EMPLOYER DOWNSIZING IN INDIA FROM BOOM TO GLOOM

A

SEMINAR REPORT

ON

EMPLOYER DOWNSIZING IN INDIA FROM BOOM TO GLOOM

Submitted by:

PANKAJ KYAL (psom-B)

MBA-II Semester

POORNIMA SCHOOL OF MANAGEMENT

ISI-2, RIICO Institutional Area,Goner Road, Sitapura, Jaipur

                                       

         Acknowledgement

Indebted to them for providing us such a wonderful opportunity to search for such a prestigious project.

We have no words to express our appreciation for all the search work that they did and for providing us all necessary information required and we with deep sense of gratitude, wish to express our appreciation to our seminar guide Miss Divya makkar. and Miss Pratima goyal Although words hardly suffice, we are deeply without whose support this report would not been possible.

We wish to express our gratitude and indebtedness to Mr. R.K Agarwal our Advisor for his encouragement .Valuable suggestion, helpful comments and constructive criticism.

We also thank to our faculty members for providing needed support and encouragement at various stages and also classmates for cooperating with us.

In the end, on behalf of our college we are thankful to R.T.U and the faculty members of R.T.U as a whole for rendering all the possible services and resources, which ultimate enabled us to complete this seminar report successfully.

                                                                            

                                                                              PANKAJ KYAL

                                                                      MBA- II-SEMESTER

s.no.	CONTAINT	Page No.
1.	PREFACE	4
2.	EXECUTIVE SUMMARY	5
3.	INDUSTRY PROFILE	30
4.	OBJECTIVE OF STUDY	38
5.	SCOPE AND PURPOSE	40
6.	RESEARCH AND METHODOLOGY	40
7.	FINDING DATA AND ANALYSIS	41
8.	CONCLUSON	41
9.	RECOMMENDATION	42
10.          .	LIMITATION	43
11.	BIBLIOGRAFY	43

PREFACE

 As employee downsizing has become increasing everywhere in recent years, the study of this phenomenon has assumed greater significance. This article develops an integrative framework that incorporates environmental and organizational antecedents as well as the implications of downsizing for individuals and organizations. Key empirical studies are reviewed and major patterns and contradictions are identified. The authors identify and discuss theoretical and methodological concerns related to the extant literature and provide recommendations for future research aimed at developing a better understanding of employee downsizing.

The thing that people need to remember is that downsizing may be back on the front pages, but the downsizing never slowed down. Downsizing has been a constant and regular feature of the new working world, and it will continue to be.

 

                                  

                            

EXECUTIVE SUMMARY

INTRRODUCTION

Meaning of downsizing

Downsizing has become a popular (or is it, unpopular?) topic in recent years. Like many other aspects of the business universe, downsizing has neither totally negative nor positive effects. Your perception usually depends on your role, as employer, employee, investor, vendor or personal situation.

Definition

Reducing the total number of employees at a company through terminations, retirements, or spinoffs.

Downsizing is something akin to retrenchment. When a company or government goes through retrenchment, it reduces outgoing money or expenditures or redirects focus in an attempt to become more financially solvent. Many companies that are being pressured by stockholders or have had flagging profit reports may resort to retrenchment to shore up their operations and make them more profitable. Although retrenchment is most often used in countries throughout the world to refer to layoffs, it can also label the more general tactic of cutting back and downsizing.

Companies can employ this tactic in two different ways. One way is to slash expenditures by laying off employees, closing superfluous offices or branches, reducing benefits such as medical coverage or retirement plans, freezing hiring or salaries, or even cutting salaries. There are numerous other ways in which a company can employ retrenchment. These can be non-employee related, such as reducing the quality of the materials used in a product, streamlining the process in which a product is manufactured or produced, or moving headquarters to a location where operating costs are lower.

 Alternatives to Downsizing

Major changes such as mergers, reengineering, enterprise resource planning systems (ERP), and restructuring often result in downsizing. It doesn't have to be that way. Here are proven alternatives that can help you cut costs while ensuring the commitment of valued employees.

The Need to Change

Market pressures force organizations to change rapidly. Given this unrelenting pace, leaders find they no longer can mull over decisions before taking action. Organizations must be nimble in considering and acting on changing needs in staffing. Leaders must ask:

Ø  What mix of skills do we need today?

Ø  What skills are we likely to need in the future?

Ø  Do we have the right number of people employed today?

Ø  How will these numbers change in the future?

Ø  How do our staffing costs compare to others in our type of business?

Long-Term Staffing Alternatives

1. Hiring Linked to Vision

The institution identifies what skills it will need in order to meet its vision and goals. During job interviews, human resources and department managers need to ask questions specifically related to skills it will need now and in the future. This strategy helps assure that you are recruiting and hiring people who can meet future challenges.

2. Cross Training

By understanding the skill mix of staff today and linking it to the skills needed in the future, the organization allows individual employees to determine what they need to do in order to remain gainfully employed. It also gives the training department a clear mandate regarding the type of skills training they need to make available to staff.

In Prahalad and Hamel's excellent book Competing for the Future, they suggest that businesses identify their core competencies and build strategies based on these fundamental building blocks. This provides a foundation for the organization and employees to build a career development process that matches what the organization needs.

3. Succession Planning

The institution needs to identify the types of management and technical skills it needs in various positions. Human Resources should work with line managers to identify likely candidates so that they can begin preparing them for positions once they become vacant. Often, succession planning is left to chance. Baseball provides a good analogy for effective succession planning. With its farm systems, players move up from A to AA to AAA as their skills increase and as openings occur.

4. Redeployment within the Organization

Ø  Redeployment can be linked to "Alternative Placement," but it seems to be used most often within the organization. Successful redeployment requires:

Ø  A sophisticated career management process so that managers and employees are aware of open positions.

Ø Career assessment and development activities that allow people to get ready for positions. One company linked individual career planning to corporate objectives so that people could see how their plans fit into overall direction. It allowed individuals who wished to remain within the company to make career development and placement decisions that increased their chances of succeeding.

5. Creating Value-Added and Revenue-Enhancing Opportunities

This is an "Employee Buy Out" within the organization. A group of employees create a new business or line of service that the company can market. (3M is a leader in this form of entrepreneurship.) Of course, the company does not enter this agreement lightly. When Ford was about to sell the name Mustang to a foreign automaker, engineers asked Ford leadership for a chance to reintroduce a Ford version of the car. Leaders said they would agree if the engineers could demonstrate that the car could be built to certain stringent quality specifications and manufacturing time that rivaled their most efficient operations. On their own time, the engineers developed plans that met these requirements.

Cost-Saving Strategies

6. A Comprehensive Model

Automakers, as well as other industries in Japan, have adopted a series of steps they use as an alternative to downsizing. If the first step does not get the needed savings, they move to the next.

Compensation. 50% of compensation is set, the other 50% is determined by profit or productivity measures.

Ø  Hours. Cut the number of hours.

Ø  Wages. Cut salaries.

Ø  Placement. Make arrangements with other employers who will agree to take displaced workers.

7. Reduced Hours

A policy is established that either places everyone in a particular job category on a flexible working arrangement or creates a flex-pool made up of volunteers from the department. The goal is to reduce the number of hours worked by each employee.

Job sharing is a variation of flextime and has been used successfully in many organizations. People divide a job between them, with each person receiving proportionate benefits.

8. Lower Wages

Wages are lowered in order to save money. Wage reduction programs differ, but here are some typical elements:

Ø  Everyone in the institution is part of the wage reduction program.

Ø  Executive compensation is reduced by the highest percentage, followed by middle management, with non-management staff suffering the smallest percentage of loss.

Ø  This is usually a temporary program instituted to get through a downturn or until other reductions such as attrition can take place.

9. Attrition

Ø  Attrition, or waiting for people to retire or leave on their own, can work in two ways:

Ø  Natural attrition. Positions are not filled as people leave. This can work in an organization where turnover is sufficiently high to gain the savings quickly.

Ø Offer voluntary early retirement or other packages to people within a certain category, such as particular position or years of service. If this offer does not result in enough savings, it is extended to a broader pool. In an agreement between the Communication Workers of America and NYNEX, they created an eight-step process for reducing costs.

10. Alternative Placement

Offer early retirement incentives to pension-eligible employees in a specific area. If that doesn't get sufficient response, expand the pool and so on. None of these options includes downsizing.

The organization makes arrangements with similar institutions or suppliers for placement. A variation of this occurred at AT&T: after the company said it would downsize, they ran ads letting other technology companies know that there were many talented men and women available for positions. Although they have been accused of using this as a public relations gimmick, it has resulted in a significant number of requests for more information about potential candidates.

11. Leave of Absence

People are offered a leave of absence with full benefits for a specified period of time to help an organization weather a downturn. Although people are promised a job upon completion of the leave, it may not be the same job or at the same pay level. This alternative must be used as a temporary measure to help an organization through a crisis.

12. Employee Buy-Outs

Some organizations have allowed employees to buy the operation that was slated for closing and set up their own business.

13. Shared Ownership

An alternative to "wage cuts" is concessions for equity. In other words, trading pay increases or pay cuts in return for company stock. This requires a high degree of employee participation in decision making. Employee ownership seems to falter when people are owners in name only, but are shut out of the decision making process.

14. Downsizing

Downsizing means that the organization makes a decision to terminate people against their will. Although sometimes described as "getting rid of dead wood," the sweep of downsizing is much broader. (If an organization really has so much dead wood, shouldn't those who allowed this condition to persist be the ones to go?)

There appears to be no good way to downsize. Studies indicate that in over half the cases, it does not meet its intended goals. And many companies find that they must rehire staff within a year. Morale and productivity often plummet. Among employees who remain after downsizing, more than half report increased stress. And the risk of violent behavior of people laid off is six times that of their employed counterparts. In a study of 531 large corporations, three-quarters reported having cut payrolls. Of the 85 percent that sought higher profits, only 46 percent saw any measurable increase. 58 percent sought higher productivity, but only 34 percent saw even a slight increase. 61 percent wanted an increase in customer service but only 31 percent achieved it.

Considering the Alternatives

There are a series of questions that must be considered when thinking about staffing. To answer them will require knowledge of the current situation, clear assumptions regarding the likely possible futures that face the organization, and an ability to speak candidly and listen carefully to the knowledge, thoughts, and opinions of other key decision makers. These questions are divided into two parts: anticipating the future and exploring options.

Get staff involved.

 People want to be part of shaping their own future. People are more committed to decisions they had a hand in making.

Members of a Human Resources department at Corning were asked to cut 30 percent of their costs,

and then finally to eliminate their entire unit. Everyone was involved in considering alternatives that affected their lives. Some choose to take severance packages, others asked for career training, and so forth. It was stressful and contentious at times, but everyone seems to be adjusting well to the changes.

There are many ways of getting an entire organization excited and involved in changes. If you have an internal organization development professional, he or she should be able to design effective ways to meet this goal.

Experiment.

 If the organization is reluctant to try cross training, for instance, try it out before you make it the law of the land. Pilot tests allow you to experiment, work out the glitches, and bail out if the idea doesn't work.

These are suggestions, but you know what works in your organization. Develop a strategy for engaging senior management (and then the rest of the organization) that fits your unique culture. But act now. Unless you are hidden away in some corner of the world that hasn't heard about global competition and the need for rapid change, you have no time to lose.

 

Alternatives to Layoffs

 

Layoffs are done to save money. Unfortunately, they are usually a short term fix, detrimental to the company. So why do so many companies persist in using layoffs as a first choice for cutting costs, and what are some of the alternatives.

Job cuts don't save money

In "Organizational downsizing: Constraining, cloning, learning" (McKinley, William, Schick, Allen G., Sanchez, Carol M. (1995) ISSN: 0896-3789) the authors point out that "while downsizing has been viewed primarily as a cost reduction strategy, there is considerable evidence that downsizing does not reduce expenses as much as desired, and that sometimes expenses may actually increase. More than thirty years ago, James Lincoln warned that the costs of layoffs generally outweigh the payroll savings to be gained from them."

Job cuts reduce performance

John Dorfman, a Boston-based money manager, analyzed the post-layoff performance of a sampling of companies. The review included 11 to 34 months of data for the companies sampled. His article Job Cuts Often Fail to Bolster Stock reports an average performance gain by the companies that had announced job cuts at 0.4% while the performance for the S&P 500 during the comparable time period was a gain was 29.3%.

Prize-winning photographer Gary Green, was laid off by the Akron Beacon, but remained a shareholder in Knight Rider, the company that owned the paper. He addressed the annual stockholder meeting saying "As a victim of the layoffs, I am the one suffering today. However, the shareholders are the ones who will suffer in the long run. The talent will leave. Circulation and revenue will continue to drop. The shareholders will be left with a worthless product. Is this the future we want for our company?"

REASON OF DOWNSIZING

  Merging of two or more firms:

 When a certain firm combines its operations with another firm and operates as a single entity, in order to stay in profit or expand the market reach, it is called a merger. In case of a merger, certain positions become redundant. The same work is done by two different staff members. Usually in such a case, the company cuts staff to eliminate redundancy in work. It is characterized by some employees leaving an organization voluntarily, or by lay-offs, especially in case of higher management positions.

Acquisition:

 If one organization purchases another one, there is a definite change in the management and the acquired company staff has to face unemployment. The reason for this is the same as the earlier case, viz to cut costs and and increase the revenues.

Change in management:

 The change in the top brass of a company can also result in downsizing. The working methods and procedures vary with the management. Therefore, a significant change in the management roles may drastically affect the employee size to suit a particular style of working.

Economic crisis:

 This is the single biggest cause of downsizing. Often, it consists of huge lay-offs by a number of organizations across various domains. The recent economic recession facing the world, has triggered a number of lay-offs in many reputed and popular firms in the world. According to a survey conducted by the US Bureau of the Census, organizations consisting of higher percentage of managerial staff downsize more than the ones with higher percentage of production process employees.

Strategy changes:

 Some companies may reduce certain areas of operation and focus on other areas. For example, if a company is working on a project in which there are no assured returns, it may downsize it's employees working on that particular project. It focuses its resources on specific projects, which could be profitable ventures.

Excessive workforce:

 In a period of high growth, a company hires excess staff, to meet the needs of a growing business. However, in times of recession the business opportunities dwindle, leading to downsizing of the surplus staff that was hired.

Increase in efficient work flow and computerized services:

 If an organization work process is extremely fast and easily meets the requirements of the market, it may downsize some of its workforce. Similarly, if manual work can be done by a machine, in a much better and cost-efficient way, it also results in the reduction in the number of employees.

Outsourcing practice:

Organizations catering to international markets require a huge and efficient employee base. If this labor can be obtained by 'exporting' the job to other countries, a huge downsizing takes place in the parent country. For instance, if a certain job can be done more effectively in India and is more viable economically there, than in the United States, the business is operated from that country.

  EMPLOYER DECISION IN DOWNSIZING

       Make a Decision. Decide if you can get by on a lower salary. If so, how much less? Are the benefits a lower level job may have worth what you are potentially giving up in a more lucrative position? Use a salary calculator to see what you could earn in a different job.

Consider Job Options. What are you interested in? What would you like to do? I know someone who left her job as a college administrator to work in a book store. Someone else left a financial services position to sell real estate. Others I know have decided to work at home, in a seasonal job, or at a couple of part-time positions. Review career and job options to get ideas.

Give it a Try. When you're not sure what you want to do, try it out. Consider a part-time job or volunteer to make sure that it is really something you want to do. Before you give up a high paying job, it makes sense to test the waters, if you can.

Revamp Your Resume. Resume experts usually tell you that you should highlight your skills and experiences to enhance your employment prospects. In this case, you will want to edit your resume, focusing on what you want to do (rather than what you are doing). Tone it down, so you don't come across as high-powered as you really are.

Use Your Cover Letters. When writing cover letters focus on your transferable skills that are relevant to the new job. You can use those skills to help explain your transition. Here's an example of a career change cover letter.

Get to Know Job Applications. You may never have had to fill out a job application, so it's a good idea to get to know them. You may need to fill out an online job application, a paper job application, or apply in person. Here's what you need to know about job applications and how to complete them.

Job Search. This part is one of the simpler steps in the process of downsizing your career. The higher the level the position the less jobs are available and the more competition there is. The opposite holds true, so you will have more choices and more job listings to consider when you're looking for lower level jobs.

Start with the job search engines, then use the niche to find job postings in the geographic location and industry where you would like to work.

Consider it a Transition. Instead of considering your new job a step down, consider that you're doing something different. Every job is of value, regardless of what we're doing. It's what you give - and what you get out of your work - that's important.

Be Humble. This is probably the most important advice I can give you. When you are moving down the career ladder, by choice or not, you may not be considered as the important person you once thought you were. Be humble, be flexible, and be willing to do what your bosses need you to do.

Title name - downsizing and the changing role of HR

Author name – sahdev

Magazine –Journal of management

Publisher – SAGE Publisher

Date – Oct-5-1999

Sahdev, Oct-5-1999, SAGE Publisher, downsizing and the changing role of HR , This paper examines the changing role of Human Resources (HR) in the specific context of downsizing. It highlights the key dilemmas facing HR professionals - on the one hand, the contribution of Human Resources Management (HRM) to the achievement of business results has come under increasing scrutiny and, on the other hand, most of the challenges of downsizing are people-related issues that require sophisticated HR interventions. The paper reports the key findings of a pilot study conducted in sixty organisations in the UK that downsized in the last three years. The key conclusion of the study is that the role of HR has become wide ranging, covering the strategic as well as implementation aspects. The clear message from the study suggests that, unless there is alignment between the two aspects, the envisaged benefits of downsizing are unlikely to take place. Key challenges facing HR professionals are managing middle managers, managing careers and managing employee expectations. There are indications to suggest that the process role of HR is likely to become more important in the medium and longer terms.

Title name - The impact of downsizing on organizational career development activities and employee career development opportunities

Author name -   Daniel C. Feldman

 Publisher - University of South Carolina, USA

Date  -   29 April 2002. 

While most of the human resource management research on downsizing has focused on the short term impact on laid-off workers and survivors, the long term, systematic impact of downsizing on organizational career development activities and employees' career development opportunities has received much less attention. This article argues that the rationale for downsizing the workforce, the goal of the downsizing and the rate, size and scope of the downsizing differ dramatically across organizations shrinking their workforces. Consequently, this article presents a theoretical framework for understanding when organizations are likely to pursue different strategies for reducing their core workforces, why downsizing organizations are likely to pursue different strategies for changing the emphasis of their career development activities and which employees are most likely to experience deteriorating career development opportunities as a result. Hypotheses to guide future theory development and empirical research in this area are discussed as well.

Title name -  Career Anchors Revisited: Implications for Career Development in the 21st Century

Author name -   Edgar h. schein

Magazine –Journal of management

Publisher – SAGE Publisher

Date-  Nov. 1996

Organizations are undergoing a metamorphosis today. Whether one speaks of "downsizing," "rightsizing," "flattening," becoming a "learning organization," or simply of a "transformation" into something as yet unknown, no one would deny that profound changes are occurring worldwide. These changes in the occupational environment have implications for career development in the future. Will there even be such a concept as an "organizational career," or will careers become a more fragmented set of jobs held together far more by what I have labeled the "internal career?" The internal career involves a subjective sense of where one is going in one's work life, as contrasted with the "external career," the formal stages and roles defined by organizational policies and societal concepts of what an individual can expect in the occupational structure. In studying careers longitudinally, it became evident that most people form a strong self-concept, a "career anchor," that holds their internal career together even as they experience dramatic changes in their external career. But will the concept of career anchor still be applicable in this rapidly changing world? What are the implications for career development as we look at several future scenarios of how the world might evolve further in the 21st Century

 

Title name -  Survivor reactions to organizational downsizing: Does time ease the pain?

Author name -  Tammy D. Allen,Deena M. Freeman,Joyce E. A. Russell,Richard C ,Reizenstein,Joseph O. Rentz

Magazine –Journal of management

Publisher – SAGE Publisher

Date -  16. DEC. 2010

The present study used work role transitions theory as a guiding framework for examining changes in survivors' attitudes following an organizational downsizing. A total of 106 managers experiencing a downsizing provided data regarding organizational commitment, turnover intentions, job involvement, role clarity, role overload, satisfaction with top management, and satisfaction with job security at three different times. Although the results generally indicated that downsizing had a significant impact on work attitudes, that the impact varied over time, and that the initial impact was generally negative; different patterns of results among the job attitudes studied were also observed. For example, satisfaction with top management increased across time, while job involvement decreased. Findings also indicated that changes in role clarity, role overload, satisfaction with top management, and satisfaction with job security were significantly related to changes in organizational commitment and turnover intentions. Changes in job involvement also moderated several relationships such that there was a stronger relationship between the independent variable and the outcome variable when job involvement was higher than when job involvement was lower. Theoretical and practical implications of the findings and directions for future research are discussed.

Title name - The difference between rightsizing and wrongsizing: 

Author name -  Davison, Barbara

Book – employee downsizing

Publisher – ICFAI publisher  

Date -  July 01, 2002 

DECREASED SALES, INCREASED COMPETITION, ECONOMIC downturn, lost customers, cost-cutting mandates, and disproportionate workforces. These are some of the sad facts of business life today. In the response to these challenges, many businesses are repositioning and reallocating both human and financial resources through a process called "rightsizing."

Rightsizing, or "resizing" as it's currently known, takes on many different meanings within organizations. It can mean reducing the workforce, "downsizing" or eliminating functions, reducing expenses, or redesigning systems and policies. It can also involve "upsizing" (increasing the workforce in certain areas), and "sidesizing" (repositioning the workforce to other areas). Unfortunately, it can also include "wrongsizing," or losing key talent that a company can't afford to lose.

These days, workforce reduction is one of the most common rightsizing activities -- a decision sometimes driven by the need for short-term profits. According to consulting firm Challenger, Gray and Christmas, close to two million jobs in the U.S. were lost in 2001. The firm reported an additional 255,000 job cuts in first quarter of 2002. And it's not over.

Title name - Relationships between firm attributes and downsizing.

Author name - Friedman, Sam

Magazine –Journal of management

Publisher – SAGE Publisher

 Date - May 2, 1994  

Based on the conventional view that employee downsizing reduces labor costs and boosts profitability, several studies belonging to this link have examined the effects of firm performance (accounting, market-based, and efficiency measures) on downsizing decisions.

 There is general agreement across studies that firm performance is an important factor in downsizing decisions, with performance declines often resulting in employee reductions (Ahmadjian & Robinson, 2001; Baumol et al., 2003; Budros, 2002, 2004; Coucke et al., 2007; Hillier, Marshall, McColgan, & Werema, 2006; Kang & Shivdasani, 1997; Tsai et al., 2006; Yu & Park, 2006). However, a few studies (Iqbal & Shetty, 1994; Perry & Shivdasani, 2005; Yoo & Mody, 2000) have found no significant relationship between firm performance and employee downsizing.

Title name -  Relationships between firm strategies and downsizing.

Author name - Joseph P. Daly

Magazine –Journal of management

Publisher – SAGE Publisher

 A majority of the 11 studies categorized in this link have investigated the effects of M&As on subsequent employee downsizing. In these studies, downsizing is seen as an avenue by which firms eliminate redundancies resulting from M&As. Findings, however, have been mixed.

Specifically, whereas Budros (2002), Conyon, Girma, Thompson, and Wright (2002), and Lehto and Bockerman (2008) observed significant employment declines following M&As, studies by Budros (1997, 2004), and Wagar (1997) did not. In examining the relationship between M&As and downsizing, O’Shaughnessy and Flanagan (1998) observed that the relationship between the two was contingent on M&A type, with the likelihood of employee reductions being greater in the context of related transactions.

Title name - Relationships between firm governance, CEO characteristics, and downsizing.

Author name – Deepak k data

Magazine –Journal of management

Publisher – SAGE Publisher

Studies belonging to this link have primarily used agency theory arguments in assessing the effects of governance mechanisms (board characteristics, ownership structures, and compensation systems) on employee downsizing. In an early attempt at understanding the relationships between ownership structures and downsizing, Bethel and Liebeskind (1993) found that firms with greater blockholder ownership experienced higher levels of employee reductions. In contrast, Filatotchev et al. (2000), in their study of layoffs among firms in Russia, Ukraine, and Belarus, observed no relationship between institutional ownership and downsizing.

Title name -  Relationships between downsizing, perceptions of trust and justice, and work  environment changes.

Author name - Deepak K. Datta, James P. Guthrie, Dynah Basuil and Alankrita Pandey

Magazine –Journal of management

Publisher – SAGE Publisher

 The limited research belonging to this link explores the effects of downsizing on organizational trust, perceived justice, workplace conflict, and changes in the work environment. The role of perceived justice in the context of downsizing was first highlighted by Brockner et al. (1994). They found that layoff severity did not have a perceptible impact on organizational trust and support when survivors perceived high procedural fairness.

However, under conditions of low perceived procedural fairness, layoff severity had a

significant deleterious effect on organizational trust. In a subsequent study, Mansour-Cole and Scott (1998) found that survivors perceive greater procedural fairness when they learn about impending layoffs from their managers and not from other sources.

Title name -  Relationships between downsizing and turnover intent and absenteeism.

Author name - Kalimo, Raija; Taris, Toon W.; Schaufeli, Wilmar B.

Magazine –Journal of management

Publisher – SAGE Publisher

Date – Apr. 2003

Most of the studies belonging to this link have examined the effects of downsizing on the likelihood of voluntary turnover among survivors. Findings suggest that although downsizing increases the likelihood of such turnover (Allen et al., 2001; Trevor & Nyberg, 2008), the effects are less pronounced when employees have greater task self-esteem, are more optimistic, and/or exhibit greater organizational commitment (Armstrong-Stassen, 1994; Mone, 1994; Spreitzer & Mishra, 2002). In addition, Armstrong-Stassen’s (1994) findings suggested that turnover intent is lower when employees feel a sense of powerlessness; with the opposite being true when they have a greater sense of mastery (i.e., they believe that they have greater control of their destiny) or when they perceive greater threat of job loss.

Title name -  Relationships between downsizing and work performance.

Author name - Shaw, J. D., Gupta, N., & Delery,

 Magazine –Journal of management

Publisher – SAGE Publisher

Date  - 2005

The studies here primarily focus on the effects of downsizing on the quantity and quality of survivors’ work. Studies indicate that downsizing results in reduced creativity (Amabile & Conti, 1999) and also has a negative impact on different aspects of quality improvement (Mishra & Mishra, 1994). Amabile and Conti (1999) attributed the reduced creativity to the deterioration in the Downloaded from work environment following downsizing. In addition, there is some evidence that downsizing results in a significant decline in other dimensions of work performance (Amabile & Conti, 1999; Gilson et al., 2004; Mishra & Mishra, 1994; Travaglione & Cross, 2006).

Title name -  Organizational Outcomes of Employee Downsizing

Author name -  Cameron, K. S.

Magazine –Journal of management

Publisher – SAGE Publisher

Date - 1994

Much of the research belonging to this stream is geared toward addressing the basic question, “Does employee downsizing result in improved organizational performance?”

Proponents of employee downsizing have long argued that downsizing represents a rational tool that managers can use to improve organizational productivity and efficiency (Cascio & Young, 2003). Improved firm performance can come from reduction of labor costs (which, in many organizations, is the largest component of the cost structure), provided reductions result in the remaining employees working at higher productivity levels.

Title name -  Relationships between employee downsizing and market returns.

Au Magazine –Journal of management

Publisher – SAGE Publisher

thor name - Chalos, P., & Chen, C. J. P.

Date -   2002

 Our review identified 12 studies that have used the event study methodology to examine shareholder wealth effects associated with employee downsizing announcements.

The wealth effects have been typically measured as cumulative abnormal returns (CARs) or cumulative prediction errors (CPEs) around the announcement day. Examination of research belonging to this reveals that, on average, downsizing announcements have a negative effect on stock price.

Title name -  Relationships between employee downsizing and firm profitability.

Author name - S. J., & Mishra, A. K.

Magazine –Journal of management

Publisher – SAGE Publisher

Date - 1993

A number of studies in Stream IV have sought to examine whether downsizing leads to improved firm profitability. Findings, however, have been mixed. Studies by Bruton, Keels, and Shook (1996); Chen et al. (2001); Espahbodi, John, and Vasudevan (2000); Kang and Shivdasani (1997); Palmon et al. (1997); and Yu and Park (2006) suggest that employee reductions lead to performance improvements. Interestingly, Espahbodi et al. (2000); Kang and Shivdasani (1997); Palmon et al. (1997); and Perry and Shivdasani (2005) observed that such improvements occurred 2 to 3 years after downsizing.

INDUSTRY PROFILE

 Abstract:

Steel Dynamics (SDI) is a steel producer and metal recycler in the US. The company operates in the US, where it is headquartered in Fort Wayne, Indiana and employs about 6,000 people.
The company recorded revenues of $3,958.8 million during the financial year ended December 2009 (FY2009), a decrease of 51% compared with FY2008. The operating profit of the company was $119.5 million during FY2009, a decrease of 85.9% compared with FY2008. The net loss was $8.2 million in FY2009, compared to a net profit of $463.4 million in FY2008.

Products/Services:

Steel Dynamics is a steel producer and metal recycler in the US. The company's key products and services include the following:
Hot-rolled steel
Cold-rolled steel
Coated steel products
Specialized galvanized sheet steels
Structural steel beams and pilings
Billets
Rails
Merchant steel products (including angles, plain rounds, flats, and channels)
Merchant beams
Channels
Specialty structural steel sections
Fabrication of trusses, girders, steel joists, and steel decking
Metals recycling
Liquid pig iron
Iron nuggets

PENNER LIMITED

Pennar Industries Limited (Pennar), one of the top ten producers of cold rolled steel strips in India, had 650 workers and 630 staff (non-unionized workers, supervisors, and managers) in 1997. Although over-manned and inefficient, the company had been profitable in the domestic market protected by government licensing and high import tariffs. As real competition, unleashed by globalization, began to bite in 1998, the company bought out 142 workers and 224 staff through a Voluntary Retirement Scheme (VRS). The severance compensation offered was very generous. In spite of reducing the workforce and improving productivity, Pennar ran into heavy losses by 2000. The management decided to downsize further, but it had no money to match the 1998 severance package. The surplus workers would have to go with the statutory compensation and staff without any compensation at all.The unions rejected the VRS for workers outright when they learned that it offered just one-third of the compensation given in 1998. They wanted at least two months' pay. The negotiations went on without any change of heart on either side. Each Head of Department drew up a list of their workers and staff to be retrenched and called the redundant staff one by one and told them to resign and leave without expecting any compensation. Many resigned and left but some resisted and abused the managers verbally, but there were no cases of violence or litigation. The new VRS for workers was formally announced on April 20, 2001. None came forward. They stuck to their demand for eight weeks' pay as compensation. Gradually, however, the workers' resistance weakened and they accepted the VRS and left peacefully. This case is useful for examining the human resource management issues and process for downsizing.

DOWNSIZING IN 2000–01

a) Staff ‘Resignations’

Between January and July 2000, up to 80 staff had been quietly persuaded to leave with six months’ pay as total compensation. This was very small compared to the VRS compensation offered in 1998. But the staff who left had realized that expecting a similar package was unrealistic. In August 2000, around the time that the company applied to the Labor Commissioner for permission to retrench 212 workers, it decided to terminate the services of 160 staff

without giving them any severance pay other than standard entitlements such as notice pay and gratuity. (Compared to the workers, the staff would find it easier to get new jobs be- cause their skills were more varied.) The Heads of Depart- ments (HoDs) were given a target percentage and asked to decide who among their staff should leave and who should stay. With the help of middle managers, each HoD listed the surplus staff. The employees knew about this move but not the extent of redundancy. So there was a lot of speculation even among the managers.

The Heads put the staff into three sets: those who had to be retained because of their key skills and superior perfor- mance; those who needed to be sent away because of unsat- isfactory performance and/or attitude problems; and, the rest. From within the third set, each HoD had to decide who should be sent away and who retained to meet the staff re- duction target for his department. Eventually, 160 staff were identified by the HoDs as redundant. These employees had been with the company or its parent for anything from five to twenty years. Some of them had even applied for volun- tary retirement in 1998 but had not been allowed to leave because the company needed their skills.

There was no general announcement about staff reduc- tion. It was each HoD’s job to tell his redundant staff that they should resign and leave. Some HoDs refused to do it. They said that they would not be able to tell their staff to go away without compensation. So Rama Rao sat with each HoD concerned and met them individually. He told them that the company had always been generous to its employ- ees; but it was now going through such bad times that there was no money to pay them any compensation whatsoever. If the company retained them, there would be no money to pay their salaries.

Once they knew that they were redundant, many of them started looking for jobs elsewhere, and about 40 left when they found suitable ones. The rest could not find any jobs. Some wanted six months to a year with full pay to find an alternative job. The company refused, but in special cases gave them up to four months’ basic pay as notice pay.

A few, angry at being let down by the company they had served loyally for several years, resigned quietly and left. Three or four used highly abusive language to vent their anger and frustration. There were, however, no cases of violence.

Several staff refused to resign. They insisted on the terms of the 1998 severance package as a condition for leav- ing. They knew very well that while they did not have the legal protection which unionized workers enjoyed, they could not be easily terminated. In practice, the judiciary had not been supporting termination of employment under the

discharge simplicitor clause. Judges tended to treat the right to

employment as more fundamental than the validity of any contract employees may have signed or accepted. Moreover, many companies found it difficult to prove conclusively that there was a fair and objective application of norms in select- ing the staff to be terminated.

Nevertheless, a discharge simplicitor letter was issued to 10 staff. Eventually, they also came forward to submit their resignations. The company accepted their resignations and withdrew their termination letters. One brought political pressure through a Member of Parliament to retain his job. But later, realizing the futility of clinging on, he resigned. “There was considerable pain all around,” admits Rama Rao reflecting on the events, “but in the end the resignations went off quite smoothly.”

There was no attempt by the staff to approach the court, either singly or in groups, to challenge the termination of employment. However, two lower level staff who had re- signed and left without any protest went to the labor court. They demanded the same compensation as workers. They claimed that they were really workers with no supervisory function but wrongly categorized by the company as staff and therefore denied the benefits of VRS given to unionized workers. The court rejected the plea when the company pro- duced evidence that they had some function above that of workers. Although it won the case, the company lost a lot of high value managerial time and resources in defending its position.

Retrenchment

According to the Industrial Disputes Act, 1947, retrenchment is the termination by the employer of the service of the work- man for any reason whatsoever, otherwise than as a punish- ment inflicted by way of disciplinary action, but does not include (a) voluntary retirement of the workman, (b) retire- ment of the workman on reaching the retirement age of superannuation, or (bb) termination of the service of the workman as a result of the non renewal of his contract of employment, or (c) termination of the service on the ground of continued ill health.

Section 25N prohibits the employer from retrenching

any workman until

1)    he has been given three months’ notice in writing indicat- ing reasons for retrenchment, and the period of notice has expired, or wages in lieu of such notice has been paid;

2)    the workman has been paid a compensation equivalent to fifteen days’ average pay for each completed year of ser- vice; and

3)    a notice in the prescribed manner is served to the appro- priate government authority and its permission is ob- tained. Such permission or refusal shall be granted only after making such inquiry as the authority deems fit. However such a permission shall be deemed to be granted if no communication is received from the author- ity within sixty days from the date of notice.

The employer shall, as a rule, retrench first the work- man who came last (“last come first go”). Extraordinary situ- ations may justify variations of this scheme.

Layoff

Section 2 (kkk) 8 of the Industrial disputes Act, 1947, defines “lay-off” to mean the “failure”, “refusal” or “inability” on the part of employer to give employment to any number of workmen on account of shortage of coal, shortage of power, shortage of raw material, accumulation of stock, breakdown of machinery, or for any other reason.

Section 25M, which imposes prohibition on lay-off,

provides:

(1)  No workman (other than casual workman) whose name is borne on the muster rolls of an industrial establish- ment shall be laid-off by his employer except with the prior permission of the appropriate Government or such authority as may be specified by the government by notification.

(2)  An application for permission shall be made by the em- ployer in the prescribed manner stating clearly the rea- sons for the intended lay-off and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.

(3)  The appropriate Government or the specified authority, after enquiry can grant or refuse to grant such permis- sion and a copy of such order shall be communicated to the employer and the workmen.

(4)  Compensation equal to fifty percent of the total of the basic wage and the dearness allowance, shall be paid to the workman for all days during which he is laid off, provided he has completed continuous service of at least one year.

Voluntary Retirement Scheme (VRS)

Voluntary Retirement has been introduced in India to en- courage surplus workers to retire prematurely and voluntar- ily. Any employee who is eligible by virtue of age and/or service can apply for early retirement when the scheme is open. Usually, the schemes are voluntary. The company is not obliged to accept every application for early retirement. The company may not force eligible employees to opt for early retirement either.

The main features of the various VRS offered by mem-

bers of the Confederation of Indian Industry are as follows:

1.    Option for employees to take compensation as pension or a lump sum.

2.    Gratuity benefits in terms of the Gratuity Scheme and rules and regulations of the    Gratuity Fund.

3.    Disbursal of the amount standing to the credit of the employee in his P.F. [Provident und] Account according to the rules of the P.F. scheme.

4.    Encashment of leave according to the rules of the company

5.    Medical Benefits according to the current Medical Insur- ance Scheme.

6.    Bonus, if applicable, on pro-rata basis.

                          

                          

OBJECTIVE OF STUDY

The main objective of the study is to evaluate the impact of employee downsizing Indian job for boom to gloom. The study has aim to cover following objectives:

1.    Defining what is downsizing.

2.    What was the main problem in employee downsizing.

3.     To study the HR issues arises due & retrenchment strategies.

4.    To study the limitation of employee downsizing.

Less Distorted Communications:

A combination of management layer reduction  can help here.

 Greater Action-Orientation; Less Analysis-Paralysis:

This usually implies reducing the headquarters staff role in decision making, or using something like IBM's contention system that requires the constant collaboration of staff and line to reach major decisions. Achieving this commonly hoped for objective also usually implies changing the mix of skills of your managers as well as their number.

 Quicker Diffusion of New Ideas:

Making your company more innovative is an important objective, especially for those businesses facing stalemated positions in maturing markets. Becoming more innovative frequently is facilitated by giving fewer people veto power over new ideas. As we have already discussed, while moderate organization streamlining can be helpful, demassing can bring with it a new corporate culture inhospitable to innovation.

Facilitating Synergies Among the Company's Divisions and Departments:

The easiest way to bring this about, structurally, is by reducing the number of divisions and departments that need to interact; then limit the hierarchy in each that can stand in the way of the interaction. As with promoting innovation, downsizing is not enough to encourage increased cooperation across organizational lines. Coordinating mechanisms, such as carefully chosen committees and task forces, as well as incentives and rewards for behaving this way are needed.

 Higher General Manager Morale:

This can come when staff groups that tend to second guess line managers are reined in (assuming the individual managers are able to solo without their "support." Reducing the overall number of managers can, to a point, increase the morale of those remaining by giving them full time management jobs- Focusing Managers' Attention on Customer Needs, Not on Internal Procedures: this requires a combination of limiting the hierarchy between key managers and key customers, and managing the operation with a short rule book.

 Placing Power and Authority in Hands of Managers Closest to Customers:

This, also, can result by reducing management layers and delegating decision making on matters of immediate concern to customers to those who deal with them most frequently.

Easier to Pinpoint Individual Responsibility for Business Performance:

This should be a natural result from creating a streamlined organization structure and a test if it is sufficiently streamlined. Responsibility for economic performance should not be lost among overlapping layers of managers. Key managers should have both performance targets and most of the resources needed to achieve them.

Increased Management Productivity:

on a manager-by-manager basis this usually happens by increasing the number of people reporting to each. Company wide, management productivity can be tracked by watching for improvements in "management value added."

                      

                         

SCOPE AND PURPOSE

The scope of study is very wide and when the economy is in down point of trade cycle the scope of retrenchment become very wider. Retrenchment strategies are used in all corporate sector. At the time of rescission retrenchment strategies are widely used by company. Determine the size and scope of any work force restructuring, including potential downsizing

Improve targeting in any labor restructuring program, including identification of skilled workers critical to the operations of the enterprise

Enter into more informed negotiations and discussions with trade unions and labor representatives

Ensure fairness and transparency of the process.

RESEARCH METHODOLOGY

The data for the study will by collected by using secondary sources. The data will collect by using various techniques and sources which are briefly described below. This study will be primarily focused employee downsizing Indian job for boom to gloom.

·         HR reviews

·         Journals

·         Magazines

·         Websites

·         Newspaper

               FINDINGS, DATA & ANALYSIS

·         Planned Downsizing: A Sustainable Alternative

·         Employer Downsizing -SUMATI REDDY &PUBLISHER ICFAI

·         Journal Management

·         Causes and Effects of Employee Downsizing

·         The effect of gender and organizational level on how survivors appraise and cope with organizational downsizing.

·         Taking a positive approach to organizational downsizing.

·         Strategic Management Journal.

·         Academy of Management Journal

CONCLUSON

Restructuring, rightsizing, streamlining, making redundant, retrenching, reduction in

force, selective shrinkage, dehiring, delayering, reengineering, rebalancing, outplacing— these are just a few of the phrases or euphemisms used to describe downsizing, a phenomenon that has become a ubiquitous fact of modern-day organizational life.

Some management issues appear to receive a disproportionate amount of academic research relative to the magnitude, importance, or prevalence of the phenomena in the “real world.”

 This is clearly not the case with downsizing research. Although research on downsizing is growing, it is still dwarfed by the magnitude of this phenomenon in the marketplace. There are a host of theoretically and practically important issues in need of additional research.

 Now, more than ever, organizational researchers need to apply relevant methodologies to these important and complex research questions. We hope that our review informs and stimulates further work in this regard.

RECOMMENDATION

Your first step has to be deciding what you want. Maybe you really enjoy your job — maybe you’re willing to do the work of as many people as necessary to keep your comfortable job. If that’s the case, it’s worth going to your supervisor and informing them of that fact. In my experience, just informing them is enough. Don’t ask for a way to prove it; don’t try to subtly suggest it. If you’re on the ‘Maybe’ list, though, you’ve probably just tipped yourself on to the ‘Keep’ list.

But the opposite is equally likely. You could be just punching that time clock. Are you ready to move on? If so, don’t wait for the axe to fall. Start planning your escape: hunt for a new job or plan another first step. As soon as you’re ready to move on, approach your boss about negotiating your last few days. If job cuts have been announced, you can probably negotiate for the full severance package they were going to offer. If the plans to downsize are still very quiet, it’s harder to request a severance package but not impossible. Don’t run out the clock, though. You might be surprised to learn that you’re on the ‘Keep’ list when you already had your bags packed. Worse, you might prevent one of your peers who really wanted to stay from doing so.

                            

LIMITATION

The study might be limited by following factors:

1.    Reliability & validity of data as it is called from secondary sources.

2.    Personal limitation- as all analysis & interpretation based on my knowledge & content.

3.    There is lack of proper time.

4.    And the literature in this particular topic is limited.

BIBLIOGRAPHY

1.    Allen, Richard Director (00123242); Feb2003, Vol. 56 Issue 7, p56, 4p, 10 Color Photographs. ”50 ways to leave your loses”.

2.    McCormick, David  International Economy; Summer2008, Vol. 22 Issue 3, p66-69, 4p

3.    www.investorwords.com/1571/downsizing.html#ixzz1FiLqRZu Lcribd.com/doc/22419238/growth-of-bpo-sector-and-its.

4.    http://www.roberttomasko.com/Downsizing.Ch3.html

5.    Planned Downsizing: A Sustainable Alternative

6.    Employer Downsizing -SUMATI REDDY

7.    Journal Management  

8.    Causes and Effects of Employee Downsizing  

9.    The effect of gender and organizational level on how survivors appraise and cope with organizational downsizing.  

10. Taking a positive approach to organizational downsizing.

11. Strategic Management Journal.  

12. Academy of Management Journal

13. http://www.lifehack.org/articles/management/dealing-with-downsizing-how-to- prepare.html

14. Dealing with Downsizing

15. Downsizing and the changing role of HR. By: Sahdev, Kusum; Vinnicombe, Susan; Tyson, Shaun. International Journal of Human Resource Management, Oct99, Vol. 10 Issue 5, p906-923, 18p, 1 Chart, 4 Graphs; DOI: 10.1080/095851999340224

16. Survivor reactions to organizational downsizing: Does time ease the pain?By: Allen, Tammy D.; Freeman, Deena M.; Russell, Joyce E. A.; Reizenstein, Richard C.; Rentz, Joseph O.. Journal of Occupational & Organizational Psychology, Jun2001, Vol. 74 Issue 2, p145-164, 20p

17. THE IMPACT OF DOWNSIZING ON ORGANIZATIONAL CAREER DEVELOPMENT ACTIVITIES AND EMPLOYEE CAREER DEVELOPMENT OPPORTUNITIES. By: Feldman, Daniel C.. Human Resource Management Review, Fall95, Vol. 5 Issue 3, p189, 33p

18. The impact of corporate downsizing on employees. By: Richey, Mark W.. Business Foru.