Nowadays, organizations are faced with a wide range of issues. These issues reflect the economic, social and environmental impact of the organization. Materiality entails identifying human rights issues that are of significant to the company and its industry.
Within business policies and strategies, change has become a core aspect of survival game in modern business world. This has been enhanced by globalization, technological advancement, changing demographics, and rapidly changing customers and workers expectations. The larger the external forces for adaptation, the higher the competition, and the bigger the internal demands for transformation. Change is even forced by a lower growth or falling market share although the profits could be rising. Strategic change does not always result in positive outcomes. Under incredible pressure to enhance financial Performance – which could be as a result of fall in the price of stocks – the management may hastily arrive at ill-conceived individualized transformation. One of the ways firms survive hard times is through downsizing. Within the international arena, the resolution to downsize has been due to a variety of factors and especially budgetary constraints. Downsizing is loosely defined as careful reduction of and organization’s employees with the aim of increasing profit.
Downsizing was initially used by sickly corporations as a way of reducing the number of employees in times of weak demand. However, other firms whose intentions was to raise shareholder value integrated this strategy. Downsizing is an organization’s application of permanent employee reduction as a means of enhancing efficiency and effectiveness. Lurie goes ahead to describe downsizing as a thoughtful elimination of employment. Applebaum explains that downsizing is a plan made by businesses to enhance its financial position through reduction restructuring with the objective of enhancing operational results. Downsizing has gained popularity as a way of demonstrating flexibility, reducing bureaucratic structures, raising efficiency as concerns decision-making, enhancing communication and promoting a culture of entrepreneurship. A review of organizational transformation shows that the significance of managing change rose in the late eighties and in early 1990s. Academicians argue that there has been an alteration in the corporate model inclined towards more effective means of organizing and controlling people from the contemporary command and control method. This traditional method of command and control concentrated on organizational culture as a model mechanism. Among the best outcomes of this strategy is the notion that a strategic change should be achieved in sync with change in the values and belief of the work force. This is to mean that a strategy on its own may not result in success unless the work force had a trust and was committed to seeing the strategy attain success. On the basis of Lewin’s force-field examination of the substantive theory of rationality, agents of change are reprimanded to recognize and eliminate any obstacles of change so that organizational change could have a better chance of surviving. According to Jick, these barriers to success could be employees themselves or old managers.
Forces prompting changes can be categorized as either external or internal. The external environment as a cause of change is widely covered in academic terms. Porter’s five force model explains how the extent of rivalry, caused by four external pressures may lead to a change in an industry and therefore an individual company. Sources of internal forces could be the company’s stakeholders, for example, managers and the employees. The stage of the company’s development is another determining factor. This is often referred to as lifecycle stages or levels of maturity. These two categories of forces lead a business entity towards the bottom line in organizational life and financial outcomes. Downsizing was identified as a prevalent strategy in the end of the last century and in the beginning of this century.
This forms one of the many types of retrenchment in addition to divestment, harvesting and so on. It is important to keep in mind that downsizing has never been popular with employees; neither those retrenched nor those remaining in the company. In downsizing, concentration is always on the employees but not on the disposal of useless assets. Top managers as strategic planners have been censured as trend followers. It is argued that if a given manager comes up with a bestselling idea, many other company executives will rush to implement the new idea without caring whether it is logically thought or not. Cascio has criticized downsizing as a strategic response to harsh conditions. He claims that many top executives are trend followers and downsizing should not be employed to solve all challenges. Cascio refers to such a culture as organizational mimicry. Such a strategy is marred by absence of diagnosis and rapid assumption of solutions in pursuit of problems. The result is that mimicking firms embrace plans that do not suit their challenges and in a way fails to encourage commitment to change by agents of change. This explains the reason a recent study by Trevor and Nyberg revealed that even the diffident downsizing may lead to a departure of valuable employees as depicted by the high turnover rate relative to firms that do not engage in downsizing.