The Impact of Downsizing on Organizational Competitiveness & Innovativeness - Assignment Example

The impact of downsizing on organizational competitiveness& innovativeness Introduction Around the world it can be observed that the rate at which change is taking place in organizations has accelerated immensely and competition among many businesses and firms is intensifying with major pressures. The massive increase in competition has caused organization to re-evaluate their business strategies (Band and Tustin 1995). Organizations need to develop a high value competitive edge to succeed in the business market and for that they need to have a certain amount of flexibility towards competition (Bahrami 1992). Competition is taking place at an immense pace everywhere and organizations constantly need to develop new strategies so that they don’t remain left out in the competition. Such strategies will become their key success factors in the future. The competition is forcing organizations to change their forms and the fundamental practices of management which they follow (Bresnen and Fowler 1994). The competitive advantage durability depends on the value of the human resources working in the organization and the intellectual capital they imply to perform their work (Wilkinson 2005, Guthrie and Datta 2008). To have a strong competitive edge in the business market is extremely vital for the firm to succeed otherwise survival of organizations starts to become quite difficult with such extreme competition taking place vigorously. The impact of downsizing is playing a major role in causing a shift in the social, economic, and the competitive organizational structures (McKinley, Sanchez, and Schick 1995). It can be observed that downsizing can strongly impact the competitiveness of organizations. At times downsizing may cause the business to lose their valuable employees and during the downsizing phase many of the employees that are being retained may become troubled over their sense of job security which in turn may affect their performance greatly. Rationale The main purpose of this research is to find out the impact of downsizing; in what ways are the strategies for competitiveness and innovation of an organization affected whence it decides to downsize. This will be achieved through investigating firms that have conducted downsizing. A deeper look will be taken at the aftermaths of downsizing which was faced by these organizations. Research Objectives 1. To find out the consequences that organizations face due to downsizing, the short and long term impacts of downsizing on the organization. 2. To find out whether innovative practices of organizations are successful when firms opt for the downsizing process; a basic question is how the innovation model of any firm changes due to downsizing. 3. To find out the effects of downsizing on the organizational competitiveness of firms, and how ‘competitive edge’ can be maintained when the downsizing takes place? 4. To find out whether downsizing reduces the costs incurred by the organizations or does it prove to have the opposite effect on the firm. Literature Review Organizational changes are constantly taking place and these changes have an immense impact on the organizational structure; organizational downsizing is being observed globally and has had a great impact on organizational dynamics (Pottruck 1998). Organizations have started developing the notion that if they downsize their organization, their costs will be immensely reduced but what they don’t realize is that at times downsizing may majorly affect the core activities of the organization and this may in turn affect the competitive edge that the firm possesses in the market. Several scholars have suggested that the innovation activities of organizations can be deeply affected because of downsizing, flatter organizations may not necessary be the right decision at all times (Baumol et al., 2003). Boone (2000) observes in his studies that on a general note downsizing is not fruitful for the organization, but at times downsizing operations have proven successful for the firm. Innovation in organizations needs to be done tactfully and with full support from the employees working for that organization. The intensity of downsizing impacts the remaining employees and their motivation towards job security may be affected as they would pay more attention towards how they are treated and less attention towards their work (Chadwick et al 2004). The results of determining the link between organizational downsizing and organizational innovativeness has been carried out by many researchers and this study will incorporate all those observations, most argue against the idea of downsizing because of its adverse effects on the firm, rather than in favor of it(Boomer and Jalajas 1999; Amabile and Conti 1995; 1999; Doughetry and Bowman 1995; Brockner et al. 1987; Mellahi and Wilkinson 2009). The firm’s main motivation and focus while downsizing is to reduce its workforce operations and this affects the firm’s core activities (Zyglidopoulos 2005). If downsizing is done to focus on major activities then with these managerial levels tends to reduce also for the firm (Luthans and Sommer, 1999). Chalos and Chen (2002) reported that firm’sprofitability and competitiveness gets affected with the downsizing process that it implements. Research Methodology The main aim of this research is to find out the impact of downsizing on organizations and how it affects their competitiveness and innovation procedures. This research is primarily inclined towards basic research. Basic research focuses more towards the knowledge expansion process of the management practices being carried out in the business and finds out its value to the society (Thornhill et al 2007). Two different types of data collection techniques exist and they are the qualitative and quantitative data collection techniques (Thornhill et al 2007). The research is basically qualitative in nature. Primary Data The primary data will be collected through interviews and questionnaires. Interviews and questionnaires will be carried out with the management levels of the various organizations that have undergone downsizing. Interviews may take one of the three forms; structured, semi-structured or unstructured. For this research semi-structured interviews will be used as an in depth study is required to carry out the research so flexibility in interviews is a necessity (Thornhill et al 2007). Secondary Data Secondary data is employed in order to support primary data, as not all required information would be easily available through primary research methods (Sekaran 2000). During research, secondary data are used for relevancy and reliability of the topic (Thornhill et al 2007).The secondary data will be collected through business journals, articles, business reviews etc. References Amabile TM, Conti R. 1995. What downsizing does to creativity? Issues and Observations, 15: 1-6. Amabile TM, Conti R. 1999. Changes in the work environment for creativity during downsizing. Academy of Management Journal, 42(6): 630-640. Bahrami, H. (1992). The Emerging Flexible Organization: Perspectives from Silicon Valley. California Management Review, pp 33-52. Band, D. and Tustin, C. (1995). Strategic Downsizing. Management Decision 33 (8): pp 36-45. Baumol WJ, Blinder AS, Wolff EN. 2003. Downsizing in America: Reality, Causes and Consequences. Russell Sage Foundation: New York. Bommer M, Jalajas DS. 1999. The threat of organizational downsizing on the innovation propensity of R&D professionals. R&D Management, 29: 27-34 Boone J. 2000. Technological Progress, Downsizing and Unemployment. The Economic Journal, 110(465): 581-600. Bresnen, M. and Fowler, C. (1994). The Organizational Correlates and Consequences of Subcontracting: Evidence from a Survey of South Wales Business. Journal of Management Studies, pp 847-864. Brockner J, Grover S, Reed T, DeWitt R, O'Malley M. 1987. Survivors' Reactions to Layoffs: We Get By With a Little Help From Our Friends. Administrative Science Quarterly, 32: 526-542; Chadwick C, Hunter LW, Walston SL. 2004. Effects of downsizing practices on the performance of hospitals. Strategic Management Journal, 25(5): 405-427. Chalos PC, Chen CJP. 2002. Employee Downsizing Strategies: Market Reaction and Post Announcement Financial Performance. Journal of Business Finance & Accounting, 29 (5&6): 847-870. Dougherty D, Bowman E. 1995. The effects of organizational downsizing on product innovation. California Management Review, 37: 28-44. Luthans BC, Sommer SM. 1999. The impact of downsizing on workplace attitudes. Group and Organization Management, 24(1): 46-70. McKinley, W., Sanchez, C., and Schick, A. (1995). Organizational Downsizing: Constraining, Cloning, Learning. Academy of Management Executive (August): pp 32-44. Mellahi K and Wilkinson A 2009 A study of the association between downsizing and innovation determinants, International Journal of Innovation Management, 12(4): 677-698 Pottruck, D. (1998). Avoiding Downsizing. 15 (2): pp 17-18. Sekaran, U. (2000). Research Methods for Business, A Skill – Building Approach’. Third Edition, John Wiley & Sons, USA. Thornhill, A., Lewis, P. & Saunders M. (2007). Research Methods for Business Students. Fourth Edition, Person Education Limited, England. Wilkinson, A. 2005. Downsizing, Rightsizing or Dumbsizing? Human Resources, Quality and Sustainability, Total Quality Management, Vol. 16, No. 8/9, 2005, pp. 1079-1088. Zyglidopoulos SC. 2005. The Impact of Downsizing on Corporate Reputation. British Journal of Management, 16 (3), 253-259. Read More