Friday, October 16, 2009

Downsizing

Visit and identify a company website that has undergone HR downsizing. Identify the cause of downsizing and describe its processes.

DOWNSIZING- in a business enterprise, downsizing is reducing the number of employees on the operating payroll. Some users distinguish downsizing from a layoff, with downsizing intended to be a permanent downscaling and a layoff intended to be a temporary downscaling in which employees may later be rehired. Businesses use several techniques in downsizing, including providing incentives to take early retirement and transfer to subsidiary companies, but the most common technique is to simply terminate the employment of a certain number of people.

Company that has undergone HR downsizing…..

IBM lay-off another 1,500 workers

BOSTON - IBM Corp. laid off 1,570 people Wednesday, primarily from an ongoing overhaul of operations in its giant technology services unit.
The Armonk, N.Y.-based Company carried out a similar level of job cuts at the beginning of the month, for a total of 3,023 in this quarter and 3,720 for the year, according to IBM spokesman Edward Barbini.
That amounts to roughly 1 percent of the company, which employed 355,000 people at the beginning of the year. But even these small numbers reflect a big project inside IBM to transform its business.
Services is IBM’s biggest division by revenue, but the advent of lower-cost competition overseas has forced IBM to work harder to improve the unit’s profit margins. In the first quarter, pretax income for IBM’s tech services fell 19 percent, even as revenue rose 7 percent.
Wednesday’s job cuts were largely part of the company’s response. Although IBM did not disclose where the layoffs were being made, the company had blamed the first-quarter profit shortfall on problems in its U.S. outsourcing business.
IBM executives say they expect no more layoffs this quarter. But other shifts like this — IBM calls it “rebalancing” — figure to follow from time to time.
That’s because IBM’s services overhaul not only involves cheaper labor — IBM’s work force in India rose from 9,000 in 2003 to 52,000 last year — but also a quest to use less labor. That means rethinking and sometimes automating the ways that services contracts are carried out. Last year, IBM adopted a business-retooling system known as Lean last year to find such opportunities.
Robert Moffat, the IBM executive overseeing Lean, acknowledges it will reduce the need for some services labor, but he contends that it will also create new work for the company overall because customers will be getting more for their money.
To some degree, that dynamic could explain another figure disclosed Wednesday: that even as it has laid off 3,700 people this year, IBM has hired 19,000 others. Barbini would not provide a geographic breakdown.
IBM shares were up 74 cents at $106.65 in Wednesday afternoon trading.

Cause of downsizing…..
First posible cause, many firms that claim to have downsized may not really have done so. Instead, they may have simply altered the compositions of their workforces more than their sizes. For example, some companies may have first reduced the number of less educated or older workers or middle managers. Then, after a suitable interval required for retooling and reorganization, they may have replaced most of their former employees with others deemed more appropriate to the company’s current needs. “Downsizing” of this sort is more accurately labeled “restructuring.” That relabeling does not make the consequent churning of the labor force any less important for those who pay the costs. After all, large-scale restructurings are apt to have substantial effects on productivity and can have devastating effects on the displaced workers (on the latter, see Gordon 1996; Leana and Feldman 1992; Rudolph 1998). But it does indicate that the firm in question is doing something other than shrinking.

A second possibility is that what is popularly known as downsizing may consist of reductions in the size of the typical firm accompanied by offsetting increases in the number of enterprises—leaving total industry employment largely unaffected. Such a scenario, like large-scale restructuring, is consistent with a large number of job terminations— lots of labor market churning, but no decrease in overall employment. In fact, as we have indicated earlier and will show in the following chapters, the evidence does not reject either of these two scenarios, neither of which should really be called downsizing (unless there is net job loss). We proceed now to the discussion of our six hypotheses, beginning with one that certainly relates directly to genuine downsizing—that is, reductions in firm size.

Describe the process of downsizing….
Develop a smooth downsizing process. It is crucial that managers invest aggressively in upfront planning for the job cuts. A company typically forms a committee to determine the appropriate level of downsizing and creates a process that takes into account the best interests of the company and the shareholders. Other important activities are training managers to conduct layoffs and assisting former employees in their job searches.

References:
http://www.msnbc.msn.com/id/18938937/
https://www.russellsage.org/publications/books/0-87154-094-0/chapter1_pdf

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