The case examines the increasing trend of employee downsizing across the world in the 1990s and early 21st century. The case discusses in detail the downsizing concept and explores its positive and negative impact on the organization as well as the employees. The case also examines the ‘best practices’ regarding downsizing prevalent in the world and the steps downsized employees need to take in the future. It also discusses the growing trend of organizations adopting concepts such as flexible working arrangements and contingent employment, in the early 21st century, to facilitate easy downsizing, when required.
Job markets across the world looked very gloomy in the early 21st century, with many companies having downsized a considerable part of their employee base and many more revealing plans to do so in the near future. Companies on the Forbes 500 and Forbes International 800 lists had laid off over 460,000 employees altogether, during early 2001 itself.
This trend created havoc in the lives of millions of employees across the world. Many people lost their jobs at a very short or no advance notice, and many others lived in a state of uncertainty regarding their jobs. Companies claimed that worldwide economic slowdown during the late 1990s had forced them to downsize, cut costs, optimize resources and survive the slump. Though the concept of downsizing had existed for a long time, its use had increased only recently, since the late 1990s. (Refer Table I).
Analysts commented that downsizing did more damage than good to the companies as it resulted in low morale of retained employees, loss of employee loyalty and loss of expertise as key personnel/experts left to find more secure jobs. Moreover, the uncertain job environment created by downsizing negatively affected the quality of the work produced. Analysts also felt that most companies adopted downsizing just as a `me-too' strategy even when it was not required. |
