The Aspects of Contemporary Organizational Design - Article Example

Paradox of Managerial Downsizing Article Review) Presented To The article explores the paradox surrounding managerial downsizing. According to the author, over the past decades, companies have embarked on a strategy of flattening organizations to ensure more effective supervision and reduce managerial costs. The flattening of organizations would remove middle managers and the employees at the lower level of the hierarchy would report to the top managers. Several companies have employed the strategy of downsizing ((Littler & Innes 2004: 1116). The paradox lies in the fact that despite the intention of organization to flatten organizations, the number of executive positions continues to increase. Some researchers who have tried to explain this paradox say that the increase in the number of managerial positions in US firms is as a result of greed and need to have empire control. Others have contributed this to restructuring and reengineering strategies applied especially by the small firms which have created new management positions. Although most companies have been outsourcing their operations, most of these operations are very complex and require managerial attention. This necessitates for the hiring of more managers. The problem with the many managerial positions arises from the act that over the years, the compensation of the managers has greatly grown in relation to the compensation of other non-managerial employees (Littler & Innes 2004: 1165). As a result, an increase in the number of executive implies that an organization has to incur greater costs to compensate the bloated number of managers. This is contrary to the organization’s main goal of profit maximization and keeping costs at minimal. From the information that has been gathered from the previous research that has been conducted on this topic, the author has developed four explanations of the paradox. One of the explanations that explain the paradox is that as organizations reduce the number of employees through downsizing, the jobs of the executives is not at risk since they are the ones making the executive decisions. Therefore, as the firms continue to shrink their staff, the number of executives continues to increase in relation to the staff size. The companies employ the strategy of ‘hire them and fire them” while the executive positions remain unaffected. Another reasons is the pseudodownsizing where firms efforts to downsizing have merely been rhetorical wit few employees being cut back. There have been reports that the number of employees that companies report to the public to have retrenched is greater than the number of employees that have actually been laid off. They do this to convince investors to put more money in their company. Another explanation is that called the “soft sandwich hypothesis” this is where some managerial positions are eradicated but people who held those positions are given new roles. This result in delayering of the organization while the number of executive is not affected but their job description changes. The last explanation is that if the managerial layers are removed then the role of the middle level manager becomes useless and they may become endangered. As a result, companies refrain from restructuring management since the middle in the middle management levels are being groomed for higher posts. To explore the different theories put forward by scholars, littler and Innus carried this research. Since the previous studies had been carried out on companies based in America, the present study sought to get a different perspective by using data on firms located outside America and chose Australia. The method used involved drawing information from different Australian dataset. From the information that was gathered from the various data sets, the authors of the articles came to various conclusions. One is that it is true that some companies may have misrepresented their facts about downsizing so as to get more money from the investors in the 1990s. However, in the year 1994 several companies did actually carry out the restructuring strategy. However, the number of executives still remained high. However at this year, the number of job offers increased with 25% being managerial jobs. At this level the firms used the hire and fire strategy which ensured that the number of executive still remained high. In the period 1995 to 1998, there has been shown evidence of delayering of executive in several companies. A good example is the Australian banks where some cases the managers were not part of the downsizing ((Littler & Innes 2004: 1145). This implies that there were changes in the persons occupying certain positions and changes in the positions but the number of managerial positions remained the same. It can thus be concluded that the four explanations for the paradox are true but not for every period since 1990. Each explanation fits a certain period. Review of research methodology The methodology used in this research was the analysis of different set of data. It was not possible to use any correlation analysis method since the data is mainly qualitative. Nevertheless, that information gathered from the study can be said to be reliable since the authors used a large data sample. The study was conducted by sending questionnaires in three different countries i.e South Africa, Australia and New Zealand. The large sample ensured that the data was representative enough and overcame the bias that may affect data collected from a single region. This is because different companies from different regions are affected by diverse factors. The information gathered was thus credible. The research also covered several years to explain the paradox. This makes the data more reliable since organizations face different challenges depending on the era. It also made it possible to develop a historical profile of the development of the managerial downsizing paradox (Littler & Innes 2004: 1157). In order to ensure that firms and industries were equally represented, variance was used to ensure that the industry or firm size would not become a bias. The study also focused on large organizations which are more likely to restructure and the managers are not the owners so they would have been the perfect subject for the study. This is because small firms are mostly managed by the owner and family members. This implies that for small firms, even when the other employees lose their jobs, the executive can never lose their position. However, it is possible that the information that was presented by the study could be biased since the authors already had an explanation of the paradox and would expect the result to fit into this template. To get the data to fit into a normal distribution so as to get the right figures on correlation analysis, some of the cases that did not fall into this were eradicated (Littler & Innes 2004: 1159). It could be possible that these cases that were eliminated could have given different explanations to the downsizing paradox. Discussion of Findings of the article From the results obtained in the research carried out in the article, some light were shed regarding the paradox of management downsizing. As explained in the article summary above, four different explanations have been put forth to explain the paradox. None of the explanations were conclusive enough. However this research revealed that none of these explanations were wrong or true. For instance, pseudodownsizing was seen to not hold true for the present conditions. This is because despite the fact that in 1990 some companies announced downsizing but did not actually follow through, from the year 1994, a lot of companies have greatly downsized the number of staff. As a result, there was a great loss of managerial jobs since 1994. Loss of job through downsizing is still a reality to many people today. The number of executives hence greatly reduced and did not go back to the original number even after increase in recruitment. From the 1990, to 1998, there were high levels of reduction of managerial jobs and the rate of hiring was also high. The explanation of the burn and churn would thus explain the reason why the number of executives remained constant. The delayering theory is also observed to apply as companies applied the strategy of restructuring in the period between 1995 and 1998. The job descriptions of the managerial positions changed and even the individuals holding them but the number of executive positions remained the same (Littler & Innes 2004: 1177). It was also observed that even with the restructuring, in most of the organization the executive positions were not affected. This is what was termed as the “soft sandwich” process theory. From the study, it can be observed that of the theories that had been developed to explain the downsizing paradox, only the pseudodownsizing was inapplicable. Analysis of companies in Australia would be an effective way of explaining the paradox to the American firms since the operations of Australian firms is greatly shaped by America. Globalization has resulted in organizations being exposed to similar economic climate. Different firms around the globe have also applied the same strategies as a way of surviving the hard economic times. The results obtained from this study have shed a lot of light on this area and would be one of the ways of developing strategies to overcome the current problem of having large number of executives ((Littler & Innes 2004: 1175). By understanding the reason why there are more executive positions despite the company’s downsizing strategies, it would be possible to develop ways of reducing the numbers but at the same time ensuring that companies remain productive. The information presented in this article is crucial for the top managers and board of directors. The human resource is the most important asset of the organization. It is the role of the organization to ensure that it has the right personnel but at the same time ensure that it gets value for its investment in employees. There is no need to keep a large number of managers who require high compensation if they are not bringing any value to the company. This is contrary to the main goal of the organization which is to maximize the shareholders value. This is achieved through lean operations and having a lean staff which includes the executive that takes the largest portion of compensation. Reference List Littler Craig R. & Innes Peter (2004)” Paradox of Managerial Downsizing”. Organization studies. http://oss.sagepub.com/content/25/7/1159 Read More