La Gear

Abstract

Layoffs, frequently called downsizing, describe the process in which companies remove temporarily or indefinitely a number of employees from their payroll. The reasons why companies downsize are related to dramatic changes occurring in the environment of the organization. Globalization and the breakdown of trade barriers among nations and the emergence of technology and automation have also necessitated companies to downsize. For companies to practice effective downsizing they must follow the following steps: education, reinforcement of company goals and values, honesty and dignity at all time, planning, and communication. Besides the steps described above there are other important points to consider when conducting downsizing, including setting a clear vision and goals, managing the transition effectively, planning, insight, teamwork, compassion and skills. Following, I will use two best practices- the Japanese approach and Taiwanese company- to describe the best way to do layoffs and downsizing.

Introduction

Facing the threat of job loss and seeing others lose their jobs can be a traumatic and bitter experience. This is one reason why many excellent companies do everything possible to avoid layoffs. However, even the most employee-friendly companies may deal with difficult economic conditions by reducing their workforce. Companies therefore have to ensure that they develop appropriate and well thought-out plans before implementing the downsizing and layoff process.

Layoffs and Downsizing

Layoffs, frequently called downsizing, describe the process in which companies remove temporarily or indefinitely a number of employees from their payroll. The general purpose of this practice is to reduce the organization's burden of excess labor costs when human resources cannot be used effectively.

The reasons why the company downsizes are related to dramatic changes occurring in the environment. This may make the company lose a market share in its industry or respond to fierce competition from its rivals resulting in the need for the company to cut costs through altering its size to fit its market and customer base. Globalization and the breakdown of trade barriers among nations and the emergence of technology and automation have also necessitated the company to downsize. Thus, the overriding rationale for downsizing by the company appears to be the need for survivial and the ability to compete in the new global economy (Beylerian and Kleiner, 2003).

Strategies for Layoffs and Downsizing

For the company to practice effective and successful downsizing, the following steps should be included:

 Education

 Reinforcement of the company goals and values

 Honesty/dignity at all times

 Planning

 Communication

Education - The company needs to educate its employees on the needs of the organization through regular meetings with employees in focus groups or feedback sessions. This will send a clear message to employees that the management is receptive to their needs and at the same time, it will help the management to design an effective downsizing program. Education can also take the form of training the employees to look beyond their existing roles and duties thus prepare them for taking additional tasks and roles in the event of a downsizing.

Reinforcement of the company goals and values - The company must ensure that the vision, mission, goals and values of the organization are clearly articulated and reinforced at every opportunity so that the employees embrace them. In the event of a downsizing, workers will then better relate to the rationale of the downsizing. This has to start with the leadership of the CEO and be reinforced by HR policies and practices that support these values.

Honesty and dignity at all time - Employees should be treated with honesty and dignity from the recruitment process through to eventual employment. If employees are dealt with honesty, in the event of a downsizing, they will better understand the rationale for this decision and thus develop a sense of wanting to overcome the problem with the company. Employers should also treat employees with compassion during a downsizing. In particular, HR should follow-up with each displaced employee in whatever way the company can support or assist him/her in his/her outplacement needs (Greenspan, 2002).

Planning - In order for layoffs and downsizing for be effective, successful workforce planning is crucial. For a company to develop a successful workforce management strategy, it must first understand the cost-reduction stage of characterizes its current business position. This reveals how long the company needs to reduce expenditures and takes into account the current economy and the duration of the economic downturn. There are stages that allow for better classification of appropriate downsizing practices.

* Stage One: Short Range Adjustments

This stage develops from a temporary slowdown in business and is identified by a decrease in short-term revenue forecasts. A company in this stage needs to implement minor cost-reduction measures to match the short-term change. Some of the best practices associated with this stage include:

 Soliciting cost reduction methods from employees

 Instituting a hiring freeze

 Instituting mandatory vacation

 Compressed workweek

 Temporary facility shutdowns

 Salary reduction

* Stage Two: Mid Range Adjustments- Secondary Cost Reduction

The need to implement this stage is when the company perceives that the expenditure adjustments will take over five to ten months. In this stage as in stage one, upper management and the HR department must clearly communicate the underlying purpose of the expenditure adjustments to the employees and state that they are trying to avoid implementing a more severe cost reduction method. Some of the best practices associated with this stage include:

 Extended Salary Reduction

 Voluntary Sabbaticals

 Employee