Downsizing is sub function of Selection & Recruitment, and it has been in practice since long, actually we don’t know when exactly it was discovered. Downsizing is mostly done when there arises a need, but that’s not the only rule, we have seen organizations downsizing even when need was not in place.
Recently, in USA alone, hundreds of thousands of professionals lost their jobs and leftover are highly insecure. Corporations continue to cut jobs and in fact they are eyeing current fiscal year by evaluating recessions’ performance to decide the future of employers. Such a situation is called “workforce optimization in response to economy decline”.
In last two years, we observed that in Pakistan recession hit couple of sectors including banking and advertising. Resultantly, both the sectors optimized their workforce on large-scale, in which most of the banks limited their operations.
I believe before I discuss downsizing conditions, let me first discuss that what recession actually is and its impact on workforce?
What is Recession?
Recession is crunch of economy for more than 6 months consecutively with a decrease in production of goods and services by the people of the country. So in particular, every product and service oriented organization is dependent on the external customers.
As in the decline of economy customer will not be willing to buy a particular product or service because of future uncertainty in the market and eventually all this result into a burden on a particular organization. This burden is equalized by downsizing, as this is assumed the most liquid way to save some bucks.
So, if you understood what recession is and how it gets started and how it comes to an end. Then let me start the topic that why companies do downsizing.
- Low Revenues
- Economy Crunch
- Cost Cuttings
- Workforce Optimization
- Low Performers – (But , company needs to do plenty of stuff before downsizing them)
- Lots of other examples are available around you.
In Pakistan, we have not seen usual downsizings curve as it happened in rest of the world; reason could be that we have not been affected by recession that badly, as the western countries..
Downsizing for the sake of Team Sizing
Recently, we have seen some drastic downsizing in many industries of Pakistan. People claiming it downsizings, but I believe we better call it “Team Sizing”.
Team sizing is the concept that is usual with the change of leadership – as the new leaders comes into an organization, he/she brings in new strategy, vision and concept of a team with him. These new things are sometimes beneficiary for in-groups (like minded) and non-beneficiary for out-groups.
This is common practice that managers take their teams to next destinations whenever they switch the jobs or given new assignments and they also believe that their success is only because of their teams.
That’s what actually happened in banking sector, upon the change of leader, his/her team got changed, as he took it with him/herself, or the HR kicked the whole team out of the play land.
Again, this is not hard and fast rule, but we have observed this happening on many occasions.
Now let me discuss downsizing because of “Non-Performance”:
Now days, professional organizations are much busy in retaining the workforce instead of lay-offs, because of the cost they incurred on developing a single personnel for a particular job. So, when they do “Cost Benefit” analysis they get to know that it’s more feasible retaining an individual instead of laying him/her off. For the purpose corporations conduct proper research on these particular non performers for answering a question that why they are not performing well? And on the basis of findings they designed specific programs like:
- Trainings / Workshops
- Forceful leaves (to enjoy time with family)
- Needs assessment and relationship with reward
- Job rotations
- Task rotations
- Skill set assessment and development and this list goes on!!!
Particular example that I want to quote here is of AT&T :
AT&T developed an alternative to downsizing called Resource Link, which is a temporary unit within AT&T composed of AT&T general management and technical professionals. These associates perform much of the work that AT&T previously contracted out. They work on a contractual basis for the various AT&T business units backfilling vacant positions, supporting temporary peaks in workload, providing specialized support, importing needed expertise, or providing cross-business unit experience.
Participants are AT&T associates who have been declared excess by their business divisions, or associates who have volunteered to broaden their experiences and opportunities. Approximately 600 associates participate; over one-half are volunteers who chose to work in Resource Link. This pool of employees is cost effective and helps to balance staffing needs with business needs (AT&T, 1994).
Like above, there are lots of best practices available around us to take the litmus test before doing anything like downsizing. Organizations have particular policies for downsizings in intense times. But just informing of non performance and giving a job dismissal letter at spot is not an ethical practice in all over the world.
There is lot of work to do before lying off someone from job, instead of just informing that “You are no more with us!” “They follow ILO in giving 3 months’ salary in advance”, but why don’t they follow ILO in obeying other particular sections.
Organizations need to think about developing particular department for personnel’s development – most commonly known as “HRD” Human Resource Development Department or Organizational Development Department to conduct semi annually skills performance assessments and many other best practices instead of that rigged “Performance Appraisals” .
I know couple of organizations in Pakistan which are working on Organizational Development in the particular industries, but still they need transparencies and complete implementation of best practices in particular cases in the organizations. “The Next Challenge for the whole world is to build Human resources instead of laying offs as world is already scarce with built in talent professionals”.
This is also fact that with recession, lay-offs are common to observe as most of the companies do not have good profits in achieving their targets, so particular remedy for remaining at the same profit or at bit low profit point is to lay-offs, but again it is in the case of recession not in the case of non-performers.