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TABLE OF CONTENTS
Executive Summary.2 Introduction.3 Role of HR in the context of downsizing....4 Right sizing, downsizing and dumb sizing..5 Conclusion...7 References9

Executive Summary Organizations like people change their shape from time to time. At one time, they are pressured to grow in terms of size and scope and at the other; they are forced to shrink back or contract. Todays external environment has become quite familiar with this shrinkage cycle of organizations. In fact, this trend has become so common that it has been given a technical or business name i.e. downsizing. This term has become so widespread by the industry giants that it has been featured in the famous magazines namely Time, Newsweek, Harpers, Working Mother etc. In simple terms, downsizing refers to the voluntarily actions of the organization to reduce the overall expenses which is done by shrinking the size of the workforce. However, there are a range of activities that come under this process namely personnel layoffs, hiring freezes, consolidation or mergers of business units. Research has shown that downsizing has more negative results due to different kinds of organizations and different types of employees. The negative outcomes include increased

centralization of decision making, short term crisis mentality, lack of innovation, decrease in employee morale and commitment towards work, increased resistance to change etc. Despite this record, downsizing is still a popular strategy for organizations facing sky-high costs, bloated employee ranks and declining efficiency. It is generally viewed as no other choice option available to survive in the market. This paper examines the underlying concept of downsizing along with the role of Human Resource in this regard. It further differentiates the terms rightsizing, downsizing and dumb sizing with the help of a practical scenario.

Introduction: In a business enterprise, downsizing refers to the process of reducing usually dramatically the number of employees to minimize the overall size and operating costs of the company. It is extremely common when the market is tight as companies strive to survive in a hostile and competitive environment. From the employees point of view, it can be seen as a very upsetting and unnerving activity. There are many reasons due to which downsizing can be done. For instance, the primary reason can be to operate the business in a more effective and efficient manner. A company may replace the assembly line workers with machines to save time and increase accuracy. Moreover, it increases the profit by decreasing the overall overhead of the business operations. An organization might decide to shutdown an entire department or division. In some cases, the number of employees is more than enough or the company is facing some serious financial issues or it is running more smoothly than before. Offices which are loaded with redundant departments consider downsizing as the process of trimming the fat. There are several terms that accompany downsizing. An employee can be terminated, fired, laid off, released or made redundant. Similarly, a business can be optimized, right sized, dumb sized etc. All these terms have different meanings depending on where one is in the world. A layoff is different from downsizing because it is intended to be a temporary downscaling in which the employees will be brought back once the company comes back on the track. Whereas, a redundant employee is one who is asked to leave the organization permanently. Rightsizing is downsizing with belief that the company should operate with fewer people. While dumb sizing occurs when downsizing in retrospect is failed to achieve the desired effect or outcome. This process is very stressful for employees as they become uncertain about whether they will be employed again or not. At times, downsizing is very abrupt when a large number of employees are released from the job on the same day. But in most of the cases, it is a nerve-wracking process in which employees are released slowly and gradually. An organization is usually engaged in downsizing in response to poor or declining economy.

Role of HR in the context of downsizing: The world of human resource is rapidly changing in the past few years and has been connected with helping the businesses achieve costs reductions and efficiency through downsizing and changes in the structure of the jobs such as decentralization, devolution etc. The HR intervention in the process of downsizing is obvious as most of the challenges of downsizing are related to people in the organization. Its role has been wide ranging which covers the strategic as well implementation aspects. According to a research on several thousand organizations about twothird of the downsizing activities were failed due to the wrong practices of the HR professionals. In some cases the expectations were violated, commitments were not kept. On the other hand, in few cases secrecy and politics predominated, human dignity was bruised and long term scarring became a part of the organization. This implies that the alignment between the two aspects is necessary to envisage the benefits of downsizing. The wrong choice regarding when to downsize the business mostly occurs due to the lack of consideration of the HR department as a full business partner of the organization. This results in no involvement of the HR professionals at the early stage of downsizing. It means that the earlier the HR department is involved in the downsizing process, the more chances of successful downsizing are present. Downsizing is a very emotional, chaotic and uncertain experience which should be handled by the HR experts who possess the skills and knowledge to deal with such situations such as workforce planning, training and skills assessment, communication etc. y Workforce Planning:

It is the duty of the HR specialists to position themselves as workforce strategist to deal with the ongoing downsizing or upsizing activities expected to occur in the future. For instance, at GE everybody knows that if a business unit is not No.1 or No.2 in its respective area, then it would be subjected to downsizing, outsourcing or shutdown. At this point, HR people partner with the managers to plan workforce sizing. A highly structured system is used by GE to evaluate the performance and rank the employees accordingly. Employees are ranged in percentile or bellshaped curve. At the time of downsizing, workers are informed to leave the position.

Training and skills assessment:

Another effective way for HR managers to thrust themselves into the planning of downsizing effort is retraining and outplacement assistance programs. A skills-training program provides an opportunity to downsize the workers within an organization. This re-assessment of skills helps in the retention of motivated employees in the tight market. With the support of the management, HR department assists managers in redesigning the flow of work in different departments and assess the skills required to get the job done after the process of downsizing. y Communication:

Proper communication is very important at every stage of downsizing. All such signs which management tries to hide from the employees are closely examined. If the management is open, honest and generous, layoffs are resent by the workers. However, poor communication can lead to misunderstanding among the employees and the public at large. This results in the speculation of the managements intentions and knowledge of the organization by the employees. Right sizing, downsizing and dumb sizing: As noted above, downsizing is simply the reduction in the number of employees to produce a better line of communication and make the business more efficient. It is a stressful and risky business and should be in the hands of the best consultants. Example: Downsizing can be better understood with the help of a practical example. In this figure, the sales and services division of a financial services company before downsizing has been shown.

This structure always served the company well but due to the new competitor in the market, the company had to go through downsizing. This new figure shows four levels as oppose to nine levels in the previous chart with greater spans of control. In this new structure, about 53 teams are reporting to the sales and services director with the productivity of up to 25% in first year.

Right sizing is less risky in which the reduction of employees takes place by a small percentage. It trims the organization in a better condition and can be achieved by the following painless means:  Releasing poor performers  Releasing the long term sick allowing early retirement  Freezing recruitment Example: The CEO of a Pharmaceutical Company started right sizing by a very crude but simple means. He observed that all the departmental heads not only started coming late but also left earlier. The deduction of the employees started only by observing the number of cars in the parking area which had a perfect view from his office. Although, the exact productivity record was not available it significantly improved the performance of the employees.

Dumb sizing refers to unreasonable downsizing which cripples the organizational success by the loss of critical knowledge and skills. This means that when downsizing fails to rebound the earnings and erodes the ability of the company to compete further, then such a situation can be termed as dumb sizing. According to the economic consultant, A. Gary Shilling, most of the organizations fire the workers just because of the tremendous peer pressure to get rid of the workers which have a painful and profound effect on the economy. Example: In the early 1990s, IBM and Sears were not able to respond adroitly to the changing markets and decimated their workforce by cutting the heart of the organization i.e. the valuable employees. The overstaffed work force was blamed to bring the profits down. However, the lack of focus was the main reason of the decline. Conclusion: It can be concluded that organizations should identify and focus on the real ways to increase performance and creativity rather than going through the downsizing process. Only this can truly recover the company from any serious crisis and can help discover new ways of doing business. Success is the best way to avoid it and the human resource department should be honest with the employees to understand the realities of the competitive workplace. The preferred role of the HR managers should be to orient and coach the CEO and higher management to adopt such perspectives to make the process a success. It should be viewed as long term strategy with a way of life rather than a single program. The employees should be involved to identify the changes required after downsizing. This will help in the proper implementation of the changes rather than a forced downsizing activity from top-down. The HR professionals should be visible, accessible and interact freely with the people who are affected by downsizing instead of succumbing to the temptation. The purpose of downsizing should be fully informed to the members of the organization. Moreover, organizations should prepare for the downsizing process before it is mandated or crucial for survival instead of using the ready-fire- aim approach. All the processes of the organization should be analyzed to eliminate inefficiencies and non-value added steps and resources. All the skills, experience and relevant attributes should be measured and assessed

before taking any decision related to downsizing or restructuring. Hence, the change in focus is essential, without which all the practices are ineffective and are actual barriers in the progress of the organizations.

References: Bumstead, you're downsized! (1994, April), Time, 143(16), p. 22. Champy, J. S.,1995. Reengineering management: The mandate for new leadership. New York, NY: Harper Business. Huselid, M. A. (In press.). The impact of human resource management practices on turnover, productivity, and cooperate financial performance. Academy of Management Journal. Miller, T., 2010. Down Sizing v Right sizing. Tony-miller.com Available at: http://www.tonymiller.com/right-sizing.asp [Accessed 21 June, 2011] Sherry Kuczynski, 2004. "Help! I shrunk the company! - role of human resources in downsizing Cover Story". HR Magazine. FindArticles.com. Available at:

http://findarticles.com/p/articles/mi_m3495/is_6_44/ai_54994203/ [Accessed 21 June, 2011] U. S. Department of Labour. 1993. High performance work practices and firm performance. Washington, D. C.: Author. WiseGeek, 2010. What is Downsizing? wisegeek.com Available at:

http://www.wisegeek.com/what-is-downsizing.htm [Accessed 21 June, 2011]