PRESENTED BY :

MAHRUKH SHAIKH (01-220102-021)

THE MEAN AND LEAN FIRM AND DOWNSIZING : CAUSES OF VOLUNTARY AND IN VOLUNTARY DOWNSIZING STRATEGIES

Simple but complex idea. Organisational change strategies Successful downsizing requires the use of HR strategies Human aspects of change

RIF :

Downsizing

Job separation
Reengineering

Right sizing
Redundary programs

EMPLOYEES PERSPECTIVE RIFs final outcome is layoff !

Helps to reduce costs

Distribution of resources Less complexity

Economic pressures

PURPOSE Improve financial performance through

Cost-cutting, while also achieving long-term effectiveness, efficiency, productivity, competitiveness

DILEMMA of Downsizing Short term cost cutting may lead to negative psychological reactions that HARM the long term aim of increased competitiveness.

Employment policies Job design

Pay/benefits policies Re-training

It is important that employees perceive that they have some influence over the downsizing change process, and that the management achieves
Company should adopt means of persuasion and bargaining rather than by force.

Mass layoff Collective dismissals Breach of employee relation

Examples : (AT & T, BRITISH TELECOM, GENERAL ELECTRICS, GENERAL MOTORS, IBM)

REFRENCE : KINNIE, PURCELL 1998)

FINANCE CONCEPTION
USE OF FINANCIAL TOOLS

LEAN AND MEAN CONCEPTION

SMALL SIZE AND STRUCUTRES

Key strategies

Key structures

Dominant collation strategy

OVERVEIW

INVOLUNTARY

VOLUNTARY

EMPLOYEES PROTECTION SHORT TERM COST SAVINGS

LOWER

HIGHER

HIGHER

LOWER

HYPOTHESIS PROFIT INDUSTRIAL FIRM ECONOMIC DOWNTURN MIMICRY OPERATIONS CEO CEO TENURE CEO AGE

INVOLUNTARY
POSITIVE POSITIVE

VOLUNTARY
NON-SIGNIFICANT NEGATIVE

POSITIVE

NONSIGNIFICANT

POSITIVE

POSITIVE NEGATIVE

NEGATIVE NEGATIVE

POSITIVE POSITIVE

A downsizing strategy reduces the scale (size) and scope of a business to improve its financial performance (Robbins & Pearce, 1992). Reduce layers of management to increase decision making speed and get closer to the customer Sharpen focus on core competencies of the firm, and outsource peripheral activities

Downsizing forces re-thinking of Employment Strategy. Lifelong employment policies not credible after a downsizing. Example: IBM abandoned lifelong policy after several layoffs in early 1990s.