DOWNSIZING

AN OD INTERVENTION
 Change Agents

Sadia Shahzad Butt (7)

Asma Khan (12)

Laiba Yousaf (16)

 LEARNING GOALS
1. To understand what ‘Downsizing’ is and what it is not
2. Explore different terminologies for downsizing and understand the general
process
3. Differentiate between downsizing and reengineering
4. Learn to demythify downsizing
5. Explore different organizational structures as operatives of downsizing
6. Learn and understand different strategies and best adopted practice
7. Explore the financial side of downsizing
W H AT I S
‘ D OW N S I Z I N G ’
A N D W H AT I T I S
N OT
MEANING, TERMINOLOGIES, PROCESS,
REASONS, CHARACTERISTICS AND MYTHS
 01 Downsizing is an approach of OD
intervention at the organization level
An approach that enables
organizations to realize
radical process
improvements
02
04 Powerful change
phenomenon

Business initiative having

broad consequences 03
 Different Terminologies

Reengineering Redirecting De - hiring

Rightsizing Reorganizing Rationalizing

Building Down Declining Revitalizing

MYTHS
RELATED TO
DOWNSIZING
SEVEN COMMON MYTHS AND THEIR
REJECTION
 Reengineering Myths
Clean Slate

Quality Top Down Future

Novelty Approach
IS
Leadership
Transformati
on
O RG A N I Z AT I O N A L
ST R U C T U R ES A S
O P E R AT I V ES O F
D OW N S I Z I N G
D I F F E R E N T O R G A N I Z AT I O N A L S T R U C T U R E S
AND HOW THEY RESPOND TO REENGINEERING
CONTINGENCY MODEL
 FUNCTIONAL ORGANIZATION

• Stable and certain

environment
• Small to medium size
• Routine technology, key
interdependencies
within functions
• Goals of efficiency and
technical quality
 SELF CONTAINED ORGANIZATION
• Unstable and
uncertain environments
• Large size
• Technological
interdependencies
across
functions
• Goals of product
specialization and
innovation
 THE MATRIX ORGANIZATION

• Requires dual focus

on unique product
demands and
technical
specialization
• Demands for high
information
processing capacity
• Requires pressure for
shared and scarce
resources
 PROCESS BASED STRUCTURE
• Uncertain and
changing environments
• Moderate to large
size
• Non-routine and
highly interdependent
technologies
• Customer-oriented
goals
 THE NETWORK ORGANIZATION
• Highly complex and
uncertain
environments
• All size organizations
• Goals of organizational
specialization and
innovation
• Highly uncertain
technologies
• Worldwide operations
DOWNSIZING: an od intervention
By decreasing By reducing the
the number of organizational
employees units or
• Layoffs managerial levels
• Attrition • Divestiture
• Redeployment • Outsourcing
• Early Retirement • Reorganization
• Delayering
 WHY DO ORGANIZATIONS DOWNSIZE?
Introduction To New The Need To
Desire To Technology &
Decrease Level Reduce Operating
Pressure Of
Of Management Competitors Cost

Merging With Another

Organization Resulting
Getting Rid Of
In Duplication Of Efforts Employee
Deadwood

Beliefs and social Implementation of

pressures that a new
smaller is better organizational
structure
 THE PROCESS OF DOWNSIZING
Clarify the Assess downsizing
Implement the
organization’s options and make
changes
strategy relevant choices

Address the needs

Follow through
of survivors and
with growth plans
those who leave
RESULTS OF DOWNSIZING
• Empirical Research on Downsizing is mostly negative
• Negative productivity and employee consequences
• Problems at the individual level: increased stress &
illness, loss of self-esteem , reduced trust and
loyalty, marriage & family disruptions
• Effects on financial performance and stock prices is
also negative
Note: However, the results must be interpreted cautiosly
 REENGINEERING CHARACTERISTICS
The focus of performance
Work units change from measures and
functional departments compensation shifts from
to process teams activities to results

Organization structures
People’s roles change change from hierarchical
from controlled to to flat
empowered

Managers change from

Jobs change from simple supervisors to coaches;
tasks to executives change from
multidimensional work scorekeepers to leaders

INSERT LOGO HERE

THE PROCESS OF REENGINEERING
Restructure the
Prepare the Design new organization
organization processes around the new
business processes

Specify the
Define
organization’s
performance
strategy and
objectives
objectives

Fundamentally Identify and

rethink the way analyze core
work gets done business processes
RESULTS OF REENGINEERING
• The results of reengineering vary largely
• Despite its popularity , it is the beginning & less
research has been conducted to unveil the
importance of reengineering
• Through various surveys, it is concluded that
percentage reduction in total unit costs is associated
with “committed leadership”
STRATEGIES FOR
IMPLEMENTATION

GENERAL AND SPEC IF IC APPROAC HES TOWARD S

DOWNSIZING
 RESTRUCTURING TACTICS
Workforce Work Redesign Systematic
Reduction
Focus Headcount Jobs, Levels, Units Culture
Eliminate People Work Status Quo
Implementation Quick Moderate Extended
Time
Payoff Target Short term payoff Moderate term Long term payoff
payoff
Inhibits Long term Quick payback Short term cost
adaptability savings
Examples Attrition Combine Functions Involve everyone
Layoffs Merge Units Simplify everything
Early Retirement Redesign Jobs Bottom up change
Buy-out packages Eliminate Layers Target hidden costs
 PRESCRIPTION FOR BEST
PRACTICES IN DOWNSIZING
1. Approach
2. Preparation
3. Involvement
4. Leadership
5. Communication
6. Cost cutting
7. Measurement
8. Implementation
 IMPACT OF DOWNSIZING IN
ORGANIZATIONS
• Centralization • Decreasing Morale

• Short-term Crisis Mentality • Increasing Conflict

• Loss Of Innovativeness • Restricted Communication

• Resistance To Change • Lack Of Teamwork

 TAKE AWAY
• Organizations should avoid such awful practices of downsizing which focus on cutting
the employee number

• Firing employees results in the loss of talent as well and expert resources

• The financial gains of downsizing are not evident

• Mostly downsizing done is at lower level where there is not much high pay rates

• Management can adopt various strategies to improve financial performance by

reduction of expenses and by improving methods of production

• If they intended to do downsizing essentially, they may adopt different strategies in this
regard
QUESTIONS

• When a company cuts 10% of its work force, does it do so across the board?
• How can companies avoid losing people they need to keep?
• How long does it take for a company to plan and execute a major layoff plan?