Planning and Implementing a Downsizing Exercise - Essay Example

Introduction Downsizing has been used by different organization over the years to increase efficiency in organization and also to increase the effectiveness due to decrease in demand for an organization’s products and services (Baumol, et al 2003). It involves careful reduction of the number of employees in the organization. Downsizing is believed to be the most appropriate way of improving the performance of an organization whose activities are on the decline. It helps an organization to reduce the cost incurred and therefore improve the performance of the organization. Unless downsizing is done carefully the organization may devastate its effectiveness and efficiency. Downsizing should be done in a procedural manner to avoid drawback that are unnecessary (Mellahi and Wilkinson 2004). An air carrier company can also downsize by reducing the number of flights in a day and also change the kind of planes used for certain flights. Downsizing in terms of domestic operation would help reduce cost incurred by air carrier organization and increase efficiency (Ronald and Cary, 2000). If the number of flights are reduced this would mean that there would be less aircrew. Amount that is paid to aircrew reduces due to this reason. An air carrier can reduce the cost by stopping flights to areas that are less productive and concentrate on areas that are more productive to the organization. Concentrating in areas that are more productive would enable the company to increase its efficiency and effectiveness (Baumol, et al 2003). Organization may be forced to downsize due to various reasons such as need to increase shareholders’ wealth, need for efficiency and effectiveness. The process of downsizing in an air carrier organization involves various stages which include analytical and planning stage, implementation stage and post implementation stage (Mellahi and Wilkinson 2004). During the analytical stage the management of the air carrier examines the costs incurred in the organization and decides the total cost that is to be reduced and how this is going to be done. Management also determines how much the organization is going to gain out of this exercise of downsizing. The organization needs enough time to carry out this activity. This is because the financial performance of the organization needs to be evaluated well and managers decide which expenses need to be reduced and employees that are going to be laid off (Carroll and Hannan 2000). After managers have decided on the expense to be reduced they come up with a plan to carry out the downsizing activity. During the implementation stage of downsizing exercise the organization undertake the activity of laying off employees and reduces other expenses that needs to be reduced (Hannan and Freeman1977). Employees are given a notice concerning the downsizing exercise. Management is required to give detailed reasons for downsizing. This will help the employee to have a clear understanding of the prevailing situation. Employees should also be given an opportunity to ask questions they deem necessary. The final stage of downsizing exercise involves post implementation whereby the employees that were not laid off are dealt with to ensure that they cope with the situation (Baumol, et al 2003). Downsizing can help the remaining employees to improve their performance since they will have chances for growth and development. This is because the remaining employees would need to be trained new skills which would help them adopt to the increasing demand for their services. Planning downsizing Every organization should have a management plan for downsizing whether they have a plan to downsize in future or not. Proper planning should be done for the process of downsizing. Planning should be done before downsizing, during the exercise and after downsizing is completed (Hannan, et al 2000). Planning make the exercise of downsizing to be successful. When an organization has a plan that is included the management strategy makes it easier for the organization to carry out downsizing when need arises (Mellahi and Wilkinson 2004). The air carrier therefore needs to have a well planned strategy for downsizing. This plan should be include in the management strategy of the air carrier. This would help the company to carry out downsizing easily without wasting much time. Implementing downsizing With global financial crisis most companies are forced to downsize for them to improve their performance (Carroll and Hannan 2000). During implementation management must communicate to the employees about the exercise which is about to happen. Employees should be informed in time that there is going to be a layoff (Hannan and Freeman 1989). Air carrier need to give notice to the employees about the exercise that is about to take place to ensure that they get prepared and avoid panic by the employees. The theoretical perspectives for downsizing With changes in the environment air carrier need to make sudden changes to the structure of the organization, the kind of products and services offered and its strategy so as to meet the demand of the environment (Carroll and Hannan 2000). There are different theories that deal with the exercise of downsizing. These theories include organization ecology theory and institutional theory. The organization ecology This theory stresses on the importance of pressure from the environment on the organization and draw attention on how this pressure from the environment affect the survival of the organization. This theory studies the changes that occur in the organization from the view of growth. The characteristics of the population that exist in the organization are determined by the external environment (Ronald and Cary, 2000). Organization need to adapt to the constraints that exist in the environment for it to survive. Due to the need that organization need to adapt to the conditions prevailing in the environment, this will force the organization do downsize meaning that it will reduce its operations and the work force to be able to survive in the environment (Bailey et al, 1994). The volume of production and services offered by the company will be reduced to be able to survive. Organization that adjusts to the needs of the environment is more likely to survive than organization that never adjusted. Institutional theory This theory requires that organization meets the requirements of the industry and society. For the organization to be able to survive in the societal environment; it should obey the rules of the society and the industry (Bailey et al, 1994). These rules act as the guidelines on how the organization should carry out its activities in the society. This theory is in the view that downsizing respond to the uncertainties that exist in the environment. When management is faced with uncertainties in organization, it makes decision that may be alike to the events of the organization. Organization should be careful on the kind of downsizing it uses since different organization can use the same way to downsize without necessary showing any improvement. According to this theory downsizing helps the organizations to deal with uncertain situations without much lose (Bahrami, 1992). Organization usually may not have any experience concerning downsizing but it can observe how other organization performed after downsizing. Management would prefer to use downsizing strategy to improve the performance of the organization by reading literature on how downsizing helps to improve productivity of an organization. Some trainings that managers receive, show that downsizing help to improve the efficiency and effectiveness of an organization. Since air carrier operates in different environment, it needs to adapt to the different social factors that exist in the different locations and also the different political and economical factors (Ronald and Cary, 2000). Outsourcing of its aircraft maintenance functions The global financial crisis affects the process of outsourcing of aircraft maintenance functions. The kind of regulations that are implemented by the government also affects the process of outsourcing of these maintenance functions (Ronald and Cary, 2000). The governments implements policies that determines the bill of rights for passengers and also pricing for fuel. The association for International Air Transportation declared in March 2009 that the airline industry was running at a debt of $ 170 billion after forecast that was undertaken by the association (Bahrami, 1992). Most companies opt to use Business process outsourcing as this reduces costs incurred by the company. The air carrier can therefore use business process outsourcing to ensure that its costs are minimized. Business process outsourcing ensures a company’s efficiency by ensuring that the company is able to do its business in the fluctuating environment. Business process when implemented appropriately it ensures that the company is able to grow in future and when the global financial crisis reduces (Bahrami, 1992). Business process outsourcing would enable the organization to reduce its maintenance costs by reducing the cost incurred for structure maintenance, costs incurred for retaining customers and also helps the organization to change the fixed cost to variable cost. Operating cost is also reduced when business process outsourcing is used (Hannan, et al 2000). Business process outsourcing would enable the air carrier to improve its delivery and standardize the business process of the air carrier. It helps the company to manage its inventory and plan its capacity. In the airline industry controlling business process outsourcing is very important. The air carrier industry should ensure that it deliver a superior service to its customers at the best price possible. Customers would always look for a service that is offered at the lowest price and a service that is superior. As the air carrier partner with the business process outsourcing it reduces its costs significantly and consequently increasing its accountability, leading to increased efficiency and effectiveness. The main benefits gained by the air carrier include the following;- Business process that is standardized Air carrier investing in business process outsourcing helps to standardize its business process. Without business process outsourcing standardization may be difficult for the air carrier to achieve through incremental efforts which may include reengineering of processes in the organization. An organization that has standardization is in a position to change to different process by use of modern technology so as to achieve high level of efficiency and effectiveness in the organization (Bahrami, 1992). Business process outsourcing ensures that the organization is consistent in the provision of its services. This would help the air carrier to retain it customers as customer are interested on the consistency of the air carrier. An approach that is commercialized towards the operations of the organization Business process outsourcing ensure that it sets prices for products and services at a price that customers would be comfortable with taking into consideration unit cost in organization (Ronald and Cary, 2000). This would help air carrier’s prices to be transparent whereby the travel industry it is important that the cost and satisfaction is very serious. Business process outsourcing do billing activity for the air carrier, collects revenue and also helps in tracing baggage for travelers (Hannan, et al 2000). Delivery model that is rationalized Organization should never have any kind of misconceptions concerning the kind of risks involved, the performance of the business and even the levels of services provided when it partners with business process outsourcing. Business process outsourcing companies ensures that the brands of the organizations are regionalized well (Ronald and Cary, 2000). They provide expertise services with high level of knowledge to ensure that the company’s efficiency and effectiveness is attained. They offer ticketing services, do commissioning processing and management of the distribution channel. They also predict the impact of economic environment and forecast the kind of technology in the travel industry. The challenges of downsizing With changing environment and global financial crisis, organizations have found it necessary to downsize so as to ensure effectiveness and efficiency in their operations. The important factor for organization to be competitive is to ensure high value than high volume. It is believed that downsizing benefits the company in that it helps an organization to improve its efficiency and effectiveness. However, downsizing in air carrier has a number effect not only to the employees but also to the organization and society. Downsizing can affect people psychologically and in the way they do their job (Baumol, et al 2003). Employees who have been laid off may be affected both physically and psychologically in that this can lead to depression of the employees who have been laid off. Downsizing affects the kind of trust that employees who remain in the organization have towards the senior management of the organization. Employees would not be able to trust the management absolutely when there is intensive downsizing in the organization. Lack of trust would lead to poor performance of the employees in the air carrier company (Carroll and Hannan 2000). Worker’s commitment is very important for customer satisfaction in the company. The level of trust will directly affect the performance of the employees and hence the achievement of objectives of the company. If management does not plan its downsizing properly, then the strategy that is used would affect the trust that exists between the employees and the management. Employees who remain in the company may experience post-downsizing challenges meaning that they might fear that the company would not be able to pay them and that there would be a limitation of careers in the organization (Baumol, et al 2003). Downsizing affects the society in that with increase in unemployment in society, there would be decrease in the amount of income tax for the government to carry out development activities in the society (Carroll and Hannan 2000). Without tax the society would not be able to develop leading to poor infrastructure and poor quality of education in the society. An organization downsizing face different challenges which include high costs involved for training new employees or employees who survived the downsizing exercise (Mellahi and Wilkinson 2004). The organization would also need to restructure its organizational structure to decide on how it will carry out its activities after the exercise of downsizing. The organization need to assure the remaining employees of job security because they have fear of losing their job in the next exercise of downsizing. The key elements for successful change implementation Introducing change in organization may pose different challenges and therefore an organization should look for the best way to introduce change in the organization. First let everyone in the organization see the need for change By creating urgency, managers would be able to gain support and motivation to introduce change in the organization. Managers need to carry out a research to see the available opportunities and threats in the market and discuss this with other members of the organization to get support (Bahrami, 1992). Convince people on the importance of change. With leadership skills, managers need to convince others the importance of change and influence people to support change to be introduced (Bailey et al, 1994). Vision for change must be created and communicated Values for change should be clearly shown and strategy that is to be used for implementing change should also be clear to everyone. This needs to be communicated in the organization (Mellahi and Wilkinson 2004). Proper planning Before implementing change in the organization, proper planning should be done. People who are affected by the change must be communicated to before the exercise takes place. Managers should ensure that the affected employees agrees and understand well the need for the change. Notices should also be given to people who are going to suffer from change (Carroll,1985). Conclusion Since employees are part of the quality of the organization, they should be treated with respect by employers. Employers should ensure that employees feel most valued to enable them deliver high quality services in the organization. Ensuring satisfaction of employees ensure high commitment by employees in their work. This increases the productivity of the organization. With negative impact of downsizing in the organization, managers should ensure that the surviving employees get enough motivation to perform their job effectively. Recommendation Since downsizing has various effects on organization, employees and society as a whole, the air carrier company needs to have a good plan for implementing change in organization. For the air carrier company to implement the exercise of downsizing successfully, it should ensure good planning before the exercise takes place, during and after the exercise. There should also be good communication to employees concerning the intended downsizing exercise and those employees that are going to be laid off should be given a notice. Reference Baumol, W J, Blinder, A S & Wolff, E N 2003, ‘Downsizing in America: Reality, Causes and Consequences’, New York: Russell Sage Foundation Mellahi, K and Wilkinson, A 2004, ‘Downsizing and Innovation Output: A Review of Literature and Research Propositions’, BAM Paper 2004, British Academy of Management. Ronald J and Cary L 2000, ‘The organization in crisis: downsizing, restructuring, and privatization’, Blackwell Publisher ltd Carroll, G and Hannan G 2000, ‘The Demography of Corporations and Industries’, Princeton, NJ: Princeton University Press. Hannan, M and Freeman, J 1977 ‘The population ecology of organizations’ American Journal of Sociology 82 (5): 929-964. Hannan, M, Polos, L and Carroll G, 2000 ‘Logics of Organization Theory: Audiences, Code, and Ecologies’, Princeton: Princeton University Press. Hannan, M and Freeman J, 1989, ‘Organizational Ecology’ Cambridge, MA: Harvard University Press Carroll, G 1985 ‘Concentration and specialization: dynamics of niche width in populations of organizations”, American Journal of Sociology 90 (6): 1262-83. Bailey, M, Bartelsman, E and Haltiwanger, J 1994, ‘Downsizing and Productivity Growth: Myth or Reality’, Cambridge, MA: National Bureau of Economic Research Bahrami, H 1992, ‘The Emerging Flexible Organization’: Perspectives from Silicon Valley. California Management Review 34 (summer): pp 33-52. Read More