Ethics

Corporate organizations have a number of choices to deal with adverse changes in the business operating environment. One of the prominent strategies for them is cutting down its workforce in a process known as downsizing. Although there are legal provisions governing the process, its nature is such that an organization has to set its own standards so that its downsizing is humane, ethical and economical. This paper explores the subject of downsizing and finds ways of making it fair and relevant to all the stakeholders.  Efficacy in Corporate downsizing

    In lean times, companies employ a number of strategies to stay afloat. All the strategies employed are meant to reduce expenses andor increase income. Some of the strategies include phasing out certain divisions or departments, reducing product costs, improving employee productivity and change of strategy. One of the prominent strategies towards this end is downsizing. Companies resort to restructuring as a way of reducing company expenses and may also be part of restructuring the strategy. Of the strategies available to companies in times of reduced business activity, downsizing ranks amongst the controversial ones. Its controversy probably stems from the fact that it is fairly subjective and mainly dependent on unpredictable and sometimes unclear benchmarks. Contrasted with a strategy such as closing down unprofitable divisions, its subjective nature becomes a bit clearer.

    However, even without its subjectivity weaknesses, the strategy remains unattractive because it mostly has to do with stripping someone of  an opportunity to make a living. Hard-line capitalism antagonists cite downsizing as one of the illustrations of the callous nature of capitalism. The postulation is not entirely outlandish. Although it is a viable strategy, downsizing has to be done with caution because the line between commercial viability and exploitation of free market principles becomes blurred if care is not exercised. This paper explores corporate downsizing and the necessary ethics to follow for the process to be acceptable. It first starts by laying down the strategies an organization can employ to avoid downsizing so that it is only done out of absolute necessity.

Strategies for avoiding downsizing
    Organizations should consider a number of options before resorting to downsizing. While this may not be a legal requirement, doing so would be ethical. Operational difficulties that lead to downsizing may be ameliorated if the organization does a serious introspection of its other aspects of operation (Arellano, 2009). This means a company ensuring that resources at its disposal are utilized optimally.  From doing so, it may decide to restructure its operations thereby ridding itself of unnecessary overheads. The company may also institute pay cuts. This will effectively spread the adverse effects of the difficulties over a larger number of people as opposed to layoffs, which only concentrates the effects on fewer individuals.

    Organizations should also plan their operations carefully so that they do not have to face difficulties that necessitate downsizing. Although it is impossible for some of the difficulties to be foreseen, the organization can nevertheless protect itself from some of them. In a nutshell, downsizing should not be a result of poor planning or avoidable circumstances.

Importance of corporate downsizing
    The term is defined by (Tang  Fuller, 1995) as reduction of an organizations workforce so as to cope with reducing reduced profitability, cash flow difficulties, changes in technology, loss of contracts or to cope with increased competition. Some of the approaches used by the companies to downsize include placing a ban on hiring, terminating contracts, transfer of employees and early retirements. There are many other options that can be used but the listed strategies present the most commonly used strategies.

    Traditionally, layoffs have been used strictly as a way of reducing chances of loss making. As (Pferfer, 2010) suggests however, layoffs are acquiring new applications. Indeed, times have changed, and companies may therefore be justified in finding more uses of downsizing. A good example is technology-driven changes. The rate of technological advancement is such that a company must regularly keep adapting to new technology lest it becomes overrun by its competitors on account of using obsolete technology. Yet adapting to the technology does not just mean acquiring new hardware andor software it also means that the companys employees must be able to use the technology. For that reason, companies may at times find it more viable to acquire new employees capable of making use of the new technology.

    Technological changes represent viable reasons for companies finding new applications of downsizing. However, some companies have acquired the notoriety of using layoff to achieve what appears to be greed. Layoffs can only be justified if an organization is facing reduced profitability or other related challenges such that failure to lay off part of its workforce will have a material adverse effect.  According to  (Pferfer, 2010), some companies are consistently trimming the workforce inspite of increasing profitablity. These kind of companies give downsizing a bad name. However, a company such as Southwest airlines did not carry out any layoff in the post 2001 period, yet almost all US airlines had to lay off workers to cope with the effects of the terrorist attacks.

    The fact that the Southwest airline did not lay off brings to the fore two salient points first is that layoffs can be avoided and secondly, it awakens ones curiosity concerning the use of reduced business activity as a justification for layoffs. Prima facie, all airlines appeared to have a justifiable cause for laying off employees, but on a second thought however, one fails to understand how a company such as Southwest survived in the sector without reporting any negative effects courtesy of its failure to lay off. Contrary to the impression that downsizing provides a form of financial relief, some companies find it better to avoid it altogether because they find it more advantageous to retain its workforce (Allan, 1997).

    Granted, the law has stipulations that govern downsizing but lawful does not necessarily mean ethically correct, and it is therefore an organizations responsibilty to ensure that its downsizing fullfills both. Needless to say, it will have to comply with the legal requirements because failure to do so carries specified consequences. However, the ethical requirement may not have any legal implications but may nevertheless have effects on the organizations operations. It is therefore in the interest of the company to ensure that its process has an ethical angle.

Important ethical considerations
    Having recognized downsizings place in business, it is now proper to focus on the ethical considerations an organization must follow so as to successfully downsize. First to note is that downsizing should only be done if it is absolutely unavoidable. As proven by Southwest airlines, companies can navigate turbulent financial times without having to downsize. However, some companies may feel, for one reason or another that it must down size. Such organization must be sure that they have complied with both ethical and legal considerations that includes using downsizing only as last resort.

    Firstly, the company has to ensure that there is a clearly laid down procedure for carrying out the layoff. If the company is doing it for the first time, it is possible that it will not have a blueprint for doing it. In such a case, the company must set out to develop a comprehensive procedure, which may be easily borrowed from the more established organizations. According to  (Moore  Edward, 2009), having clearly laid down procedures gives the employees an assurance that the layoff process is not arbitrary or carried out at the whims of particular persons.

    As noted earlier, one of the weaknesses of downsizing is its apparent subjectivity. Laying down the rules will greatly reduce this element. In addition, without the rules, even those doing the layout may fear becoming future victims of the process. As a result, such managers may resort to getting rid of employees, who show future competitive potential. Related to that as well is that managers may err, not out of a desire to keep out good employees but because human nature means different judgements. For that reason, rules, apart from providing ethical benchmarks, also enable the organization to align the downsizing process to the organizations goals and aspirations.

    Apart from defining the organizations objectives for carrying out the downsizing process, the framework must also define the ethical benchmarks to be observed in the process. It should act as a guide for the personnel responsible for guiding the process. There is a tendency of personnel doing the downsizing to blame themselves for causing loss of someones livelihood  (Moore  Edward, 2009). These may have a definate effect on the productivity and morale of such a person. To reduce the potential effect of such attitudes and mentalities, it is important that the organization lays down its rules and regulations so that the dismissals can be directly attributed to the laid down procedure and not any individual manager.

     Another equally important consideration is to keep members informed on the process (Ache, 2005). This means giving clear, detailed and honest information. An organization must avoid situations whereby employees learn about such plans through office rumour mills or informal groupings. Downsizing is a sensitive matter, and for that reason, all employees must be kept abreast with the happenigs within the organization. It would be unfair for an employee to get to work one morning, only to be told of a dismissal courtesy of downsizing.

    Providing this kind of information in advance will give them a chance to prepare for any eventuality. The assumption here is that downsizing within the organization is culmination of a series of strategic meetings in which all options are discussed so that the organization only choses it as a last resort. There must be an effort to ensure that employees are briefed from the first day the organization starts to consider cost cutting measures or any other strategy that may affect the employees.

This may be done formally or informally. A good way of achieving good information flow is by the company adopting an attitude that views employees as partners rather than mere workers. An organizational culture that looks down upon employees has an overall effect of alienating them when it comes to such matters yet they may have helpful input. An example of such an input would be a workforce that offers to take a wage cut as a way of reducing the companys overheads. Of importance is that at the end of it, the employees should very much feel part of the process and not victims of what they view as an inconsiderate management.

Send off packages should also be considered. A send off package refers to the compensation, financial or otherwise , given to the employee as a result of serverance. The law provides for standards to be followed, but the company should not feel constricted by this. Send off packages may not be the panacea for all the negative impacts of downsizing, but it may provide limited reprieve for the employees. In fact,  (Greer, 2005) reports about a study done on employees complaining about unfair dismissals during layoffs. According the study, the employees who felt unfairly dismissed did not change this view even after a generous package was given by the organization. Although this re-emphasizes the importance of ensuring fairness in the dismissal process, it does not negate the importance of having a good send off package in place.

An organization should strive to define its own benchmarks on the send off package it should only use the legal requirements as the bare minimums. The packages should be a product of thorough research because  the company should consider the possiblity that the employees may not be able to secure employment after their dismissals. Send off packages vary greatly. Some organizations only offer monetary rewards, which are mostly dictated by the law, while others will offer a variety of benefits ranging from entreprenural training to counselling services to ensure that one copes with the effects of a job loss. All a company needs to consider is that the package should be reasonable, fair and affordable.

The issues addressed so far have mainly focused on the dismissed employees. One may be tempted to believe that downsizing only has an effect on the dismissed employees. Dismissed employees tend to be more affected, but equally distressed are the remaining ones. Most of the issues faced by the remaining employees relate to job insecurities and new job demands (Appelbaum, 1993). They are equally apprehensive about their place in the newly structured organization. This may stem from the fact that the employees may have to find new ways of fitting in to the system after the workforce has been restructured to take cognizance of the downsizing. It may then lead the employees harboring fears of becoming irreleavant to the organization.

The organization must find ways of dealing with such sentiments so that employees are aware of the fact that downsizing has clear objectives and is carried out as per a stipulated policy within the organization. The downsizing should be accompanied by safe landing strategies that will enable the remaining employees find their footing in the new structure. Without such a strategy, the employees may remain unsettled in the anxious and disconcerted to the extent of having their productivity reduced.

    While it has so far been determined that downsizing may be unavoidable, an organization must ensure that it does not misuse it. The papers findings are twofold one is that downsizing can be avoided, and secondly, an organization has the responsibility to ensure that its downsizing action is in line with certain ethical considerations. A company cannot solely rely on government guidelines in coming up with a downsizing strategy. If not properly carried out, a downsizing process can end up being more costly than its benefits. Costs associated with a poorly executed downsizing strategy may range from litigation from unfairly dismissed employees, reduced productivity due to unsettled attitude towards work and attendant costs that come with hiring new workers to replace the dismissed ones.

The last risk can largely be attributed to unplanned downsizing that may lead to employees occupying important positions being dismissed, something that will necessitate the company to later on get replacements for the positions. New employees will mean new training and induction, which will lead to extra costs being incurred. More important as well is the increasing realization that downsizing may not solve all the financial problems faced by the company. Any company intending to downsize must first consider the downsizing avoidance strategies before forging ahead with it.