Which way should you downsize in a crisis?

Which way should you downsize in a crisis?

Article Type: Abstracts From: Human Resource Management International Digest, Volume 18, Issue 3

Zatzick C.D., Marks M.L. and Iverson R.D. MIT Sloan Management Review (USA), Autumn 2009, Vol. 51 No. 1, Start page: 79, No. of pages: 8

Purpose – Develops a framework which integrated the apparently incompatible practices of talent management and downsizing. Findings – The following best practices all mitigate the potential negative effects of downsizing: cost reduction without workforce reduction, relying on attrition or retirement rather than forced reductions, communication which is clear, candid and inclusive, giving employees a voice, and demonstrating fairness and compassion. Downsizing which is reactive and commitment-oriented is in reaction to an external shock like a recession, and companies need to maintain their future capacity for attracting and keeping suitable personnel; an example is Xilinx following the dot-com bust. Proactive downsizing which is commitment-oriented needs to communicate the need for change, using the many alternative downsizing practices like voluntary layoffs, early retirement and transfers; examples are SAS Institute and Southwest Airlines Co. Downsizing which is reactive and control-oriented often features dramatic cuts in workforces and minimal legal amounts of notice and severance; it is not necessarily disastrous and is often used in the call center industry, but Circuit City Stores’ layoff decision in 2007 may have contributed to its downfall in 2008. Downsizing which is proactive and control-oriented results from changes in desired workforce due to perceived threats and opportunities and will rely on various best practices like attrition, transfers and retirements; an example is Wal-Mart Stores. Companies can learn from past mistakes, as did Cisco Systems Inc. between its 2001 layoffs and its commitment-oriented reaction to the problems of 2008. Yahoo’s generous severance packages contrast with the sit-in strike of workers laid off without severance pay at Republic Windows & Doors and with Radical Entertainment’s 2008 confusing layoffs just a year after doubling in size. Finally, if budgets preclude downsizing initiatives, they may move from commitment to control, or else discriminate in their treatment of core and support workers, as has Delta Air Lines Inc. Article type: General review ISSN: 1532-9194 Reference: 39AC604

Keywords: Downsizing, Employee involvement