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Downsizing


1.  Introduction

Once people used to be viewed as assets to develop; now they・re viewed as costs to cut (Central 1998, p. 57).  Increased domestic and international competition, deregulation, mergers and acquisitions, pressures for increased profitability and performances have all played a part in forcing business organizations to adopt downsizing as the prevalent strategy since late 1980s.  Downsizing aims to achieve greater organization efficiency by job elimination (Stone 1998, p. 585).  However, downsizing is more than a simple reduction in head counts.  There has been increased appreciation for the impact layoffs have on the people who remain since these individuals represent the future success of their organizations. 

1.1    Background of Sanho Limited

Sanho Limited is a garment trading company.  Their business was hit by the Asian economic crisis and profit was dropped significantly last year.  In order to maximize profit, the organization decided to cut major cost and laid off 25 percent of their workforce from original 200 staffs to 150 staffs in December 1998.  The management believed that the :downsizing; was the best approach to streamline the organization to be stronger and leaner to gain competitive advantage in the dynamic environment.  The objective of the organization was to improve effectiveness and efficiency with profitability increase in the near future.

1.2    Definition of Downsizing

.Downsizing sometimes called rightsizing, RIFs (reductions in force), and restructuring・ (Robbins & Coultar 1996, p. 62).  It is defined as .a set of activities designed to make an organization more efficient, productive, and/or competitive through the planned elimination of positions or jobs・ (Ferris & Buckley 1996, p. 100).  Hence, .downsizing should be a product of the organization aligning its strategic business objectives and shaping its corporate cultural to better fit its changing environment・ (Stone 1998, p. 588). 

1.3    The Problem

Downsizing may be the most traumatic of all organizational changes.  Robbins and Coultar argued that even the best planned and executed downsizing effort creates tremendous anxiety for those remaining employees (survivors) in the organization (1996, p. 62).  Most downsized organizations were failed in achieving desired outcomes due to lack of proper planning and addressing feeling to the survivors.  The study is worthwhile to the organization to ensure their efforts were successful implemented against their objectives.  Therefore, it is important to identify if the organization is more effective and efficient after downsizing against its strategic business objectives.  Otherwise, prompt actions have to be taken to avoid long-term effects as survivors represent an essential resource for the organization・s future survival (Fisher et al. 1996, p. 746).

1.4    Aims and Objectives

The aims and objectives of the report are important to develop the questions for interviews and survey.  The results were used to compare with literatures to obtain root causes of the problem, which helped in the formation of policies and strategies for the future success of the organization.

The aims with detailed objectives of the report are to identify:

(1)   Did the organization use a strategic proactive transformation plan in the downsizing action?

l        What approaches to reducing workforce size were used?

l        Did communication, counseling and assistance were provided to the laid-off?

l        What communication strategies were used to survivors?

l        Did work process re-design?

l        Did training, counseling and assistance were provided to survivors?

(2)   What are the effects on the survivors and the organization after downsizing?

l        What are the positive impacts?

l        What are the negative impacts?

(3)   Is the organization more effective and efficient after downsizing?

l        Any effects on productivity?

l        Is customer service improved?

l        Is quick response improved?

l        Does sales turnover increase? 

(4)   What has to be done to meet organizational objectives?

l        Define motivational factors.

l        Formation of policies and strategies.

2.  Literature Review

There have been a lot of literatures about downsizing since 1994.  Most are criticizing the actions have been creating huge negative impacts on the laid-off, the survivors, and the organizations as well.  Only few literatures argued that the actions are with potential advantages and can be successfully implemented with strategic planning.  All of the researches are summarized below.  Further references used for the paper are listed at the end of the report under the References and Bibliography sections.

2.1 Downsizing: The Corporate Buzzword in 1990s

Since labor costs represent a big part of an organization・s total costs, this is an attractive to start for downsizing.  Downsizing became the corporate buzzword and boomed in 1990s due to the increase demand on quality, cost, service and speed.  The Hong Kong situation is not that much better than the other countries.  The economic downturn has decreased the retail sales to drop by 16.7 percent in 1998 and further worsen by 18.7 percent in January 1999 compared to 1997 as shown in Figure 2.1.

Most organizations forced to follow the buzzword trend and used downsizing as one of their strategy planning to improve effectiveness and efficiency in order to survive.  Massive layoffs have been spreading over after the China takeover and Table 2.1 has shown the biggest layoffs from October 1997 to March 1998 in Hong Kong.

Most organizations use downsizing as long-term strategies and play it as repeated actions.  One statistic (Figure 2.2) discovered that 24 percent of 500 surveyed organizations have downsized three times or more in the past three years.[

Another survey in 1998 (Figure 2.3) found that 17 percent of 430 surveyed organizations considered to downsize and reduce their workforce in the next three years.

2.2 The Positive Side of Downsizing

Some literatures have viewed downsizing as a .positive strategic planning tool・ in preparing organizations to deal with the challenges the next two decades have to offer, and an opportunity to revitalize the organization (Jones 1996).  The anticipated benefits of downsizing increase operational efficiency of the organization in terms of the economic level. 

Noe et al. (1997) has stated that downsizing provides opportunities for human resource management.  It often allows the organizations to :get rid of dead wood; and make way for fresh ideas.  It is often a unique opportunity to change an organization・s culture and can demonstrate to top-management decision makers the value of the organization・s human resource to its ultimate success. 

Some organizations have used downsizing efforts to implement increased employee participation programs such as empowerment, self-managed work teams, and mentoring to help redefine employees・ own job.  Whitman (Tristram 1990) has cited that the upside of downsizing is significant.  The relationship between the company and the employee today is much less paternalistic and less autocratic.  Downsizing helps to develop a high-performance workplace, the survivors have opportunities to learn new skills and gain broader job experience (Robbins & Coultar 1996, p. 62).  The workforce as a whole is more diverse and has more ability to response change around them. 

2.3 The Negative Side of Downsizing

Bourque & Gosselin (Dupuis et al. 1996) has argued that massive downsizing very often seems to generate more problems than it solves, and only rarely does it achieve its original financial objectives.  Frequently their performance suffers and the long-term effects on organization・s structure, culture and work process are also affected and not easily recovered. 

2.3.1        What Happen to Survivors

A downsizing begins with a sense of violation and ends with angry, sad, and depressed employees.  The loss of co-workers and friends is a painful experience to survivors, who may feel guilty and deep-sensed unfairness and suffer from :survivor sickness; (Central, 1998, p. 55).  The symptoms include fear of persecution, inner tension, diminished self-esteem, lack of initiative, general apathy, depression and a paradoxical sense of guilt (Dupuis et al. 1996), eventually there would be a loss of morale, trust, productivity and, ultimately, a loss of business (Stone 1998). 

People need a vision of the future, a sense of what they are trying to achieve, and they also need to know that they are part of a goal-oriented team pulling in the same direction (Bacal 1998).  However, downsizing has disrupted survivors・ sense of futility with respect to long-term planning of the organizations (Recruit 1999).  They may feel distrust and betrayal by the management that their commitment to the organization may suffer and seek for other jobs for sense of security. 

Reduction of organizational or hierarchical layers redefines traditional career paths and reduces opportunities for promotion.  The new reporting channels require adaptation, information evaporate all affect survivors in their well being (Recruit 1999).  They may feel confusion about their mandate and dissatisfy with communications from leaders.  They may think performance by merit no longer exists tends decreasing motivation.  Sharing the work from the laid-off may frustrate and overburden survivors, which cause them to display unusual stress behaviors (Central 1998, p.55). 

Elimination of specific jobs may lose good people simply because they have held the less essential jobs.  The emphasis on generalist rather than specialist skills hurt the psychological contract between the organizations and employees.  Survivors may build the employment relationship temporary and their prime loyalty being to themselves not the organizations (Stone 1998, p. 586). 

        2.3.2        What Happen to the Organizations? 

Margulis (Dupuis 1996) has cited that the best and the brightest employees will often leave the organization.  The costs of hiring new employees are enormous for an organization that has lost not only its best people but along with their special know-how and expertise.  The consequences can be disastrous for the organization, which can find itself unable to keep up with its competitors because of a drop in the quality of its products and services.   

The negative impacts on survivors may translate into a number of problems to the organizations.  The organizations move towards less risk-taking and innovation; destructive conflict tend to increase; internal competition for resources increase; individual survivors devote less effort to working together and more attention to doing things that will protect themselves; general listlessness and lethargy; and decrease service levels and increased public hostility (Bacal 1998). 

2.3.3                Statistics about Downsizing 

Some important survey statistics and data discovered the negative effects on the survivors and the organizations.  Some even criticized that downsizing has not reached the results originally expected:

l         70 percent of survivors in a study of 909 managers felt insecure about their futures, reduced confidence in their ability to manage their careers and felt the organization was not a better place to work after the downsizing (Central 1998, p. 56).

l         A study of nearly 25,000 employees found that workers・ attitudes about the outlook for their organizations, work environment, pay and management had changed markedly over the past year.  55 percent expressed fears about their company・s ability to survive (Sui 1998). 

l         The Wall Street Journal survey (Noe et al. 1997, p.59) found that most downsizing couldn・t achieve desired outcomes as expected (Table 2.2):

Most organizations found that they have lost their valuable talents and have to even paying more to re-employ former employees after downsizing.  One survey reflected that 35 percent of the respondents rehired former employees (Figure 2.4).

2.4 The Implications 

Downsizing should be part of a clearly defined, long-term vision that fits into the company・s overall strategic plan (Mishra et al. 1998).  So a careful and systematic transition plan is required (GovExec.COM, 1992).   

To maintain the size and capabilities of the workforce equal to the magnitude and complexity of the work (Goldenkoff 1997) is the key to enhance competitiveness and productivity to stimulate recovery (Talent Information Management 1997).  Most organizations found that workforce planning, whereby care is taken to ensure that employees with the skills and training needed to accomplish the organization・s work are retained, is an important component of success for downsizing.  Five-pronged approach to workforce downsizing that considered as: size, skills mix, skills distribution, costs and organization capability and culture (GAO 1995).   

If an organization simply reduces the number of its employees without changing its work processes, work overload and staffing growth will recur eventually (GAO 1995).  Work process re-design also needs a strategic planning linked to the organization goal in order to success. 

The organization needs to anticipate and plan to address the immediate loss of morale, trust in management and ability to cope with stress that occur in the wake of a downsizing to prevent those negative feelings fester and hinder employees from moving forward (Mishra et al. 1998).  Beach (Monk 1998, p. 42) has defined morale as the total satisfaction a person derives from his/her job, working group, boss, the organization and environment.  Morale pertains to the general feeling of well-being satisfaction and happiness of people.  Indicators of low morale include: absenteeism, breaches of discipline, higher employee turnover, complaints, lowered output, loss of interest, group conflicts, disloyalty and sabotage.  Therefore, low morale can decrease productivity, effectiveness and efficiency that hurt the competitive advantage of the organization.  

Researchers discovered that survivors of a layoff were most affected when they felt that those laid off were not compensated fairly, or were unfairly let go (Pisarnweerawong 1996).  Therefore a proactive planning providing counseling and guidance to help those laid-off can ease the stress from the survivors. 

Survivors do not get information about downsizing from formal channel will look from informal channel like the grapevine.  The disadvantage of the grapevine is that it may transmit incorrect and untimely information.  When grapevine passes inaccurate or unconfirmed information, especially about rumored layoff or other stressful events, employees who cannot verify the truth may feel demoralized.  The Ragan Company (1998) recommends to communicate immediately with employees details of .3Ls・: layoffs, losses and lawsuits, as well as other important news affecting the organization. 

Open communication, managerial support and employee retraining are the keys to motivate the survivors of downsizing (Kogan 1996).  Positive, inter-group relations between managers and their supervisors have a positive effect on manager involvement, organizational trust, and organizational commitment, which return gaining employees・ loyalty, trust and eventually increase job satisfaction.   

Ray et al. (1995, p. 468) stated the results of training, such as improved employee morale or job satisfaction, are often described as intangible and hard to measure.  These improvements can benefit organizations by reducing labor turnover, absenteeism, error rates, transfer request, and filed grievances (soft-dollar benefits).  Such indirect benefits could produce increases in productivity, ultimately affecting the organization・s bottomline (hard-dollar benefits).   Drucker (Central 1999) emphasized that everyone must take responsibility for the organization・s objectives, contribution, and behavior, and this is what the employees and the organization has to understand and learn in the next era. 

Downsizing should be a product of the organization aligning its strategic business objective and shaping its corporate culture to better fit its changing environment.  Therefore, it needs to be conducted in a humane way with honesty, compassion and good communication with all concerned.

3.  Methodology of Research 

3.1    Schedule of Activities

The schedule of activities for the research work is illustrated as Table 3.1. 

3.2    Literature Research

Only limited resources about downsizing were found from books.  Most of the secondary sources of information were obtained from newspapers, magazines, Internet and government documents, of which some examples and statistics were collected for comparison.  All of the informations were used to build up the theoretical background to support the results from primary research.

3.3    Method/Design 

Primary sources of information were gained through interviews and survey questionnaires in order to achieve the aims and objectives of the report. 

3.3.1        Information-Getting Interview       

Research interview・s function is generally to enrich the other data by adding qualitative comment rather than providing further quantitative data (Keats 1998, p.18).  Therefore, face-to-face discussions were made separately with the managing director and human resource manager of the organization to get insight information.  Directive interview style was used in balancing freedom and control with open and closed questions (Lahiff and Penrose 1997, p. 495-496).  Tape recorder and notes taking were the major tools in the discussions.

3.3.2                Organization Files 

Using organization records can provide better quality data and take less time and effort than other research methods (Lahiff and Penrose 1997, p. 293).  The following data from organization files were compared before and after downsizing:

l        Administrative Department V to investigate both the attendance/leave application record and staff turnover to observe morale level

l        Accounts V to compare the sales turnover to measure the productivity 

3.3.3                Questionnaire 

A questionnaire survey with staffs was conducted to discover the survivors・ feeling about downsizing.  Demographic questions to test the appropriateness of the research (Lahiff and Penrose 1997, p. 289) plus different types of closed questions were used.   

The questionnaire comprised of 12 questions.  Wording was kept simple to avoid ambiguity and to ensure consistent responses.  A combination of tick boxes, open and closed questions and rating scales were used to ensure variety and ease of use.  The questionnaire was designed bearing in mind content wording, response structure and question sequence.   

A pilot test was conducted initially on three supervisors to discover if there were any irregularities or difficult, vague or ambiguous question.  The pilot study found that the questionnaire was user-friendly. 

All responses have remained anonymous and confidential.  The respondents were able to answer questions freely and there was no coercion or pressure to receive specific responses.  No attempt has been made to correlate names to questionnaires. 

A time limit of 14 days was given for the return of the questionnaires.  Questionnaire was dispatched and collected by hand as to get best response rate. 

3.4 Population and Sample 

Due to time constraint, the questionnaire survey was undertaken with a sample of 50 staffs (33.3 percent) from the total population of 150.  Systematic random sampling was appropriate in this study because each member of the population had an equal chance of being part of the sample (Lahiff and Penrose 1997, p. 287).  It was done by drawing from a list and took every third name.

3.5 Data Presentation 

The report is based on a descriptive style of research.  The purpose of descriptive research is .to describe systematically the facts and characteristics of a given population or area of interest, factually and accurately・ (Flint 1988, p.1).

Since the data were collected and presented for the purpose of analysis and interpretation, visual support was used to enhance the readability of the report.  Both table and figures were used.  Table is used for delivery of precise data.  Figures include graphs and charts are used to summarize information, add clarity, illustrate relationships, and to add vividness (Lahiff and Penrose 1997, p. 424).

3.6    Limitations 

Several limitations of this research are outlined as follows: 

l        Downsizing is a new topic in Hong Kong after the Asian economic crisis.  Hence it was difficult to collect data in this criteria domestically.

l        The scope of the topic is very extensive.  The challenge was how to select appropriate information to produce the report in proper length.

l        Although there was limited information about downsizing from books, large number of resources were able to obtain from other sources and extensive reading was required in number of week・s time.

l        The most challenge was time limit to select an interesting topic and produce the report in a professional manner.

4.  Results and discussions

The findings and results had satisfied most part of the aims and objectives of the report.  They were used to compare with the literatures and to identify the root causes of the problem at last. 

4.1    Research Results 

Valuable information was got from interviews to supplement the data from organizational files and questionnaire surveys.  The results are summarized in the following sections. 

4.1.1                Interviews 

Face-to-face interviews were made separately with Mr. Peter Wong, the managing director and Ms. Mary Chan, the human resource manager of the organization for insight information.  The recapitulation are listed as below: 

(1)   Approaches to reducing workforce size

l        The organization did not consider the other alternatives to remain survival in the downturn because they believed downsizing was the fastest and convenient way to reduce overhead and retain the best workforce to achieve their goals.

l        The organization used one month in planning and implementing the downsizing.

l        The organization・s goal was to retain only the best workers, so they used the recognition of merit but involuntary approach for the elimination. 

(2) Communicate, counseling and assistance to the laid-off

The organization communicated well with those laid-off and offered them with outplacement service, including financial and psychological counseling and assistance in finding new jobs.

(3) Consideration of survivors

l        The management believed that the survivors would feel relieved, even grateful that they survived to keep their jobs.  They assumed that the survivors would get over the effects of downsizing over time.  Thus they did not use any communication strategies with the survivors in the downsizing.

l        The management did not have any work process re-design after downsizing.  The survivors shared the works from the laid-off.

l        The management did not provide any training, counseling and assistance to the survivors like taking extra work and helping in disruption in the transition period.

(4) Management・s observation

l        Grievance had been increased.

l        Customer complaints increased: slow response, poor service and quality, overall performance was worse compared to last year.

l        Some of the valuable employees resigned and left the organization after downsizing.

l        Poor discipline was found like poor punctuality.

4.1.2                Organizational Files 

The following information was summarized from the organizational files: 

(1)       Attendance and staff turnover 

(A)  Attendance was evaluated from punctuality and absenteeism. 

Punctuality is defined as reporting to work at the time fixed every morning with an allowance of 15 minutes.  It was found that more than half of the employees were late by 30 minutes in the first quarter of this year compared to 14 percent from last year as per Figure 4.1. 

Absenteeism is defined as missing a day or more of work without authorization by a superior or without the knowledge of consent of the organization.  It was appeared that the absenteeism rate in the first quarter of this year had increased by double compared to past four years as illustrated on Figure 4.2. 

(B) Staff turnover

Staff turnover in the first quarter of this year was increased by 6-8 per cent compared to past four years per Figure 4.3.  Stone (1998, p. 737) emphasized that knowing the reasons for turnover yield much revealing information about the human resource climate.  It also helps the organization to diagnose an organization・s weakness and confirm its strength.  The data was got from the separation forms, which was the procedure for any resignation that the employees had to complete before leaving.  Figure 4.4 has analyzed the main reasons for leaving: no job security (51 percent), poor working conditions (28 percent), no chance for promotion (9 percent), no challenge job (5 percent), and low pay (3 percent).

(2)       Sales turnover

Sales turnover is a vital data for an organization to survive.  Unfortunately it was dropped significantly since 1997.  This is also the reason for the organization to downsize its workforce in order to squeeze profits from the lower sales turnover.  Sales was decreased by 15 percent in 1998 and further dropped by 5 percent in the first quarter of this year.  Figure 4.5 compares the sales turnover for the past five years. 

4.1.3                Questionnaire

A response rate of 90 percent was gained with 45 respondents out of 50 surveys distributed.  The response rate was able to generate an appropriate research.

Respondents' Particular

More than half (62 percent) of respondents were working with sales department, however, the results were still appropriate as sales department represented 70 percent of total workforce.  Other respondents were from different departments in similar ratios as illustrated on Figure 4.6.

Junior level and middle level represented 87 percent and 11 percent respectively as per Figure 4.7, which were considered as appropriate data compared to the actual composition of workforce on the organization.

Figure 4.8 demonstrates the number of years working for the organization.  Almost half of the respondents had worked for the organization within one to three years.  Others were in similar ratios, working for the organization less than a year up to 10 years more.            

Employee Feelings about Downsizing

(1)       Is downsizing the only way to remain survival in the economic downturn?

Only 27 percent of the respondents agreed with the layoff.  64 percent did not think that layoff was the only way to remain survival in the economic downturn as revealed on Figure 4.9.  Main solutions they selected were: pay cuts (34.5 percent), pay freezes (13.8 percent), hiring freeze (10.3 percent) and demotions (6.9 percent).  Figure 4.10 summarized the result. 

(2)       Did the management treat the laid-off in a fair manner if it was really needed to downsizing?

70 percent felt that it was a fair and humane way in handling the issue.  Only 20 percent felt it was not and 10 percent were unsure in the case.  Figure 4.11 demonstrates the result.

(3)       Is it a positive impact on the survivors and the organization with downsizing?

Only 24 percent felt that the layoff had positive impact, 69 percent felt it was not and 7 percent was unsure in the case.  The positive impacts those respondents believed were: reduced cost (27.3 percent), create opportunities for remaining employees (18.2 percent), reduce bureaucracy (18.2 percent), others included increase profits, increase efficiency and effectiveness, increase competitive advantage.  The negative impacts those respondents believed were: threat to morale (48.4 percent), loss of expertise (16.1 percent), loss productivity (16.1 percent), others included cost of adapting, increase conflicts and reduce competitive advantage.  Figure 4.12, 4.13 and 4.14 summarizes the findings. 

(4)       What should the management do to ease the stress of survivors in the downsizing?

Figure 4.15 illustrates what the employees expected the management to do in the case: provide employees with as much information as possible (37.8 percent), solicit employee participation (22.2 percent), make senior manager more accessible (15.6 percent), others included provide training for employees and help those encountering difficulties.

(5)       How did employees get their first hand information about the downsizing?

It was surprising to discover that almost 90 percent of the respondents got the first hand information from peers (the grapevine) and others were learnt from management as per Figure 4.16 

(6)    How are the survivors・ feeling about their job in the organization after downsizing?

93 percent of the respondents did not feel secure about their job and felt there was too much negative rumors around the organization.  Almost 90 percent felt there was lack of top-down communication and certainty of career.  Almost 80 percent felt they were work overloaded.  Less than half of the respondent felt they did not have enough training sessions, had no choice in shift assignment, were lack of feedback about performance nonexistent, got unsatisfactory rewards and were work unfulfilling.  Figure 4.17 demonstrates the findings.             

(7)    What are the three top motivational factors that best suited in the current situation?

It was interesting to find that job security was the top motivational factors.  The balance sequence was: growth opportunities, appreciation shown by management, good company policy, being well informed, interesting work, rewards, working conditions, inter-personal relations and help with personal problems.  Figure 4.18 has shown the results.

(8)       What are the employees・ own rating on their current morale?

It was shame to find that no respondent was in the highest level of morale, while more than half respondents were in the lowest level and 24 percent in the low-medium level as appeared on Figure 4.19

(9)       Will the survivors consider staying with the organization?

More than half of the respondents still considered staying with the organization while 39 percent might not.  However this is already a high percentage that the management should take care of.  Figure 4.20 illustrates the results.

4.2 Discussions

Mishra et al. (1998) and GovExec.COM (1992) emphasizes that downsizing should be aligned with organizational overall strategic plan in a systematic process.  The research discovers that reduced short-term cost (27.2 percent) was one major positive effects and only small percentage (18.2 percent) agreed that downsizing created opportunities for survivors that contradicts with arguments from Robbins & Coultar (1996, p. 62) and Whitman (Tristram 1990).  The fact that the benefits Sanho Limited gained couldn・t outweigh the costs they paid has to evaluate root causes and take proper actions to rectify.  The research has identified the problems as following section.

The significant cut of workforce did not improve the sales turnover in the first quarter of this year as desired outcomes, which similar to the findings from Noe et al. (1997, p. 59).  The economic downturn did affect the sales a lot but it is an overall climate (Figure 2.2) that Sanho Limited should take into consideration before the action.  The research also shows a surprising finding that the employees preferred other alternatives include pay cuts (34.5 percent) and pay freeze (13.8 percent) as to keep their job.  The lack of communication and employee participation in the action lost some of these valuable suggestions hence the action finally did not get supports from the survivors.  The research proved that the downsizing action was not proper planned, which revealed from those negative impacts. 

Survivors・ most concern is how the organization treats the laid-off as this would be the image of their future according to Pisarnweerawong (1996).  Sanho Limited did a good job in providing counseling and guidance to those laid-off to accept their situation.   Unfortunately they neglected those survivors, who still needed to work in the downsized environments.  The literature shows that the neglect would create survivor sickness (Dupuis et al. 1996) that affect morale, which ultimately decrease productivity, efficiency and effectiveness. 

The research found that lack of communication (37.8 percent) also created too many negative rumors (90 percent) that demoralized the survivors (The Ragan Company 1998) to feel insecure and lack of vision (Bacal 1998).  A very high percentage (93.3 percent) of employees was afraid of job loss and uncertain about career development.  It is because the organization did not redefine the future organizational strategies and vision to the survivors, which would lead to the success in the dynamic environment.

GAO (1995) emphasized the importance of work process re-design in a downsizing.  But Sanho Limited did not sensitive of the importance.  The research shows that more than 70 percent of employees were overload conforming to Stone (1998) argument as one of the major problem from downsizing.  Training is another factor lead to organizational success during this change as it can improve morale ultimately affect the organization・s bottomline (Ray et al. 1995, p. 468).  However, lack of training (11.1 percent) and counseling (8.9 percent) in the case made the employees not knowing how to handle extra work and their disruption.

The research shows a very high percentage (68.9 percent) of negative impacts to the survivors and organization in a downsizing, which are similar to the literatures (Stone 1998; Dupuis 1996) and ultimately will lead to a loss of business.  This includes:

 

l        threat to morale (48.4 percent)

l        loss of expertise (16.1 percent)

l        loss of productivity (16.1 percent)

The research indicates that 39 percent of the employees felt that Sanho Limited was not a better place to work after downsizing.  Although it is lower than finding from Central (1998), this is still a danger signal that the organization needs to address immediately as survivors represent an essential resources for the organization・s future survival (Fisher et al. 1996, p. 746).

The research reveals that the survivors in the organization were deeply affected by the downsizing.  Their top three motivational factors were: job security (100 percent); growth opportunities (62.2 percent) and appreciation from management (37.8 percent).  The literatures pointed out that the negative impacts make the survivors lack of confidence about the organization, lack of vision about their future and loss of trust.  This information is valuable to the organization as it has re-confirmed the employees・ feeling after downsizing and what they are expected from the organization.

5.  Conclusion and Recommendations

5.1 Conclusions Drawn from the Research 

Downsizing has attracted considerable criticism for being a representation of greed, shortsightedness and social irresponsibility.  Without a strategic approach, it seems that downsizing easily becomes dumbsizing.  Unfortunately Sanho Limited is also one of the failure representative. 

The problems of Sanho Limited have been identified as below points and details can be referred in discussion section:

l        lack of proactive transformation plan

l        improper downsizing approach

l        lack of communication strategies

l        lack of work process re-design

l        lack of training and counseling to survivors

l        lack of sensitivity to negative effects to survivors

All above have translated further problems like decrease in morale and productivity, tended to customer complaints including slow response, poor quality and service.  The research proved that the downsizing action did not achieve the desired result as expected.  The organization is not effective and efficient after downsizing. 

Recommendations based on the research results are discussed in the next section.  Leading staff through downsizing requires the organization to exercise superior judgement and decision-making.  It is a complicated task that involves the leader in recognizing the natural reactions of survivors, and determining the right timing for moving the organization from the emotional reactions to a focus on the present and future.  While it is difficult, the consequences of mis-managing or under-managing the situation are severe.

5.2    Recommendations

Following recommendations are suggested based on findings from the research:

(1)       Clearly defining and communicating the company・s short-term and long-term vision and values (Jones 1997) V let the employees focus on the short-term vision and values.  Once their negative feeling have been relieved, align them to the organizational long-term vision and values.

(2)       Creating open communication channels V increase information exchange by developing formal and informal channels, for example, newsletters, email, bulletin boards, annual report, management by wandering around, the grapevine, suggestion box, etc. 

(3)       Identifying necessary training and education V includes new skills, culture and vision.  This also include managerial training in their skills at communicating, motivating and leading as this is their role to guide their people through the aftermath of downsizing. 

(4)       Setting new performance targets V communicate new performance standards, change reward and pay systems to match new goals and objectives. 

(5)       Creating alternative career paths V allows employees to advance by moving horizontally rather than vertically (GAO 1995) like job enrichment.  Also let employees achieve goals in self-directed teams with help and coach from managers. 

(6)       Using contingent workers to relief current employees・ workload V the benefits include flexibility, cost control and expertise that can be focused immediately and for only as long as necessary on specific tasks and projects (Burr 1997). 

(7)       Helping employees to overcome five types of loss - security (not feeling in control), competence (don・t know what to do), relationship (familiar relationships are gone), direction (don・t know where they・re going), territory (feel uncertain about what is theirs) (Fox 1997). 

(8)       Re-designing the work processes V simply the workflow with the aids of office automation.

The implementations would only benefit from proper planning, evaluation, feedback and follow up.  Therefore, top management support and involvement, plus employees・ participation would be advantage.  Further research is also recommended in some of the areas like training programs and work process re-design would increase the effectiveness and efficiency during implementation.


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