Corporate Downsizing

Paper Summary:

This paper explains that downsizing takes several forms: (1) Companies reorganize and restructure to increase efficiencies or economics of scale, (2) de-layer to eliminate layers of bureaucracy and reduce payroll expenses, (3) outsource certain functions to focus more resources on key competencies and (4) use contingent workers to meet demand increases and help keep payroll costs down. The author points out that the old paradigm that institutions will take care of their employees has been shattered as managers, who are often impervious to these changes, recklessly disregard the human consequences, which accompany massive reorganization. The paper relates that retained employees often suffer from post-downsizing stress syndrome, a psychological response that may surface after a series of layoffs; these employees demonstrate a sense of hopelessness about their situation resulting in increased anxiety about work-related issues, which eventually affects their health, personal life and attitudes toward work.

From the Paper:

"The ongoing practice of job elimination usually has another unintended and often unforeseen consequence: a rise in both discrimination lawsuits by minorities, women, and older workers, and occupational and non-occupational disability claims. The disability claims affect the organization's bottom line directly by increasing disability benefit costs, and indirectly through the loss of key employees' contributions. Furthermore, many managers are suing for wrongful discharge and quite often are collecting, which, together with discrimination lawsuits, have a negative impact on the firm's bottom line. Thus, "job massacres" may help to undercut the very cost and productivity advantages they are supposed to create."

More papers on Corporate Downsizing:

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