Organizational Behavior Concerning Change within the Workplace - Term Paper Example

ABC Merchandise, a U.S-based manufacturer of sports products, is facing a pronounced downturn in business. Top management has decided to reduce its workforce. This managerial action is expected to improve the efficiency of the firm and, subsequently, to enhance its competitiveness. Their management is facing the question of how to go about downsizing and which downsizing strategy or strategies to adopt? A downsizing strategy directly, or indirectly, impacts stakeholders such as management and non-management employees, communities, suppliers, and customers.

At issue is whether the savings from employee reductions may, under certain conditions, be more than offset by rising agency costs and other stakeholder costs. Studies conducted by Amundson, Borgen, Jordan, & Erlebach (2004) and Armstrong-Stassen (2004) have highlighted negative effects of firing and layoffs on surviving employees, which include high degrees of stress due to increased workloads and job insecurity, reduction in organizational commitment, and lack of trust in management. Therefore it is important that downsizing process must entail long term thinking and it should b done in the context of coherent plan.

Downsizing: Impact on Stakeholders Not all downsizing outcomes are positive. The evidence continues to prove that downsizing is risky business, often leaving a legacy of inhumane management which targets only symptoms and in the long run destroys the future health of the organization. About half of the organizations never see the benefits expected from downsizing. Long-term decreases in labor costs are achieved by fewer than two-thirds of the organizations that downsize and less than half of the organizations realize any lasting improvements in profitability (Hopkins & Weathington, 2006).

The simple fact is downsizing doesn't guarantee increased profits. Organization begins internal and external actions to reduce costs. If downsizing is selected, four steps follow: (a) planning for downsizing, (b) communication of the workforce reduction, (c) implementation of the reduction, and (d) managing the new workforce (Mondy & Noe, 1993). Each of these steps has associated human resource issues. During the planning stage, rumors and unintended organizational messages are a problem, because the anticipation of reductions interferes with communication.

During the actual reductions, coping with the reduction activity is the chief concern. Finally, when managing the new workforce, survivor issues emerge. All of these lead to reduced organizational effectiveness indicated by increased turnover and decreased productivity (Mondy & Noe, 1993). Companies often manage to eliminate the right numbers of people in the wrong areas or lose some of the best minds, especially if cost cutting is the driving force (Mondy & Noe, 1993). New employees must be recruited and trained, contractors hired, or ex­-employees brought back as contractors.

All of these situations create problems. Unfortunately, the increased costs for training the workforce, working necessary overtime, contributing to retiree health benefits, and making severance payments catch organizations unprepared for the total expense. Prospective employees are likely to avoid a