Restructuring, Layoff & Flatter Organization Downsizing
DOWNSIZING A set of organizational activities undertaken by the management, designed to improve organizational efficiency, productivity, and/or competitiveness
Reason for Downsizing • Changing market conditions • Mergers and acquisitions • To make daily operations of a business more efficient • Closure of business unit • Overstaffing • Reduce costs • Unprecedented disaster
Contd… • Release least productive resources • Organization decline caused by loss of revenue and market share and by technological and industrial change • New organizational structures • Rightsize resources in relation to market demand
Effect of Downsizing on Organization • Effect on survivors • Survivor Syndrome • Survivor Guilt • Survivor Envy • Effect on implementers • Effect on organization
Restructuring Restructuring is the corporate management term for the act of partially dismantling or otherwise reorganizing a company for the purpose of making it more efficient and therefore more profitable. It generally involves selling off portions of the company and making severe staff reductions.
Symptoms indicating need for Restructuring • New skills and capabilities are needed to meet current or expected operational requirements • Accountability for results are not clearly communicated and measurable resulting in subjective and biased performance appraisals • Parts of the organization are significantly over or under staffed • Organizational communications are inconsistent, fragmented, and inefficient • Technology and/or innovation are creating changes in workflow and production processes • Significant staffing increases or decreases are contemplated • Personnel retention and turnover is a significant problem • Workforce productivity is stagnant or deteriorating • Morale is deteriorating
Expected Results • Improved productivity and morale • Reduced personnel turnover • Increased organizational effectiveness and efficiency
Types of Organizational Structures • Functional Organization • Divisional Organization • Matrix Organization • Process Based Organization
Advantages Disadvantages • Promotes skill specialization • Reduces duplication of scarce resources and uses resources full time • Enhances career development for specialists within large departments • Facilitates communication and performance because superiors share expertise with their subordinates • Exposes specialists to others within same specialty • Emphasizes routine tasks; encourages short time horizons • Fosters parochial perspectives by managers and limits capacity for top-management positions • Multiplies interdepartmental dependencies; increases coordination and scheduling difficulties • Obscures accountability for overall results
Advantages Disadvantages • Recognizes interdepartmental interdependencies • Fosters an orientation toward overall outcomes and clients • Allows diversification and expansion of skills/training • Ensures accountability by departmental managers and promotes delegation • Heightens departmental cohesion and involvement in work • May use skills and resource inefficiently • Limits career advancement by specialists • Impedes specialists’ exposure to others within same specialties • Puts multiple-role demands upon people and creates stress • May promote departmental objectives as opposed to overall organizational goals
Advantages Disadvantages • Makes specialized, functional knowledge available to all projects • Use people flexibly • Maintains consistency by forcing communication between managers • Recognizes and provides mechanisms for dealing with legitimate, multiple sources of power • Can adapt to environmental changes • Can be difficult to implement • Increases role ambiguity, stress, and anxiety • Performance is lowered without power balancing between projects and functions • Makes inconsistent demands and can promote conflict and short-term crisis orientation • May reward political skills over technical skills
Advantages Disadvantages • Focuses resources on customer satisfaction • Improves speed and efficiency • Adapts to environmental change rapidly • Reduces boundaries between departments • Increases ability to see total work flow • Enhances employee involvement • Lowers costs dues to overhead • Can threaten middle managers and staff specialists • Requires changes in command-and-control mindsets • Duplicates scarce resources • Requires new skills and knowledge to manage lateral relationships and teams • May take longer to make decisions in teams • Can be ineffective if wrong processes are identified
Layoff Layoff is the temporary suspension or permanent termination of employment of an employee or (more commonly) a group of employees for business reasons, such as the decision that certain positions are no longer necessary or a business slow-down or interruption in work
Causes of Layoff • Worker Characteristics • Performance • Tenure • Education • Organizational Change Characteristics • Announced Layoffs • Upcoming Merger • Organizational Restructuring • Job Characteristics • Contingent vs. Permanent • Part-time vs. Full-time • Union vs. Non-Union • Organizational Technology • Changing Technology • Proximity of Job to Core Technology
Effects of Layoff on Employee • Loss of wages and benefits • Loss of role as worker and provider • Loss of dignity and self esteem • Loss of trust • Loss of control over life • Loss of the pattern of daily life
Retrenchment Retrenchment means any termination which is not a disciplinary action inflicted on a workmen or VRS or retirement or superannuation or ending of a fixed term contract or termination of service due to continued ill health.
Difference between Retrenchment and Layoff Lay off means failure, refusal or inability of employer due to shortage of raw material, coal, power, breakdown of machinery etc to provide employment. Termination means Dismissal, Retrenchment or Completion of a contract or Non Renewal of Contract etc. Termination is not always negative. All these activities are termed as termination.
Flat Organization Flat organization (also known as horizontal organization) refers to an organizational structure with few or no levels of intervening management between staff and managers
Features of Flat Organization • Few or no Intervening Managers • Minimizes Bureaucracy • Empowering employees to take decisions • Better Communication flow between upper managers and baseline employees • Works best with small sized organizations
Benefits of Flat Organizations • Increases productivity • Middle manager salaries are eliminated • Base line employees get showcased • Faster Decisions taken • Better work culture
Quantity and Quality Quantity Cost Factor Demand Quality Profit Center Cost Center
Role of HR in Downsizing • Proper Manpower planning should be done • HR should be involved in the planning stage of Downsizing • Make provisions for a smooth exit of the employee • HR should reassess employees for training programs • Proper communication is necessary • Re energizing employees