HR professor


Mass Layoffs: Downsizing Your Organization the Right Way?

Cutting down the organization's size is not a new trend. Companies who have grown into unwieldy proportions downsize to cut the flab. Companies, who get into mergers and acquisitions, have to 'right size' in order to fit into the new organization. Also, when there is an economic recession, most companies go in for mass layoffs.

Why do companies need to downsize? The reasons for downsizing may vary for each company. Every company can have any one of these reasons to downsize:
  1. One reason could be that the company wishes to bring in fresh blood within the organization. Old school ideas need to be tossed out of the window. Since that can't be done easily, the only way out is to cut out the conventional thinking managers.

  2. Another reason is to trim costs. In most cases, organizations downsize to control the spiraling cost of employment. Here again, care must be taken that the overall effects of downsizing on productivity does not negate the cost cutting benefits.

  3. Sometimes organizations seeking a cultural change have to resort to mass layoffs to weed out the bad influences. Here the layoffs could happen across departments regardless of rank. People who detract from the organization culture are shown the door. Also, when companies that have high performance standards layoff non performers.

  4. During times of mergers, we see a lot of companies downsizing. During a transition phase, there could also be lateral and vertical shifts along with downsizing.
For companies, it is a tough call to choose downsizing. When an organization downsizes, employees are insecure and uncomfortable with the new environment. There could be unpleasant scenes, cut throat competition and low morale in the workplace. People don't trust anybody and nobody is willing to be helpful or caring.

Moreover, there are legal issues related to downsizing. Most of the times, downsizing leads to numerous lawsuits which are time consuming and undesirable. Companies can protect their interest while downsizing, only if they follow the proper procedures. Without taking the necessary steps, companies can land up in serious labor disputes and cost them dearly.

HR personnel should undertake the responsibility to maintain all records of employees and update the company on the changes in government rules and guidelines. Ensure that the company is within the framework of the rules designed by the State.

Every employee should be well versed with the company's policy regarding recruitment, transfer, training and even termination. These policies could be provided as a written handbook or an online resource where employees can read the organization's policies and framework.

Companies should stick to the guidelines and not deviate from the stated rules. Also there should be no room for misinterpretation or manipulation of rules.

If the company has to adopt mass layoffs due to economic slowdown, it is best to have documented evidence for reference. Hence, collect bills, invoices, bank statements, and ensure that all records are collectively pointing towards a business downturn. Courts would like to a lot of evidence that conclusively indicate business decline.

Very often companies start the downsizing plan without charting out an effective plan. What use is it to layoff many employees when the end result does not match your expectations? Downsize right; create a logical and practical plan of action. Who do you fire? Why? What are the immediate fallouts? Who is the source of the problem? What is the backup plan? Who can replace the fired executive? How much is the target for saving costs? Also decide in what order do you want to downsize? Do you start downsizing from the bottom or the top?

Finally, don't lose the humane touch of the organization. Downsizing is hard even for your employees. So help them get jobs elsewhere, provide counseling and you can even let them use company premises to continue their job hunt. End the relationship cordially. Who know when you might need to rehire an employee who was downsized?

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