handling,
maintenance and customer service departments. Though Delta succeeded in
making some money in the short run, it ended up losing experienced and
skilled workers, as a result of which it had to invest heavily in rehiring many
workers.
As investors seemed to be flocking to downsizing companies, many
companies saw downsizing as a tool for increasing their share value. The
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above, coupled with the fact that senior executive salaries had increased by
over 1000% between 1980 and 1995, even as the layoff percentage reached
its maximum during the same period, led to criticism of downsizing.
In light of the negative influence that downsizing was having on both the
downsized and the surviving employees, some economists advocated the
imposition of a downsizing tax (on downsizing organizations) by the
government to discourage companies from downsizing. This type of tax
already existed in France, where companies downsizing more than 40
workers had to report the same in writing to the labor department. Also, such
companies had liable to pay high severance fees, contribute to an
unemployment fund, and submit a plan to the government regarding the
retraining program of its displaced employees (for their future employment).
The tax burden of such companies increased because they were no longer
exempt from various payroll taxes.
However, the downsizing tax caused more problems than it solved. As this
policy restrained a company from downsizing, it damaged the chances of
potential job seekers to get into the company. This tax was mainly
responsible for the low rate of job creation and high rates of unemployment
in many European countries, including France.
THE SECOND PHASE
By the mid-1990s, factors such as increased investor awareness, stronger
economies, fall in inflation, increasing national incomes, decrease in level of
unemployment, and high profits, reduced the need for downsizing across the
globe. However, just as the downsizing trend seemed to be on a decline, it
picked up momentum again in the late-1990s, this time spreading to
developing countries as well.
This change was attributed to factors such as worldwide economic recession,
increase in global competition, the slump in the IT industry, dynamic
changes in technologies, and increase in the availability of a temporary
employee base. Rationalization of the labor force and wage reduction took
place at an alarming rate during the late 1990s and early 21st century, with
increased strategic alliances and growing popularity of concepts such as lean
manufacturing and outsourcing .
Criticism of downsizing and its ill-effects soon began resurfacing. Many
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companies suffered from negative effects of downsizing and lost some of
their best employees. Other problems such as the uneven distribution of
employees (too many employees in a certain division and inadequate
employees in another), excess workload on the survivors, resistance to
change from the survivors, reduced productivity and fall in quality levels
also cropped up. As in the early 1990s, many organizations downsized even
though it was not necessary, because it appeared to be the popular thing to
do.
Due to the loss of experienced workers, companies incurred expenditure on
overtime pay and employment of temporary and contract workers. It was
reported that about half of the companies that downsized their workforce
ended up recruiting new or former staff within a few years after downsizing
because of insufficient workers or lack of experienced people. The US-based
global telecom giant AT&T was one such company, which earned the
dubious reputation of frequently rehiring its former employees because the
retained employees were unable to handle the work load.
AT&T frequently rehired former employees until it absorbed the 'shock' of
downsizing. It was also reported that in some cases, AT&T even paid
recruitment firms twice the salaries of laid-off workers to bring them back to
AT&T. A former AT&T manager commented, "It seemed like they would
fire someone and [the worker] would be right back at their desk the next
day." Justifying the above, Frank Carrubba, Former Operations Director,
AT&T, said, "It does not happen that much, but who better to bring back
than someone who knows the ropes?" Very few people bought this
argument, and the rationale behind downsizing and then rehiring former
employees/recruiting new staff began to be questioned by the media as well
as the regulatory authorities in various parts of the world.
Meanwhile, allegations that downsizing was being adopted by companies to
support the increasingly fat pay-checks of their senior executives increased.
AT&T was again in the news in this regard. In 1996, the company doubled
the remuneration of its Chairman, even as over 40,000 employees were
downsized. Leading Internet start-up AOL was also criticized for the same
reasons. The increase in salary and bonuses of AOL's six highest paid
executive officers was between 8.9% to 25.2% during 2000. The average
increase in salary and bonus of each officer was about 16%, with the
remuneration of the CEO exceeding $73 million during the period. Shortly
after this raise, AOL downsized 2,400 employees in January 2001.
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Following the demand that the executive officers should also share in the
'sacrifice' associated with downsizing, some companies voluntarily
announced that they would cut down on the remuneration and bonuses of
their top executives in case of massive layoffs. Ford was one of the first
companies to announce such an initiative. It announced that over 6,000 of its
top executives, including its CEO, would forgo their bonus in 2001. Other
major companies that announced that their top executives would forgo cash
compensations when a large number of workers were laid off were AMR
Corp., Delta, Continental and Southwest Airlines. In addition to the above,
companies adopted many strategies to deal with the criticisms they were
facing because of downsizing.
TACKLING THE EVILS OF DOWNSIZING
During the early 21st century, many companies began offering flexible work
arrangements to their employees in an attempt to avoid the negative impact
of downsizing. Such an arrangement was reported to be beneficial for both
employees as well as the organization. A flexible working arrangement
resulted in increased morale and productivity; decreased absenteeism and
employee turnover, reduced stress on employees; increased ability to recruit
and retain superior quality employees improved service to clients in various
time zones; and better use of office equipment and space. This type of
arrangement also gave more time to pursue their education, hobbies, and
professional development, and handle personal responsibilities.
The concept of contingent employment also became highly popular and the
number of organizations adopting this concept increased substantially during
the early 21st century. According to the Bureau of Labor Statistics (BLS),
US, contingent employees were those who had no explicit or implicit
contract and expected their jobs to last no more than one year. They were
hired directly by the company or through an external agency on a contract
basis for a specific work for a limited period of time.
Companies did not have to pay unemployment taxes, retirement or health
benefits for contingent employees. Though these employees appeared on the
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payroll, they were not covered by the employee handbook (which includes
the rights and duties of employers and employees and employment rules and
regulations). In many cases, the salaries paid to them were less than these
given to regular employees performing similar jobs. Thus, these employees
offered flexibility without long-term commitments and enabled
organizations to downsize them, when not required, without much difficulty
or guilt. Analysts commented that in many cases HR managers opted for
contingent employees as they offered the least resistance when downsized.
However, analysts also commented that while contingent employment had
its advantages, it posed many problems in the long run. In the initial years,
when contingent employment was introduced, such employees were asked to
perform non-critical jobs that had no relation to an organization's core
business. But during the early 2000s, contingent employees were employed
in core areas of organizations. This resulted in increased costs as they had to
be framed for the job. Not only was training time consuming, its costs were
recurring in nature as contingent employees stayed only for their specified
contract period and were soon replaced by a new batch of contingent
employees. Productivity suffered considerably during the period when
contingent employees were being trained. The fact that such employees were
not very loyal to the organization also led to problems.
Analysts also found that most contingent employees preferred their flexible
work arrangements and were not even lured by the carrot (carrot and stick
theory of motivation) of permanent employment offered for outstanding
performance. In the words of Paul Cash, Senior Vice President, Team
America (a leasing company), "It used to be that you worked as a temp to
position yourself for a full-time job. That carrot is not there any more for
substantial numbers of temps who prefer their temporary status. They do not
understand your rules, and if they are only going to be on board for a month,
they may never understand." With such an attitude to remain outside the
ambit of company rules and regulations, contingent employees reportedly
failed to develop a sense of loyalty toward the organization. Consequently,
they failed to completely commit themselves to the goals of the
organization.
According to some analysts, the contingent employment arrangement was
not beneficial to contingent employees. Under the terms of the contract, they
were not eligible for health, retirement, or overtime benefits. Discrimination
against contingent employees at the workplace was reported in many
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organizations. The increasing number of contingent employees in an
organization was found to have a negative effect on the morale of regular
employees. Their presence made the company's regular employees
apprehensive about their job security. In many cases regular employees were
afraid to ask for a raise or other benefits as they feared they might lose their
jobs.
Though contingent employment seemed to have emerged as one of the
solutions to the ills of downsizing, it attracted criticism similar to those that
downsizing did. As a result, issues regarding employee welfare and the
plight of employees, who were subject to constant uncertainty and insecurity
regarding their future, remained unaddressed. Given these circumstances, the
best option for companies seemed to be to learn from those organizations
that had been comparatively successful at downsizing.
LESSONS FROM THE 'DOWNSIZING BEST PRACTICES'
COMPANIES
In the late 1990s, the US government conducted a study on the downsizing
practices of firms (including major companies in the country). The study
provided many interesting insights into the practice and the associated
problems. It was found that the formulation and communication of a proper
planning and downsizing strategy, the support of senior leaders, incentive
and compensation planning and effective monitoring systems were the key
factors for successful downsizing.
In many organizations where downsizing was successfully implemented and
yielded positive results, it was found that senior leaders had been actively
involved in the downsizing process. Though the downsizing methods used
varied from organization to organization, the active involvement of senior
employees helped achieve downsizing goals and objectives with little loss in
quality or quantity of service. The presence and accessibility of senior
leaders had a positive impact on employees - those who were downsized as
well as the survivors. According to a best practice company source,
"Managers at all levels need to be held accountable for - and need to be
committed to - managing their surplus employees in a humane, objective,
and appropriate manner. While HR is perceived to have provided
outstanding service, it is the managers' behavior that will have the most
impact." In many companies, consistent and committed leadership helped
employees overcome organizational change caused by downsizing.
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HR managers in these companies participated actively in the overall
downsizing exercise. They developed a employee plan for downsizing,
which covered issues such as attrition management and workforce
distribution in the organization. The plan also included the identification of
skills needed by employees to take new responsibilities and the development
of training and reskilling programs for employees. Since it may be necessary
to acquire other skills in the future, the plan also addressed the issue of
recruitment planning.
Communication was found to be a primary success factor of effective
downsizing programs. According to a survey conducted in major US
companies, 79% of the respondents revealed that they mostly used letters
and memorandums from senior managers to communicate information
regarding restructuring or downsizing to employees. However, only 29% of
the respondents agreed that this type of communication was effective.
The survey report suggested that face-to-face communication (such as
briefings by managers and small group meetings) was a more appropriate
technique for dealing with a subject as traumatic (to employees) as
downsizing. According to best practice companies, employees expected
senior leaders to communicate openly and honestly about the circumstances
the company was facing (which led to downsizing).
These companies also achieved a proper balance between formal and
informal forms of communication. A few common methods of
communication adopted by these companies included small meetings, face
to face interaction, one-on-one discussion, breakfast gatherings, all staff
meetings, video conferencing and informal employee dialogue sessions, use
of newsletters, videos, telephone hotlines, fax, memoranda, e-mail and
bulletin boards; and brochures and guides to educate employees about the
downsizing process, employee rights and tips for surviving the situation.
Many organizations encouraged employees to voice their ideas, concerns or
suggestions regarding the downsizing process. According to many best
practice organizations, employee inputs contributed considerably to the
success of their downsizing activities as they frequently gave valuable ideas
regarding the restructuring, increase in production, and assistance required
by employees during downsizing.
Advance planning for downsizing also contributed to the success of a
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downsizing exercise. Many successful organizations planned in advance for
the downsizing exercise, clearly defining every aspect of the process. Best
practice companies involved employee union representatives in planning.
These companies felt it was necessary to involve labor representatives in the
planning process to prevent and resolve conflicts during downsizing.
According to a survey report, information that was not required by
companies for their normal day-to-day operations, became critical when
downsizing. This information had to be acquired from internal as well as
external sources (the HR department was responsible for providing it). From
external sources, downsizing companies needed to gather information
regarding successful downsizing processes of other organizations and
various opportunities available for employees outside the organization. And
from internal sources, such companies need to gather demographic data
(such as rank, pay grade, years of service, age, gender and retirement
eligibility) on the entire workforce. In addition, they required information
regarding number of employees that were normally expected to resign or be
terminated, the number of employees eligible for early retirement, and the
impact of downsizing on women, minorities, disabled employees and old
employees.
The best practice organizations gathered information useful for effective
downsizing from all possible sources. Some organizations developed an
inventory of employee skills to help management take informed decisions
during downsizing, restructuring or staffing. Many best practice
organizations developed HR information systems that saved management's
time during downsizing or major restructuring by giving ready access to
employee information.
The major steps in the downsizing process included adopting an appropriate
method of downsizing, training managers about their role in downsizing,
offering career transition assistance to downsized employees, and providing
support to survivors. The various techniques of downsizing adopted by
organizations included attrition, voluntary retirement, leave without pay or
involuntary separation (layoffs). According to many organizations, a
successful downsizing process required the simultaneous use of different
downsizing techniques. Many companies offered assistance to downsized
employees and survivors, to help them cope with their situation.
Some techniques considered by organizations in lieu of downsizing included
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overtime restrictions, union contract changes, cuts in pay, furloughs,
shortened workweeks, and job sharing. All these approaches were a part of
the 'shared pain' approach of employees, who preferred to share the pain of
their co-workers rather than see them be laid-off. Training provided to
managers to help them play their role effectively in the downsizing process
mainly included formal classroom training and written guidance (on issues
that managers were expected to deal with, when downsizing). The primary
focus of these training sessions was on dealing with violence in the
workplace during downsizing.
According to best practice companies, periodic review of the
implementation process and immediate identification and rectification of any
deviations from the plan minimized the adverse effects of the downsizing
process. In some organizations, the progress was reviewed quarterly and was
published in order to help every manager monitor reductions by different
categories. These categories could be department, occupational group
(clerical, administrative, secretarial, general labor), reason (early retirement,
leave without pay, attrition), employment equity group (women, minorities,
disabled class) and region. Senior leaders were provided with key indicators
(such as the effect of downsizing on the organizational culture) for their
respective divisions. Some organizations tracked the progress and
achievement of every division separately and emphasized the application of
a different strategy for every department as reaction of employees to
downsizing varied considerably from department to department.
Though the above measures helped minimize the negative effects of
downsizing, industry observers acknowledged the fact that the emotional
trauma of the concerned people could never be eliminated. The least the
companies could do was to downsize in a manner that did not injure the
dignity of the discharged employees or lower the morale of the survivors.
QUESTIONS FOR DISCUSSION
1. Explain the concept of downsizing and describe the various downsizing
techniques. Critically evaluate the reasons for the increasing use of
downsizing during the late 20th century and the early 21st century. Also
discuss the positive and negative effects of downsizing on organizations as
well as employees (downsized and remaining).
2. Why did contingent employment and flexible work arrangements become
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very popular during the early 2000s? Discuss. Evaluate these concepts as
alternatives to downsizing in the context of organizational and employee
welfare.
3. As part of an organization's HR team responsible for carrying it through a
downsizing exercise, discuss the measures you would adopt to ensure the
exercise's success. Given the uncertainty in the job market, what do you
think employees should do to survive the trauma caused by downsizing and
prepare themselves for it?
ADDITIONAL READING & REFERENCES
1. Making Sense of Corporate Downsizing, www.csaf.com, April 1996.
2. Downsizing and Employee Attitudes, www.ncspearson.com, September
1995.
3. Downsizing Strategies Used in Selected Organizations, www.c3i.osd.mil,
1995.
4. The Wages of Downsizing, www.mojones.com, January 1996.
5. Kirschener Elisabeth, Chemical & Engineering News,
www.chemcenter.org, October 1996.
6. Hickok Thomas, Downsizing and Organizational Culture,
www.pamji.com, 1997.
7. P.Jenkins Carri, Downsizing or Dumbsizing, http://advance.byu.edu/bym,
1997.
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17. Duffy Tom, Downsizing with Dignity, www.nwfusion.com, 2001.
18. Global Slowdown Bites I.T. Gaints, www.asiafeatures.com, July 2001.
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20. Freeze Executive Pay During Periods of Downsizing,
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21. Layoff and Outsourcing Update, www.erie.net, March 2002.
22. Skaer Mark, Employee Mindset Is Different Today,
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23. GE to Layoff 1,000, www.wspa.com, July 2002.
24. DiCarlo Lisa, US Airlines on Course with Loan Guarantee,
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25. M.Song Kyung, Boeing Tells 600 More of Layoffs Today,
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26. Gomez Armando, The Ups and Downs of Downsizing,
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27. Carmaker Jaguar to Cut 400 Jobs, http://story.news.yahoo.com,
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28. Telecom Giant Sheds Scots Jobs, http://news.bbc.co.uk, September
2002.
29. Dresdner to Cut 3,000 Jobs, http://news.bbc.co.uk, September 2002.
30. Leicester John, Alactel to Cut 10,000 More Jobs,
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31. Noguchi Yuki, With Sales Down, Ciena Cuts Another Round of
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32. www.geocities.com
33. http://govinfo.library.unt.edu
34. www.greylockassociates.com
35. www.whatis.com
36. www.shrm.org
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46. www.bpcinc.com
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47. http://members.aol.com
48. www.doleta.gov
49. www.msnbc.com
