Asgmt 3 - Downsizing PDF

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You are the CEO of a large retail organization, employing 25000 employees in Canada. Almost every business is reorganizing its operations in response to the economic slowdown caused by the Covid-19 pandemic.

As the CEO, you are forced to make some difficult decisions about downsizing i...

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Professor Jeanette Farahbakhsh HRM 822NUU Assignment 3: Downsizing July 23rd, 2020

Table of Contents

EXECUTIVE SUMMARY COVID-19 REDEFINING WORK, WORKFORCE AND THE WORKPLACE DOWNSIZING STRATEGY CRITERIA RECOMMENDED STEPS TO FOLLOW COMMUNICATIONS STRATEGY10 CONCLUSION WORKS CITED14

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EXECUTIVE SUMMARY The pandemic COVID-19 has caused insecurities and business uncertainties. For the retail industry it has been the toughest, with the lockdown and looming doubts, many retail organizations have had to take desperate measure to survive by cutting back costs. Some options to cut back costs are reducing overheads, lowering wages and the most extreme being downsizing. Downsizing should only be done if the survival of your company depends on it and done after careful planning and considerations. Everything from the downsizing strategy to the downsizing communication plan is critical to the success of the transition of the company. How to go about downsizing is critical to the organization’s survival as it can either make or break an organization. Downsizing for the retail industry considering the Covid-19 difficulties as well as online shopping trends must be done not only for the short term but also with a long-term vision. This can be done initially through workforce reduction which would involve laying off many workers and then through work redesign and systematic change strategy. Some recommended steps to follow these strategies are by developing a transition plan, involving human resources in all decisions, maintaining open and clear communications and helping those who are being laid off as well as engaging the retained employees and giving importance to them. Communications is one of the most key components of downsizing. How to go about it is through maintaining two-way communication. Just by listening intently to the employees is giving respect to their opinion and most importantly giving them a clear picture of the organization’s situation to help them understand the decision from the organization’s point of view.

COVID-19 REDEFINING WORK, WORKFORCE AND THE WORKPLACE “What the average workplace will look like in a post-COVID-19 world will be very different than before workers left” (Ferreira). COVID-19 has impacted the workplace in many different ways which has bought numerous challenges for organizations. Organizations are struggling. When Covid-19 started nobody could predict what would happen next, now experts are putting in all their efforts and research into devising the best work policies but at that time it was sudden and unexpected, huge household names are still struggling and many have declared bankruptcy. Covid-19 bought an enormous change to the phenomenon of work, workforce and the workplace. Employees now have to deal with the social distancing needs, self isolation and work from home pressures. Companies are continuously changing the staffing needs. The sudden need for technology for all sorts of jobs resulted in many people losing their jobs which were not applicable to the work from home situation. The bigger companies focused on reducing overheads to minimize expenses and maximize earnings. COVID-19 managed to shut down many small businesses with millions of people losing their jobs permanently or for a temporary period of time. In short, tough economic times such as these call for solutions to best manage the company resources and it usually involves cutting back on overheads through marketing cuts, overhead cuts, etc. Salary for many organizations is the biggest expense and if making profit through selling more is not possible, then companies go for drastic measures to cut back their expenses. One of those could be downsizing. According to Doyle,2020 “Downsizing is when companies terminate multiple employees at the same time, often to save money. As opposed to

termination for cause, downsizing is typically not due to any conduct on the part of the employee.” Retail Organization Climate A lot of brick and mortar retail organizations have been going downhill since some time now, even before the outbreak of corona. With online businesses like Amazon, the presence of giants such as Walmart, and the shift in retail patterns etc. the retail businesses have had a cutthroat competition since some time now. Keeping in mind the needs of today’s society, the future of retail is dependent on a business model which incorporates online presence at large. This also means letting go of employees with certain skill sets who are not required anymore. Employing a strategy such as this may save the retail business from shutting down fully. Retail Business Closures with Respect to Covid-19 Covid-19 impacted retail businesses the most. Owing to lockdowns across the globe, the retail business suffered a huge blow. The work patterns changed, this impacted all kinds of retail businesses like elaborating example of Fashion & Clothing brands, people working from home have stopped investing in new work clothes. In terms of Food, taking examples of coffee chains or salad bars, people are now at home, which means nobody wants to step out specially to buy a coffee or a light lunch. They would rather prefer to make coffee at home or invest in a coffee machine. Same thing goes for lunches. Taking into account current situation now that lockdown has eased and many offices have opened up, people are going to work, a lot of people are still wary of eating outside food in fear of contracting covid-19 , hence the notion of making food at home is more in effect.

Looking at the impact these have had on businesses, major chains like JC Penny, H&M, Neiman Marcus, Macy’s, Starbucks and several others have announced shutting down of stores or are on the brink of bankruptcy (McDonald, 2020). The impact on the work force employed by them will ofcourse be huge. It will not only result in letting go of the salespeople and the store managers but also indirectly impact the cleaners, the suppliers and their profitability ultimately resulting in downsizing by them as well. Cutting it short, it is a chain which will impact many businesses directly or indirectly.

DOWNSIZING STRATEGY CRITERIA Taking into account the company’s short term as well as long term strategy, the company will have to employ several strategies to downsize. Short Term Strategy Till a cure is found, it looks like Covid-19 is here to stay. The organization is suffering from the effects of it and also needs to appease the shareholders. Hence, for short term basis, the work force downsizing should be done through lay offs a) Workforce Reduction: The organization will have to go for severe workforce reduction strategy, which would mean letting go of many people. Taking use of the company’s performance appraisal system, high performing team members with special skill sets must be retained while those positions which are easier to fill and those whose requirements are not needed due to lock down may be let go. Keeping the negative impact of downsizing in mind as well as in order to maintain the brand image, the

company should go for temporary layoffs which means laying off the employee for a temporary period till things get back to normal. Once the lockdown eases, then the company can employ them back. Long Term Strategy In the long term, considering the retail environment besides the covid-19 threat, it is important to have a strategy to streamline products and go online, while minimizing brick and mortar stores. This would result in downsizing of many employees whose roles are irrelevant in a situation like this, like customer service representatives etc. However, it would also mean new openings in roles that were previously not there like having more online presence would require warehouses and in turn warehouse supervisors etc. Hence, company’s strategy should be to internally move people who can adjust in a different role while downsizing others. a) Work Redesign: This should be the retail company’s medium-term plan, which would mean switching away from brick & mortar stores to having more online presence and investing in warehouses. It would also mean that the company will have to let go of people with certain skills sets or working at certain stores which they plan to close. If possible, the strategy should be to retain the hard workers and bright people and try to internally relocate them within another function but that is not possible for all employees. b) Systematic Change Strategy: This should be the retail company’s long-term goal. It would entail that cutting costs becomes second nature to all the employees, it is a part of their goals. It would also entail cutting back on several functions through outsourcing.

RECOMMENDED STEPS TO FOLLOW Even though downsizing should be the last option for any organization, once the organization decides to downsize, it should make sure it is done in a dignified manner. As the short-term goal is to downsize large amounts of workforce, the organization must employ several stages to go about it smoothly in order to minimize disruption and negative emotions from workers. Lively (2020) mentions critical steps to follow when downsizing in order to maintain calm. 1. Develop a transition plan Have a proper plan before moving ahead with layoffs. This means aligning the company goals and objectives with the required skills. This must be done by aligning the senior management, HR and others like union leaders. Cross functional teams must be made to identify the jobs and functions that the company needs to cut back on and those that they company cannot live without. The layoffs should not be done without proper planning and thought put into it (Lively, 2020). 2. Human Resources Involvement: Human resources must be involved in all decisions the company plans to take with respect to the employees. Experienced HR professionals can also help with handling the intricacies of the situation including designing severance packages and handling employee layoff terms in order to avoid future lawsuits. HR can help to keep the organization compliant. 3. Maintain Open & Clear Communications: Communication should be open and clear between the management and the employees from the start of the downsizing plan to the end of it. Instead of hiding the downsizing

plans from employees and then giving them a sudden shock, it would be best to be transparent about it. Keep the employees in loop and let them know whatever the company plans for future are, so they can also move on. It would also be a wise idea to share why the company had to go through downsizing and the reasons for it, this would help them understand the situation from the organization’s point of view as well and might help with cooling down some of the negative emotions. Be respectful to everyone. Communication should be present for the retained employees as well in order to keep their morale high and ease their fears with the transition process. 4. Hiring Freeze: Gandolfi (2008) says “Hiring freeze is a mild form of downsizing and reduces labour costs in the short term.” It is a regular practice amongst many firms going through downsizing to continue hiring for new openings. It gives a wrong impression to the employees. If possible new openings for key positions should be filled through internal hiring, if not possible, the firm should for the time being till its going through its transition period try to respect the laid off employees and not bring in new people. 5. Providing Assistance: The firm should aim to provide assistance to its downsized employees as well as to the retained ones with proper employee assistance programs etc. It may not be possible in the current economic situation as well as the company’s financial situation, but it should make sure to clear the dues of all laid off employees and provide them some extra money as well in the form of severance package. Also, if the budget allows, the company can hire the services of outplacement service firms that specialize in dealing with displaced employees to help alleviate their stress and frustration (Lively,2020).

6. Importance to Survivors: Survivors meaning the retained employees must be given their due attention during the transition period as well as after the transition. It is important to do so because the retained employees are the ones responsible for shaping the company culture after the downsizing. If ignored, they can become toxic as well as demotivated. Everyone will start searching outside for jobs. The best ones will be the first to leave as well and the organization will be faced with the trauma of brain drain.

COMMUNICATIONS STRATEGY There can never be enough communication about downsizing, meaning communication is critical to downsizing. Employees must be communicated at each and every step in such a manner that it is neither too open (telling everything) nor too hidden. Either ways it can be frustrating for the people. Hence, it is critical to have a communication plan that outlines the steps to communication thoroughly for all the stakeholders involved including but not limited to the employees, managers, human resources and the senior management team. A person losing their job is a trauma, in order to best handle it, communication should be given its due importance. Communication for a personal topic like laying off must be done in a manner that conveys to the employees the seriousness of it and the fact that it is not a game for management, they are also equally affected by letting their people go. Hence, it must not only be done through emails, memos or letters, the communication must also be done face to face and two way to take into account the employees’ perspective as well.

According to Beaty (2011), there are several strategies to go about it such as: 

Small Group meetings

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Briefing by managers

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One on one discussions

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Video conferencing etc.

In the current environment with everything closed face to face physical meetings are not an option for many organizations, however, close meetings are still possible through many video chat platforms. The communication plan should include the following to ensure it runs smoothly: Employee First: This means telling the employees before the media. If the employees hear the news through someone else first, then it can create panic and disruption. Communicate the Reasons: Communicate the reasons for downsizing, it will make it easier for the employees to accept the decision if they understand the rationale behind it. Provide Timelines if Possible: Tell the employees about the company future plans and give them timelines if possible, to prepare them. Train to Deliver: This entails training of supervisors of employees who are to be laid off to deliver the news. The manager must be trained on what to say and how to provide support. Their manner must be empathetic. Empower Employees: Empower employees by taking into account their suggestions on how to maximize savings and minimize downsizing. This could be done through two-way communication and by setting up teams including employees of all levels to input their ideas. It

would empower them in a situation such as downsizing where the employees feel helpless (Beaty, 2011). Manage Survivors: The communication plan for the survivors must be laid out carefully to ensure their motivation levels remain up and they don’t go out looking for jobs. This can be done by assuring them of their continuous employment, make career counselling available to them, provide them employee assistance programs if needed and lastly hold group meetings between senior management and remaining employees once the layoffs are announced (Beaty, 2011).

As per CMBell (2018) “During difficult times in a company, it’s easy to want to take a low profile as a leader. But these are exactly the times when presence and communication is most important.”

CONCLUSION 2020 has been the one of the worst years in the history of Canada’s economy. “Around 2 million people lost their jobs in Canada in May 2020 with unemployment rate going up to 13% from 7.8%” (Lundy, 2020). Many studies have been conducted studying the effects of downsizing on a company. Downsizing can really hurt a company and its brand image as well as most importantly its employees’ morale. Cascio emphasizes the downside of downsizing by saying “Studies have tracked the performance of downsizing firms versus non downsizing firms for as long as nine years after a downsizing event. The findings: As a group, the downsizers never outperform the non downsizers.” I personally believe downsizing should be the last option for any company looking to cut back costs, there are so many alternatives available for cutting costs which must be taken into account before a company decides to downsize like hiring freeze, reduced hours, lowering wages etc. Sucher & Gupta (2018) state “While companies tend to prioritize short-term financial results over the long-term well-being of their employees, employees are the lifeblood that enables a company to keep delivering the products and services that ultimately generate shareholder benefits.” However, if a company does decide to go about it then it should follow the steps outlined above and always take into consideration its employees and paying them their due respect, being compassionate and communicate effectively.

Works Cited Cascio, Wayne F. (2009). Employment Downsizing and its Alternatives: SHRM. Retrieved from https://www.shrm.org/hr-today/trends-and-forecasting/special-reports-and-expertviews/Documents/Employment-Downsizing.pdf. C.M. BELL. “14 Tips on Communicating with Employees During Layoffs, Mergers, or Other Times of Change.” C.M.BELL, 11 January 2018, https://www.cmbell.com/blog/2018/1/11/14-tips-on-using-internal-communication-topreserve-employee-engagement-during-layoffs-or-other-hard-times. Accessed 23rd July 2020. Doyle, Alison. “What is Downsizing? Definition & Examples of Downsizing”. 22 July 2020, https://www.thebalancecareers.com/what-happens-when-a-company-downsizes2061972#:~:text=Downsizing%20is%20when%20companies%20terminate,reduction %20in%20force%2C%20making%20redundant. Accessed 23rd July 2020. Ferreira, Jennifer. “What a post-COVID-19 workplace could look like”. Ctvnews.ca ,07 May 2020, https://www.ctvnews.ca/health/coronavirus/what-a-post-covid-19-workplace-couldlook-like-1.4928118. Accessed 20th July 2020. Gandolfi, Franco. “Hr Strategies That Can Take the Sting Out Of Downsizing-Related Layoffs”. July/August 2008, https://iveybusinessjournal.com/publication/hr-strategies-that-cantake-the-sting-out-of-downsizing-related-layoffs/. Accessed 23rd July 2020. Lively, Richard. “Downsizing: What Critical Steps Do You Need to Take?”. 03 June 2020, https://rairesources.com/4-critical-steps-when-downsizing/. Accessed 23rd July 2020.

Lundy, Matt. “Two million Canadian jobs lost in April as unemployment rate reaches 13 per cent”, theglobeandmail.com, 08 May 2020, https://www.theglobeandmail.com/business/article-two-million-canadian-jobs-lost-inapril-as-unemployment-rate-reaches/. Accessed 23rd July 2020. McDonald, Samantha. “Retail Store Closures: All the Companies That Are Downsizing in 2020”. Footwearnews.com, 26 June 2020, https://www.yahoo.com/lifestyle/retail-store-closurescompanies-downsizing-184630504.html . Accessed 20th July 2020. Sucher, S.J. & Gupta, S. “Layoffs That Don’t Break Your Company”. HBR.org, May–June 2018, https://hbr.org/2018/05/layoffs-that-dont-break-your-company. Accessed 22nd July 2020....