Organizations Downsizing and Outsourcing Plans and Implementations Success - Assignment Example

Topic: Management Title: Organizations Downsizing and Outsourcing Plans and Implementations Success. SBS TBS981 Intake D 2010 Your student name Your student number October 2010 Executive Summary The global financial crisis brought a lot of predicaments to business and companies regardless of their sizes. This prompted quite a number of reactions from all the affected entities and to the Airline company discussed herein, they decide to perform a downsizing exercise to their organization and eventually outsource the maintenance functions department in order to stay put in the business environment as before and realize more profits just like its competitors. The airline company contracted a business consultant to look at its recommendations and give the way forward in terms of advice and implementations. The consultant performed his duties and finally the downsizing was performed alongside outsourcing the airlines’ maintenance functions department. The results were great because the positive part of the whole exercise was greater than the negative part of it. After the exercise, the Airline Company recorded a more than 60% boost in sales in a span of six months compared to its earlier stagnant losses it made before the exercise. Aircrafts spare parts costs drastically reduced and there was efficient, leaner and effective employee workforce. The company achieved more control of the maintenance results and gain access to almost all of the high-end maintenance technologies existing. The restructuring exercise brought about the modernization, flexible, adequate structures, more compact and smaller and effective personnel. They also achieved a credible maintenance team permanently capable of properly and efficiently responding to the modern airline security risks. The airline company was able to spend less in staff costs and the distribution of large network carriers. In the long run, it recorded more profits, less loses and effective workforce. TABLE OF CONTENTS PAGE NUMBERS Executive Summery……………………………………………………………2 Table of Contents………………………………………………………………3 1. Introduction………………………………………………………………...4 2. Challenges Associated by Downsizing and Outsourcing……………...4 The Challenges Associated By Downsizing………….….4 To the Organization…………………….……...4 To the leadership……………………….………5 To the employees…………………….………....5 Challenges Associated by Outsourcing………….…….....6 3. The Key Elements of Successful Downsizing Strategy……….………...6 To avoid bankruptcy and closure of the company….…..6 Acquisition and Merger……………………………….…...6 To consider Privatisation………………………………......6 Reduce the opening operating costs to remain in the International Markets………………………………….…..6 4. The Key Elements of Successful Outsourcing Strategy…………….......7 Costs…………………………………………….……….…..7 Written Contract…………………………………….……...7 Staffing Issues……………………………………….….…...7 Roles and Expectations………………………………..…...7 Performance Criteria………………………………..……...8 5. Recommendations and Implementations ………………………………..8 Planning and executing of the Outsourcing Downsizing Exercise……………….……9 Benefits Downsizing and Outsourcing to an Organization…………………………………….…..…..…..9 6. Conclusions…………………………………………….…………..………12 7. References and Bibliographies………..………………………………….….13 1. Introduction Due to the Global financial crisis that hit the world markets and saw the closure of many businesses and loss of jobs globally, the a few businesses that survived the predicaments like one International Air Carrier, decided to downsize and outsource its maintenance functions. This decision prompted them to engage a business consultant to advice and assist them in the said plan. Downsizing basically means the cutting down, restructuring the company’s staff and operations cost so as to improve the productivity, efficiency and the competition of the organization with other players in the industry (Gladys, 2000). Most companies may try so hard to be employee friendly even during the most economic trying times but are eventually forced to reduce their number of employees when the economy becomes too bearable to their pockets. However they have to tread with caution and well laid down plans before implementing the downsizing and outsourcing processes. Outsourcing entails contracting work out: obtaining the goods and services from outside suppliers and also the hiring of consultants in order to maintain a flexible workforce. The three categories of downsizing comprise of Global (Macro), Organization (strategy) and Individual (Micro) levels (Gladys, 2000). We shall dwell on the Organizational (strategy) downsizing for this case. 2. Challenges associated by Downsizing and Outsourcing For these changes and implementations to take place successfully, the organization evaluated several critical issues such as the availability of skill and critical mass for internal improvement. Leadership, technical, continuous improvement mindset, and process skills are among the skill sets required and considered. The other factors that were also considered are time, which was needed for the completion of improvement of all the areas of maintenance that need s attention. These areas include tools, technology, leadership, people, supplies and parts, process and maintenance. The management also availed the necessary apparatus for the successful in-house development project. The tools comprised of people, money, cooperation and resources. 2.1 The Challenges Associated by Downsizing 2.1.1 To the organization: a) There are always are problems with deciding which employee to let go and who to retain. b) The airlines maintenance department being the most important and sensitive department than all other departments, obviously consists of the most competent and hardworking employees who are likely to be affected by means of being eliminated in the process of re-prioritizing and restructuring activities. This posse a great threat to the organization (Ronald and Cary, 2000). c) The organization gets it difficult to downsize without causing disasters d) Difficulty in gathering support of the main stakeholders e) Undecided on what to do away with f) Retaining resourceful people and maintaining morale is difficult a) The organization will experience more stress due to increased workload and restructuring. b) The workplace surrounding will be haunted with paranoia and the fear of more possible job losses. 2.1.2 To the leadership: a) Leaders might forget to practice self care pay less attention to the employees. b) They might start to excuse poor performance as just a passing phase that will fade out soon enough. c) They will downplay their corporate values, forget to lead by example and also apply double standards. d) They may not pay attention to the personal impacts on the employees to facilitate the grief process and even share the facts on why the decisions were made. e) Sometimes the leaders might not be visible to listen to employee concerns and even conduct the regular organizations meetings. 2.1.3. To the employees: a) They will be so much concerned about their safety in the workplace to meet the targeted production standards. b) Their will be an increase of suicide cases, violence, crime and workplace theft, stress, substance abuse, social problems, and physical complaints. c) The surviving employees might experience, loss, grief, trauma and anxiety after witnessing the layoffs of the colleagues. d) There will be a shift of focus on resources like safety, learning and diversity instead of business or economic outcomes. 2.2. Challenges Associated by Outsourcing: a) Compromising on skilled workforce:- The highly skilled workforce team which took much time to train might be lost as the management change hands with the new contractors who will managing the department. There might be cases of flight cancellations and delays, laps in security leading to smuggling of drugs, aircrafts incidents and accidents and environmental pollution brought about by the fact that the aircraft will consider flying without passengers to and from the new foreign stations to be repaired and maintained. This could be cause as a result of ineffective budget approach, poor facilities and inadequate resources. b) Increased security risks: - The outsourcing company might not have the necessary and the required airline security monitoring facilities and up-to standard foreign repair stations. They might as well lack the skill and knowledge on how to detect and protect the passengers from internal and external security threats from airline high-jacks and possible terrorist’s attacks. c) Compromising on passenger safety:- the mandatory regulatory standards normally required in the airline industries and even other organizational systems like the level of education in the specified fields is normally overlooked when it comes to the contracting of an outsourcing companies, compromising on the regulatory standards of the airline. d) Supplier’s immaturity: - The vendor poses a possibility of risk as they might not be having the much needed knowledge and experience around the airline industry. e) Control requirements level: - The contracted vendor might not possess enough experienced human resources, a collection of reputable top practices to influence, expertise, systems and infrastructure. f) The vendor might have a few issues like poor infrastructure, legal, geographical and cultural differences. 3. The key elements of Successful Downsizing strategy: 3.1. To avoid bankruptcy and closure of the Company: The main reasons and objectives as to why the company resorted to downsizing exercise was to cut down on its company’s operating costs. 3.2. Acquisition and merger The restructuring involves reform the entire operations so as to attain the natural process. The redundancies and duplicate of tasks are eliminated for its success. The downsizing is realized due to the elimination of large positions. The new organization brought up as a result of this exercise will now be expected to effectively and efficiently operate and accomplish calculated intentions of the new organization. 3.3. To consider Privatization The organization might be preparing for privatization so as to improve on its efficiencies to realize and record high profits which will positive impacts on the stock markets and return on share value. 3.4. Reduce the operating costs to remain at par in the international Markets The organizations struggle to maintain and remain in the comparatives in a more polarized market by trying to cut on the operating and production costs (Nadia, 1994). 4 The key elements of Successful outsourcing Strategy: 4.1 Costs The total costs should be agreed upon, specified, evaluated and verified before making commitments. 4.2. Written Contract The two parties should take their time in negotiating a contract that will be beneficial, fair and profitable to all of them. They have to develop specific definitions and measurements to build flexibility. If the contract is not profitable to the both parties, then none of them wins the contract and whichever company that demands most upfront savings has to pay dearly in the process. 4.3. Staffing Issues This the process of communicating with the staff to help smooth the process by minimizing their anxieties, sharing findings through vendor screening and conducting feasibility studies, and keeping them informed of the outsourcing arrangements, plans, implementations and progress. The organization should then finally arm itself with plans details, directly and fairly handle employees’ issues. 4.4. Roles and Expectations Sound expectations, responsibilities and roles do bring about good results in the partnerships. The vendor is required to know the organization’s objectives in outsourcing and if at all the outsourcing is expected to fix an internal hitch. The two parties should also agree on the specific responsibilities they are each going to perform and establish the communication channels fro the start. The organization should also establish the vendor’s capability for the key success of the outsourcing exercise to avoid complications in the long run. The meeting between the two parties should come up with a workable solution, follow-up action plans and evaluate their own performance with clear communication and timely deliveries. 4.5. Performance criteria The organization should evaluate the procedures and measures before having the agreement signed. Both the vendor and the client should agree in advance and put in writing the necessary measures that will oversee the outcome of original expectations and performance. Early establishment of internal staff plan to carry out regular measurements and monitoring. The written appraisal programs and plans should be integrated in the organization’s operating strategies (Linda and Barbara, 1998). 5 Recommendations and Implementations: The need to keep the more skilled and experienced employees by re-assigning them to other departments so as not to loose them in the restructuring process was put into consideration. This was decided on and achieved by referring on the employee’s ratings appraisals (Bernard and George 2001). The downsizing and Outsourcing exercise of the maintenance function department of the International airline carrier was recommended because of a number of reasons. The need to select the ideal vendor of the appropriate size, skills and of significant business value to put into practice for a long-term was put into consideration and recommendations as described below: a) The requirements of the outsourcing exercise before it is commenced. b) The organization has to be willing to accept the involvement of the third party which introduces the product design through the help of the management. c) They have to comply with the government’s incentives and other regulations. d) Seek for the best engineering talents availability in the low cost country. e) Consider the organizations culture before conducting the outsourcing exercise 5.1. The planning and implementation of the Downsizing and Outsourcing Exercise: Downsizing and Outsourcing Analysis The airline company developed a long time plan before eventually carrying out the downsizing and outsourcing exercise. The high performing departments were left out of the downsizing exercise and the areas which performed poorly were restructured. Staff analysis was conducted and realigned into the downsizing planning phase to aid in the retention of highly skilled and knowledgeable employees. The plan also helped to put into check the possibility of emergence of negative consequences such as job uncertainties and insecurities (Steven et al, 1999). A locally available vendor with an internationally established team possessing high level of experience and skills with an ideal formula of success was chosen to reduce the complications experienced by working with offshore outsourcing vendors and to deliver the maximum efficiency quality work for the client. 5.2. Benefits of Downsizing and Outsourcing to an organization: Downsizing: The downsizing strategies mainly comprises of systematic strategy, workforce reduction and work reassigning. Workforce reduction strategy includes offering retirement incentives to employees, outplacements, buyout packages, transfers, attritions and layoffs. Systematic strategy is a long term strategy which works by ensuring that the never ending workforce reduction with its continuous and repetitive characteristics does not take place in the future. Workforce redesigning strategy includes the reduction of work and not reducing the number of employees (Steven, et al 1999) Downsizing goals are increasing labour productivity, reducing total costs, improving quality and efficiency enhancing Downsizing recommendations and Implementations: Downsizing Stages: a) The decision to downsize b) Downsizing program planning c) Making the downsizing announcement d) Implementing the downsizing program The recommendations Process: 1) The mentoring initiatives and planning should involve all the key stakeholders 2) Overall downsizing strategy should be integrated into the mentoring initiatives. 3) Individuals and groups who should be retained in the downsizing exercise should be identified, they form the form the design monitoring basis programs that addresses the knowledge and critical retention transfers required at all of the organizational levels. 4) Mentoring initiatives that will help support the company’s new performance appraisal system, review process, goals, strategy and culture should be developed. Downsizing Implementations For successful achievement of the restructuring exercise by an organization, a proper preparation was conducted in advance as in this case where the organization first invested its resources and time in analysing tasks systematically, resource needs, personal skills, time use, inefficiencies and redundancies. This enabled them to process, eliminate unnecessary workload, positions and to discover areas that required additional growth and investments. A quick and rapid approach was used in the restructuring process to avoid and minimize the anxiety and fear associated by questioning who the next victim to be laid off was. The involvement of the employee’s participation and communication also helped in the successful and improvement of the downsizing exercise. Their effectiveness will rate higher than their competitors in the market over time. They will eventually have a credible maintenance team permanently capable of properly and efficiently responding to the modern airline security risks. The restructuring exercise will bring about the modernization, flexible, adequate structures, more compact and smaller and effective personnel. The airline company will spend less in staff costs and the distribution of large network carriers. They will also realize and achieve the three main operational restructuring pillars namely restructuring the balance sheet which shoots up their profits, cutting costs and boosting their revenues (Debarshi and Subham, 2000). Their performance indicators recorded an increase in effectiveness of the customer satisfaction and the entire savings will be doubled (Kim, 1998). Outsourcing Recommendations and Implementations: Contract the experts The company took seriously matters pertaining to outsourcing and took a lot of care while deciding on who they should contract so as to avoid the obstacles in the process. Help build the market Organizations saw the need to build their own personal operations to assist the vendors to thrive in their field of outsourcing. Knowledge transfer: The offshore resources were to be assisted to grasp the business process alongside its assimilation with the rest of the organization while concentrating on the business roles process and mechanics. Implementing Outsourcing Procedure; a) Evaluation of approach options b) Vendor selection c) Contracting d) Program roll-out Outsourcing Implementations After the outsourcing exercise, the existing level of service brought about by the maintenance team will improve and speed up the maintenance progress. The management will also be able to determine the focal points on the key management time on the core company problems. They will also achieve more control of the maintenance results and gain access to almost all of the high-end maintenance technologies existing. The maintenance team will as well get exposed to other maintenance experts possessing great expertise which will help in turning around their weak point to professional performance team. The outsourcing team will also help the Organizations employees to significantly improve their career and personal growth as they closely work together as team (Jerry, 2001). The airline tremendously reduced its costs and complexity and improved in the success of its operations. The outsourcing will help by bring energy to the airline company by switching the workloads causing risks, high costs, and frustrations to another company with the better and specialized expertise and skilled desired at a much lower cost and efficiency. Operational and expenditure on spare parts was predicted to reduce by over 60%. 6 Conclusions Due to the economic difficulties driven by the global fiscal crisis the world over, organizations have immensely resorted to layoffs, downsizing and outsourcing some of their departments to the relevant vendors either internally or externally. The airline industry is among the big business venture vastly affected by the emergence of the worldwide global credit crunch. As a result of this, they were prompted to take the necessary precautionary measures to stay afloat in the airline industry. Issues such as poor economy, rising fuel prices, dwindling number of travelling passengers are some of the issues that made the air line company to downsize and outsource its maintenance functions. The Downsizing and Outsourcing exercise was foreseen and conducted with the help of the reputable Business Management Consultant up to its implementation and completion success. International Carrier Airline eventually saw a shoot up in demand amid the global financial crisis due the improvement of services, low budgetary costs and the efficiency brought about by the Downsizing and Outsourcing exercise carried out. 7 References: 1. Nalib N. and Appelbaum S.H., 1994. The Impact of Downsizing Practices On Corporate Success. Available at URL: http://www.appelbaumconsultants.com/articles/1994-96/DownsizingImpactonCorporateSuccess.pdf (03 May 2010) 2. George .O.K. and Bernard .J. C. 2001. Smart Downsizing: Reducing Costs While Increasing Competitiveness. Available at URL: http://www.cambriaconsulting.com/wp-content/uploads/Smart_Downsizing.PDF (03 May 2010) 3. Debarshi .D. and Subham .L. C. 2000. European Airline Industry – Strategy for the New Millennium. Available at URL: http://www.skytechsolutions.com/pdf/researchPapers/European%20Airline%20Industry%20-%20Strategies%20for%20the%20New%20Millennium.pdf (04 May 2010) 4. Steven .H.A., Andrea .E. and Loretta. T.S. H. 1999. Strategic Downsizing: Critical Success Factors. Available at URL: http://www.appelbaumconsultants.com/articles/1999-00/DownsizingSuccess.pdf (04 May 2010) 5. Kim S.C. 1998, Strategic Organizational Downsizing: An Extreme Case. Available at URL: http://webuser.bus.umich.edu/cameronk/Stragetic%20Org%20Downsizing.pdf (04 May 2010) 6. Linda .B. and Barbara .M., 1998, Outsourcing: Planning for Strategic Partnerships. Available at URL: 04 May 2010) 8 Bibliographies: 7. Jerry, S. R. (2001) The Handbook of employee benefits, Sixth Edition. The McGraw-Hill Companies. 8. John, A. (1997) Managing careers into the 21st century, Paul Chapman Publishing Ltd: A SAGE Publications Company 9. Ronan, M. (2005) The outsourcing process: Strategies for evolution and management: Cambridge University Press 10. Ronald, j. and Cary, L.C., (2000) The organization in crisis: downsizing, restructuring, and privatization, USA: Blackwell Publishers Ltd. Read More