Downsizing and its Impact on Employees and their Families

Downsizingand its Impact on Employees and their Families

Downsizingand its Impact on Employees and their Families

Businessentities are always examining ways in which they can enhance theirbottom-line, which is profit making. More often than not, companiesachieve this by implementing strategies that would increase theirsales or reduce their costs at any point. This is all about ensuringor safeguarding the efficient operation of business entities in boththe long-term and the short-term. However, a large proportion of thestrategies that allow for the reduction of costs invite immensecontroversy. This is the case for downsizing of employees. Downsizinginvolves the reduction of number and size of workforce in a businessentity through merging some divisions and retrenching ore relievingsome workers of their services. It is noteworthy that this would beaimed at enhancing the efficiency, productivity and profitability ofthe business entity particularly in the long-term. More often thannot, downsizing is based on the acknowledgement of the fact that somedivisions and positions may have duplicated services andresponsibilities resulting in wastage of the limited resourcesavailable for the business entity. It is often the case thatdownsizing often has a positive effect on the business entity’sbottom-line. However, this is not always the case for employees.Indeed, there has been controversy and intense debates regarding theeffects that downsizing would have on employees and their families.Nevertheless,the debate on the impact that downsizing would have on families isinfluenced by evidence that supports the notion that employees andtheir families would be negatively affected, depending on whathappens to them after the business downsized.

Thisdoes not necessarily mean that business entities should not downsizeas they have a duty to the shareholders to increase their profits inboth the long-term and short-term through enhancing their efficiency.However, it is imperative that once they undertake the practice, theyalso offer other services that can assist the employees (both victimsand survivors) to adjust to the change. These can include counselingservices, business advice, career guidance, as well as offers to linkup to other companies or recommend the workers to other companieswhere the workers apply for work.

First,downsizing causes the breakage of the families of those individualsleft in the workplaces, as well as those that have been sacked. Asnoted, the main reason for a large proportion of business entities toundertake downsizing is to eliminate the duplication of roles in theworkforce. More often than not, it would mean that the tasks thatwere accomplished by several people would be done by fewer people.This means that the employees that remain in the workforce are likelyto have an increase in the responsibilities and tasks assigned tothem. Of course, most workers sacrifice the time that they spend withtheir families so as to make ends meet, in which case the pressure tocomplete the tasks and meet deadlines means that there would be lesstime spent with their families. Few families have the capacity tostick together in instances where less time is spent togetheri.Usually, such increased responsibilities put pressure on the familiesand cause them to drift apart in the long-term and even cause thebreakage of families. This is also the same case for the families ofthe individuals who have had their services terminated in thebusiness entity. More often than not, employees recognize that theretrenchment comes with a reduction or even complete elimination oftheir financial resources with the earnings stopping almostimmediatelyii.This gives them an impetus to undertake other jobs even when theyrequire much more hours. Scholars note that in some cases, sackedworkers have to take up two or three jobs so as to cater for thereduction of income and to stay in the same wage bracket. This meansthat a larger proportion of their time is dedicated to work andmaking ends meet than was previously the case, meaning that there isa high likelihood for them to drift apart and, in some cases breakapart or separate.

Perhapssome of the least considered effects or impacts of downsizing onemployees and their families revolve their mental states. In a studypublished at the International Journal of Applied Management andTechnology, Schiro and Backer (2010) sought to examine or determinewhether the victims and survivors of organizational change anddownsizing experience any mental health issues after the occurrenceof the same. They acknowledged that organizational change anddownsizing would cause health-related mental issues. Indeed, theystated that the process of downsizing specifically creates immensestress within the workplace with survivors of the process exhibitingor demonstrating immense anxiety as they try to cope and come toterms with the departure of their colleagues from the workplaceiii.It is often the case that the employees grieve for their colleagueswho have left and demonstrate or experience anxiety and uncertaintyregarding their future in the organization, as they try to determinewho would be the next individual to lose his or her job. Eventually,the employees suffer from depression, which also has a bearing ontheir relationship with all people including their families. Scholarshave acknowledged that more often than not, employees take out theirstress and depression on the vulnerable members within their circles,with their families being the most at risk. The depression oftenresults in withdrawal individuals, causing them to drift apart fromtheir families and resulting in the breakage of families.

Inaddition, downsizing often results in negative financial consequencesfor the employees. More often than not, employees who are sacked inthe course of downsizing have less money as they will not bereceiving a salary any moreiv.This may be a big blow especially in instances where the employeesare the main breadwinners in their families. The loss of theirregular salaries results in the depletion of the savings that theemployees had managed to accumulate and even cause them to take outloans so as to cover their bills. In some cases, they fail or areunable to keep up their rental or even mortgage payments after theylose their jobs, sometimes resulting in the loss of their propertiesdue to foreclosure. Even in instances where the health benefits areextended under COBRA (Consolidated Omnibus Budget Reconciliation Act)this is often a costly option that would eventually run outv.The deficiency of health benefits results in missed check-up andfailure or inability to pick-up their prescriptions, which results indeterioration in the health of the individual. Of course, theirfamilies are affected as there is a high likelihood that they wouldhave to do with fewer luxuries than they had had in the past. In somecases, this could mean having to do without things that may beconsidered as basicsvi.In instances where the individuals do not get jobs that pay as muchas the earlier one, they are forced to move from high-end estates toothers a bit lower in the spectrumvii.This often means that the social ties that they may have build for along time would have to be broken as they seek to create others withindividuals within their economic status. This, with no doubt, putsimmense pressure on them and could make it really easy for them tobreak up as the social support that they had becomes depreciablyreducedviii.On the same note, it means that they are not be able to participateor take part in the same social activities that they were used to inthe past.

Moreover,sacked individuals often find it extremely difficult to reveal theturn of events to their significant others or their families as theyare apprehensive of the effects that such a revelation would have onthe peace in their homes. More often than not, the loss of income asa result of the sacking is bound to have quite a ripple effect on thelivelihood of the family, in which case it is understandable thatthere would be genuine panic on the part of the family members. Thisis the case especially when the sacked individual was the sole ormain breadwinner in the family, as it means that the family wouldhave to do with less at least for some timeix.Instead of revealing the details to their families and causing panic,they choose to hold on to the information hoping that before long,they would get another job and be saved the embarrassment ofdisclosing the terms of their leaving the other business entity.While this seems like a proper or well thought-out strategy, iteventually disintegrates in instances where the things do not workout as the individuals have hoped, in which case they have to comeclean with their families about the developments. Even when the planworks out just fine, the realization that one lied to his or herfamily has the capacity to cause a disintegration of trust in thefamily and, eventually, the breakage of the same. More often thannot, the idea that crops up in the mind of an individual when he orshe realizes that another person has been lying about a particularissue is that the culprit thought that the victim could not betrusted with the truth, which has a bearing on the survival of thefamilies in the long-termx.Of particular note is the fact that this is not limited to caseswhere an individual’s plans fail to work out but in all cases wherethere is acknowledgement of the fact that an individual lied at anytime. Usually, the culprits are men even in the modern times as thepatriarchal societies within which a large number of families arecreated mean that men are expected not to show any weakness and bethe providers. In essence, the loss of jobs and incomes in the caseof males often upsets the balance within families as the women intheir lives filling in the gaps and taking over some responsibilitiesthat were previously meant for menxi.This bursts up the egos of men and cause them to be lessauthoritative in their own homes. Eventually, the downsizing willhave caused breakdown of the families.

Further,it is imperative that one examines the impact that downsizing has onthe reputation of the company or business entity. It is worth notingthat downsizing usually has a negative impact on the reputation ofthe business entity. Corporate reputation comes as an extremelycrucial intangible resource, with volumes of literature demonstratingthat the reputation may be a considerable source of sustainablecompetitive advantage. Corporate reputation underlines the publicevaluation of the fundamental image and identity of an organizationthat makes a positive or favorable position in the long-term. Underconditions of demanding consumers and increased competition,corporate reputation has become a significant source of competitiveadvantage. Consumers usually select to purchase particular goods andservices from an entity based on the image, brand, image and otherintangible characteristics, in which case it is imperative thatcompanies make more investments on the creation of reputations thatwould reflect the enterprise’s business. Scholars have noted thatfavorable reputation results from long-lasting favorable publicperception of the enterprise and may be transformed or converted toadded value and become a valuable asset to the enterprise, whichcannot be copied by competitors. Of course, the increased profitsfrom a company’s reputation have a high likelihood for enhancingthe quality of work environment of the employees in the company, aswell as their remuneration. However, research has shown thatdownsizing has a negative impact on the reputation of a company orbusiness entity. It is noted that individuals usually perceive adownsizing company as one that is unfair to the employees in thelong-term, in which case it fails as far as corporate socialresponsibility is concerned. In fact, downsizing is often viewed byconsumers as an indicator of inability to compete sustainably in theindustry. This is likely to result in a decrease in the appeal of thebusiness entity as worthy investment, which reduces the amount offinancial resources that are available to the company either forcurrent operations or for expansion purposes. This means that therewould be a decrease in the likelihood for the business entity tooffer better salaries or be flexible in its operations, in which casethere is bound to be uncertainty about the jobs of the survivors.This has a negative impact on the health of the workers as a resultof depression and stress, as well as an increased possibility fordeterioration of the relationships with the family members in theshort-term and the long-term.

Ofcourse, it could be acknowledged that there may be some positiveeffects of downsizing on some of the employees and their families.This is the case for both the employees who have been sacked andthose that have remained. First, employees who have been sacked maysee this as an opportunity to reinvent themselves and change thecourse of their careers. In “The Disposable American”, LouisUchitelle underlines the fact that the lay-off business culture maybe creating a society characterized by downwardly mobile and insecureworkers. Some of the employees today expect to undergo the experiencea number of times before they get to the retirement agexii.However, as much as layoffs give rise to a number of physical andmental health consequences, the consequences can be reduced for theindividuals that that take it as an opportunity to re-inventthemselves and see the layoff as a challenge that they can surmountwith time. There have been instances where individuals lose theemployment at one point or another and get into personal business oreven apply and get taken into another company where the conditionsare much more appropriate than would have been the case if they hadremained at the previous place of work. It may be acknowledged thatthey could not have made the move if they had not been challenged todo the same by the sudden and unexpected loss of their jobs asbrought by the change of employment. Eventually, they end up beingthankful that they lost the jobs in the first place as this was thefirst step towards getting to a better place. Indeed, scholars haveacknowledged that a large proportion of individuals that are informal employment often get too comfortable in their currentworkplaces and job stations that they never even make the effort toventure outxiii.In essence, it becomes easy for them to miss out on opportunities intheir lives as they do not want to venture out of their comfortzones. However, the loss of employment and income as a result ofdownsizing leaves them without much of an option in terms of whatthey can do in both the long-term and the short-term, in which casethey end up dedicating themselves and their efforts to the privateventures in the hope that they work out. In this case, given theimmense dedication to their private ventures, they eventually workout especially in the long-term, thereby allowing them to do muchbetter, not only in terms of the earnings but also the career growth.The individuals in such cases have much more control of their timeand schedules, in which case they can dedicate a large proportion ofthe same to their families. This means that the bonds wouldeventually become much strongerxiv.This means that there is a high likelihood for downsizing becoming anopportunity for the reinvigoration of one’s career, as well as thereinvention of one’s commitment to his or her family.

Inaddition, downsizing and the subsequent loss of employment presentsan immense amount of time to the employee. In a large proportion ofAmericans, setting aside some time for family and friends becomesimmensely difficult when there are numerous commitments, tasks andresponsibilities to accomplish. The monstrosity and multiplicity ofresponsibilities could mean that individuals have less time for theirfamilies, leading to immense tension and breakage of families in thelong-termxv.However, the loss of employment that comes with downsizing presents aopportunity for re-invention and re-invigoration of one’scommitment to family values, in which case the individual would havemuch more time to mend fences with loved ones. This means that theyplace much more value to their families and have the time andcapacity to work towards eliminating any form of tension and thecreation of conducive environments in which their relationships canflourishxvi.They can create much more time for individuals to help out in thefamilies and spend much more time bonding with their children andother family members. This results in stronger and well-foundedfamilies in both the long-term and the short-term.

Onthe same note, downsizing enables individuals to pursue other areasor prospects that they like. In a large number of cases, peopleremain in certain jobs not because they like or are passionate aboutthem but because they are afraid of sticking out their necks beyondthe comfort zones created by the current employment. It goes withoutsaying that such a way of life is pretty much unfulfilling andtastelessxvii.It is much more like living in a place where they do not like andwhich has a negative effect on their health but still sticking to itbecause one does not want or have the capacity to move to anotherplace. Downsizing, in this case, presents an opportunity for movingto areas that are of someone’s liking and for the living of a morefulfilling life as an individual would have wanted. Of particularnote is the fact that being passionate about a certain career isimperative to being successful in the same. This means that thesacked employees have a much better opportunity for succeeding in theother ventures about which they are passionate than in the workplaceswhere they perform tasks as a matter of necessity.

Inaddition, there is a high likelihood that the individuals that areleft in the business entity are handed a much better platter forgrowth and increase in their incomes. This is especially consideringthat the business entity would be earning much more as a result ofthe elimination of unnecessary costs or extra baggagexviii.Indeed, there are many times when individuals earn a bit more whenthey are clear about what they want and are passionate about the jobsthat they doxix.In the case of the individuals that are left in the organization, theincreased tasks and responsibilities means that they would have to becompensated more as that would be an addition to the elements oftheir initial contractsxx.In this case, it is possible that the individuals that are left orsurvivors of downsizing in the business entities have a much betterchance for vouching for increases in their salaries and anenhancement of the conditions of working. Indeed, the main aim ofdownsizing is the elimination of extra baggage and unnecessary coststo allow for enhanced profitability and sustainabilityxxi.In instances where a business entity has higher levels of profits, itstands a much better chance for increasing the salaries and wages ofthe workers and offering other benefits that would have an impact onthe quality of lives of the workers. In essence, the downsizing canhave a positive effect if this is the result. This is also the casefor individuals that own the company or business entity as the higherprofits cause an increase in their disposable incomes in which casethey have much more capability to afford not only the basics but alsoluxuries. This means that downsizing has a positive effect on theirlives as it increases the capacity of workers to afford some luxuriesthat they could not have afforded without the increase in the income.

Asmuch as all this is true, it goes without saying that the effects ofthe downsizing on employees and their families is subject to whathappens after the process has been carried out in the organization.There is always the possibility that it could be the beginning of aset-up that propels the sacked individual to better lifexxii.Of course, it could mean more hours to the family, which enhances thestrength of their bond, or it could mean less of the same as thesacked individual seeks to cover up for the inadequacies and gapsthat come with loss of income. On the same note, the individual couldearn much more in terms of finances if he or she gets employed in abetter place or ventures into private business that pays much morethan he was earning in the previous jobxxiii.However, if this does not turn out well, the individual is likely tobe in a worse financial position, which breeds tension and conflictsin the family as the members are forced to do without a largeproportion of luxuries that they were used to in the pastxxiv.On the same note, there are cases where individuals get the impetusto pursue their interests or things that they are passionate about,something that they could not have done when they were employed as aresult of deficiency of time. These facts underline the notion thatthe impacts or effects that downsizing has on families depends on themanner in which an individual takes or handles it in both theshort-term and the long-term.


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Uchitelle,Louis. 2007.&nbspThedisposable American: layoffs and their consequences.New York: Vintage Books.[34-57]

ZeinabA. Karake, OrganizationalDownsizing, Discrimination, and Corporate Social Responsibility(Westport, Conn: Quorum Books, 1999), [34-56].

Zu,Liangrong. 2009.&nbspCorporatesocial responsibility, corporate restructuring and firm`sperformance: empirical evidence from Chinese enterprises.Berlin: Springer.[55-67]

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i Uchitelle, Louis. 2007.&nbspThe disposable American: layoffs and their consequences. New York: Vintage Books.

ii Cary L. Cooper, Alankrita Pandey, and James C. Quick. Downsizing: Is Less Still More? (New York: Cambridge University Press, 2012), [42-52].

iii Uchitelle, Louis. 2007.&nbspThe disposable American: layoffs and their consequences. New York: Vintage Books.

iv David MacCormick, The Downsized Warrior: America`s Army in Transition (New York, NY: New York: University Press, 1998), [23-37].

v Celly, Nikhil. 2009.&nbspSubsidiary downsizing in large multinational companies. Ottawa: Library and Archives Canada = Bibliothèque et Archives Canada.

vi Charles R. Greer, Strategic Human Resource Management: General Managerial Approach, 2nd ed. New York Pearson Education, 2004), [37-76].

vii De Meuse, Kenneth, and Mitchell Lee Marks. 2002.&nbspResizing the Organization Managing Layoffs, Divestitures, and Closings – Maximizing Gain While Minimizing Pain. San Francisco, CA: Jossey-Bass

viii Uchitelle, Louis. 2007.&nbspThe disposable American: layoffs and their consequences. New York: Vintage Books.

ix Uchitelle, Louis. 2007.&nbspThe disposable American: layoffs and their consequences. New York: Vintage Books.

x Platt, Harlan D. 1998.&nbspPrinciples of corporate renewal. Ann Arbor: University of Michigan Press.

xi Cary L. Cooper, Alankrita Pandey, and James C. Quick. Downsizing: Is Less Still More? (New York: Cambridge University Press, 2012), [42-52].

xii Downs, Alan. 1995.&nbspCorporate executions: the ugly truth about layoffs–how corporate greed is shattering lives, companies, and communities. New York: AMACOM

xiii Celly, Nikhil. 2009.&nbspSubsidiary downsizing in large multinational companies. Ottawa: Library and Archives Canada = Bibliothèque et Archives Canada.

xiv Uchitelle, Louis. 2007.&nbspThe disposable American: layoffs and their consequences. New York: Vintage Books.

xv David MacCormick, The Downsized Warrior: America`s Army in Transition (New York, NY: New York: University Press, 1998), [23-37].

xvi David MacCormick, The Downsized Warrior: America`s Army in Transition (New York, NY: New York: University Press, 1998), [23-37].

xvii Uchitelle, Louis. 2007.&nbspThe disposable American: layoffs and their consequences. New York: Vintage Books.

xviii Ronald J. Burke, and Cary L. Cooper, The Organization in Crisis: Downsizing, Restructuring, and Privatization (Malden, MA: Blackwell Publishers, 2000), [46-63]

xix Ronald J. Burke, and Cary L. Cooper, The Organization in Crisis: Downsizing, Restructuring, and Privatization (Malden, MA: Blackwell Publishers, 2000), [46-63]

xx Zeinab A. Karake, Organizational Downsizing, Discrimination, and Corporate Social Responsibility (Westport, Conn: Quorum Books, 1999), [34-56].

xxi Kanter, Rosabeth Moss, Barry Stein, and Todd Jick. 1992.&nbspThe Challenge of organizational change: how companies experience it and leaders guide it. New York: Free Press.

xxii Platt, Harlan D. 1998.&nbspPrinciples of corporate renewal. Ann Arbor: University of Michigan Press.

xxiii Zu, Liangrong. 2009.&nbspCorporate social responsibility, corporate restructuring and firm`s performance: empirical evidence from Chinese enterprises. Berlin: Springer.

xxiv Ronald J. Burke, and Cary L. Cooper, The Organization in Crisis: Downsizing, Restructuring, and Privatization (Malden, MA: Blackwell Publishers, 2000), [46-63]