Downsizing of Employees as a Solution to Company's Cost Reduction - Essay Example

Introduction Today downsizing of employees is perceived to be part of most companies working life. This is as a result of cost cutting and to become accustomed to the current changing demands in the market. Most organizations have continually faced steep fall in their revenues and even sales considering the rate and intensity of economic crisis that started in 2007. Hence, most companies had to downsize their employees as one of the ways to reduce on cost. On the other hand, companies conduct downsizing as a component of a wide workforce strategy intended to support business overall plan. Layoff is perceived as being one of the tools utilized to improve the performance of an organization. As for those in the managerial positions, they perceive this as being an opportunity to improve company’s alertness both in the short term and long-term. This is possible only through designed and targeted coaching, and transformation. Employment relationship comprises of various beliefs between an employer and an employee. It mainly concern what the two parties expect from each other. This is also known as psychological contract. Psychological contract is mainly termed as being an agreement that is informal and is between an employee and an employer. The expectation and beliefs involved are not written and are mainly held by both the employee and the employer. Psychological contract exists in all the categories of employment that include; full time, part time, contract work and even temporary. It presents proper framework that helps in appreciating and supervising the behavior of an employee. According to Sparrow psychological contract is a deal that is open ended and consist of expectations of an individual and an organization. The expectation consists of what both parties will have to give and what they get in return from the relationship. Over time various expectations arises as the views develop regarding employers dedication. Psychological contract has its foundation on trust and thoughtfulness and varies among the employees. It is based on social exchange theory. This theory clearly highlights that the basis of individual relationships are on the assessment of individual cost benefit and review of other options. In psychological contract, the costs mainly involve time and effort. The benefits on the other hand are; financial achievement, social class and other benefits emotionally that include; job contentment or sense of reason. Cost benefit analysis result is evaluated with possible alternatives that include one’s accessibility to other available jobs and obstacles to departing from the present job. Hence, the agreement between the two parties focuses on various aspects both social and emotional. The perception of an employee towards employer’s observance of psychological contract greatly influences work and plan to stay in a given organization. Fair treatment of employees and appreciating their work boosts productivity and continuity in a given company. This is not the case for employees who view that the contract has not been observed which may arise from managers not honoring their promises. The psychological contract is useful to both the employer and the employee. Through it an employee feels secure with sense of control at the work place. In the case where the contract is violated by an employer then an employee may decide to leave. On the other hand, in the case of employers regular supervision will not be necessary since the contract provides means of managing employees. Employers observe the contract by developing the trust of employees through policies and procedures that are fair and unbiased mainly referred to as procedural justice, proper allocation of resources also known as distributive justice which mainly involve pay and benefits that are reasonable. Finally is interactional justice that involves employees being handled with respect and courtesy. The formation of psychological contract commences when individuals are recruited and hired. Its development and change continues as the new employees are absorbed and as they gain experience in the work place. A significant role in developing and sustaining the contract is played by human resources. This is possible through; the policies and procedures practiced, ways of communicating with employees, supervision of employees and growth trainings to the managers. In an organization, both the employer and employee have different expectations. Psychological contract covers various features in an employment relationship. The perception of employees includes the following; first, is to be provided with secure working conditions and to be treated fairly and be respected. Secondly, is work to be distributed among all the employees in an equal manner and every individual roles and responsibilities to be clearly outlined. In addition, they expect precise assignments at the work place. Thirdly, is to be provided with appropriate opportunities that will help them to grow, and to be involved in various decisions making on projects they undertake. Fourth, they expect and to be rewarded accordingly for their effort and their achievements acknowledged. Fifth, they expect those in the managerial positions fulfill their promises and to be assured of job security. On the other hand according to the employer’s perception psychological contract should include various employment affiliation features. They include; first, observation of policies and procedures, to be committed to the organizational values, innovative, skilled and creative at the place of work. Secondly, they expect the employees to be put in adequate effort when conducting various assignments, be loyal and submissive. Thirdly, employers expect the employees to be good ambassadors of the organization and to be able to boost the company’s image. At times the expectation of the two parties can be justified. However, in some cases they are not. Friction and tension can result from common misunderstandings hence; the outcome will be allegations and unsatisfactory performance. On the extreme end it can result in the employment relationship being brought to an end. For harmony to exist between an employee and a company, the psychological contract has to remain balanced. The set of values between the two parties is disrupted when the psychological contract is breached. Employees ought to put in adequate effort to retain their current job. This can be possible only when individuals meet the required targets on the assigned duties. They should avoid incapability by improving their skills and other qualities in order to be rated among the best employees. They should also ensure that they are not redundant in their place of work. In addition, they should always remain loyal and submissive to those in the company’s top position. When laying off individuals communication is significant. Employees ought to know the grievance raised against them and be given an opportunity to explain what they understand regarding performance. Downsizing process can have negative impact on behavior in their place of work. Those affected include the remaining employees, those leaving the company and the community at large. For the remaining employees they might feel sense of guilt and depression. After the downsizing process, there might be a great decline in employees’ confidence, allegiance and trust for those in the top position. Job satisfaction and involvement will be affected tremendously. In addition, the levels of stress increases, and there might be increase in voluntary turnover and some individuals may opt to quit working for the organization. Survivors should not be overlooked especially managers who conduct the firing process and the human resource officers who in most cases attend the dismissal meetings. They also require counseling to relieve them from the exhaustion and stress of the whole process. Psychological contract that guide employer and the employee relationship should be applicable for those who have been dismissed and the surviving employees. During this process the expectation of employees is that they be treated fairly by the employer. For most employees they perceive downsizing to be violation of psychological contract. The retained employees may react to the process differently. The outcome may be less involvement in the organization activities, absenteeism or even other individuals leaving the organization. Employees who are categorized as high performing may opt to seek employment elsewhere in order to avoid uncertainties in the current environment. The downsizing company will face several questions from the retained employees. First is whether the dismissed workers were treated in a manner that is dignified, respectful and fair. Secondly, the survivors will question why they should remain in the organization. They would want to know how the development in their career will be affected. They would want to know if they have a future in the organization. Thirdly, they would want to know if a business strategy exists. The big question will be if the company will improve after the downsizing process. The procedures followed by an organization in the selection, notification and support of those affected are significant. This is mainly referred to as procedural justice. When the downsized individuals view the process to be fair, less claims of termination will be filed. In addition, the frequency of deliberate turnover among the remaining employees will be minimal. Moreover, there will be less disruption and violence. An organization can promote fairness in the whole process through provision of sense of personal control among the affected employees. This can be done by giving the individuals options that include choice in severance forms and the date of departure and assisting them in outplacement. The lesson is that when proper human resource practices are observed in the whole process negative effects will be minimal. The laid off workers should be given appropriate support. During this period an organization can organize individuals with proper training and experience to provide them with internal counseling services. The company can also assist the laid off individuals to secure jobs in other organizations. This way they will be able to face the loss and move on. Conclusion Downsizing of employees cannot be termed as the only solution to cost reduction. In addition, it is not an assurance that savings in the short term will be more than costs in the long term. On the other hand the livelihood of an organization greatly relies on its cash flow hence downsizing may be inevitable in trying to maintain it. In such a situation, downsizing should be conducted compassionately and in a dignified manner. This is possible only by applying finding that have been researched and clearly outlined. Those concerned with the whole process also ought to be practical in handling the reactions of the surviving employees. Downsizing should be conducted only when an organization perceive it to be inevitable. It should not be that it is fashionable or because other opponent companies are doing it. The expectations of the employer and the organization differ since each party has varied perspectives. The employee views include; to be treated in a fair and equitable manner and to be assured of job security. Secondly, is to be involved in decisions making in their departments and to remain influential. Thirdly, they expect those on the managerial positions in the company to honor their word and to also be provided with safety in their places of work. Fourth, employees expect to be rewarded accordingly and their achievements to be recognized. The views of an employer greatly vary from those of the employee. The expectations include; first, the employees ought to be competent and to put in adequate effort towards achievement of the company’s objectives. Secondly employees have to be submissive, committed towards the organization and to remain loyal at all times. Cooper, L. C., Pandey, P., & Campbell, J. 2012.Downsizing: Is Less Still More? Cambridge: Cambridge University Press. pg 1 Searle, N., R. & Skinner, D. 2011.Trust and Human Resource Management. London: Edward Elgar Publishing. pg 315 Michael Armstrong 2006. A handbook of Human resources management Practice 10th edition. Kogan page. London. Petersitzke, M. 2009. Supervisor Psychological Contract Management: Developing an Integrated Perspective on Managing Employee Perceptions of Obligations. Gabler Verlag, Witte, H. 2005. Job Insecurity, Union Involvement and Union Activism. Burlington: Ashgate Publishing, Ltd.pg 120 fairness Cropanzano, R. (Ed). 2012. Justice in the Workplace: From theory To Practice, Volume 2. 2nd ed. Mahwah, NJ: Psychology Press, pg 98. Fairness TitleIntegrating Newly Merged OrganizationsAuthorMichael GendronPublisher Westort: Greenwood Publishing Group, 2004. Right sizing- pg 83 Public Servants as Partners for Growth Toward a Stronger, Leaner and More Equitable Workforce: Toward a Stronger, Leaner and More Equitable WorkforceAuthorOECDPublisherOECD Publishing, 2012 Impact of downsizing loss of talent p. 81 Intergrate re- Personnel Management Theory And Practice, 3 Vols. SetAuthorsArun Kumar, Rachana SharmaPublisher. New Delhi: Atlantic Publishers & Distri, 2001 There should be a sound lay off policy- pg 266 eligible to lay off compensation, severance pay Unemployment in China: Economy, Human Resources And Labour Markets Volume 13 of Routledge Contemporary China SeriesAuthorDr Malcolm WarnerEditorsGrace O. M. Lee, Dr Malcolm WarnerEditionillustratedPublisher New York: Taylor & Francis, 2007 pg 51 Ethical Intelligence: Five Principles for Untangling Your Toughest Problems at Work and BeyondAuthorBruce WeinsteinPublisher. California: New World Library, 2011 Business Ethics. Author William H. Shaw Edition6, illustratedPublisher. New York: Cengage Learning, 2007 Douwn sizing with compassion 218. Back to Basics: Biblical Principles for Leading and Managing in the 21st Century. AuthorGeorge F. KalivodaPublishe. Washington, DC:Xulon Press, 2007 Sufficient notice and not monitoring their every move p. 146 Read More