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Human resource management is an approach that aims at optimising the performance of the workforce and making the workplace more effective by improving the relationship between the employees and the employers and by improving the overall work conditions. The approach uses a number of concepts, such as training and development, career management, compensation & benefit, performance management, etc. to improve the condition of the employees in companies. Apart from improving the conditions of the workforce, the management of human resources also addresses some important organisational issues, such as retention, employee turnover rates, health and safety, discrimination and diversity, etc. (HRZone, 2013) but one of the biggest issues for any human resource management team is to carry out a downsizing operation.
In Singapore, the government’s “two airline policy” ensured a comfortable agreement between the government owned – Singapore Airlines and its only competitor – Silvertail Airlines till 1990. The companies decided that both of them would accept high fares and would also keep limited schedules. In 1980s, the scenario began to change a little and the companies started coming under pressure after the government started thinking of deregulating the air transport sector. Initially, the change could not cause a major damage and few airline companies that entered the market also failed. After the introduction of low cost careers on a national as well as an international level, the scenario changes completely and the effect on Silvertail Airlines was major and dramatic. With the fall in the share prices of the company the stakeholders responded with anger and the entire Board of Directors was replaced with bright and zesty marketers, advertisers and accountants who were brought in from the United States of America and were supposed to work under an innovative and open minded CEO. With the establishment of a new board, a number of changes were introduced. The company became leaner and meaner while top-heavy management structures were also demolished. During the restructuring of the organisation, a number of managerial positions disappeared while maintenance started to be outsourced and regional branches got closed. Finally, Silvertail Airlines emerged as with a new and polished image in the market and the company started to promote itself as new, young and innovative. The only problem that the management of the company were now facing was that a number of members from the cabin crew and ground crew had declined the management’s redundancy offers, which became a reason for the meeting that was held between Sam Milroy (Recruitment Manager) and Bobbi Stephens (Cabin Crew Director). By the end of the meeting, the two decided that they would rewrite the job descriptions and make the jobs and tasks challenging for the crew so that the older crew members can’t meet the standards, which would make it easier for the management to separate them.
After an extensive conversation, Sam and Bobbi realized that the issue of lack of enthusiasm and initiative in the older crew members was a serious problem and a danger to the image of the company. They decided that if they do not accept the redundancy offers, the only thing that the management can do is to make their work life so difficult that they themselves become restless and leave the jobs. Bobbi suggested that they could reduce the number of perks given to the crew members and to promote younger guys in the organisation as compared to older guys. He also suggested that the management could stipulate the promotion criteria and make it difficult for the older crew members to receive promotions. Finally, the two decided that they would rewrite the job descriptions and position description and make it harder for the employees to complete the internal competency requirements.
The plan prepared by Bobbi and Sam is not a well thought of plan and can have some serious implications from the organisational point of view. First of all, if the management starts to make the lives of its employees difficult, the effect will be on the young as well as on the old employees. They might lose their work life balance and start to experience stress as a result of it, which might lead to a decline in the performance and a high employee turnover rate. Secondly, if the management tries to reduce the perks that it offers to its employees, such as offering them a three star hotel rather than a five star hotel, the change might be heavily resisted by the employees. As the market in the country is growing and becoming more competitive, there will be a constant demand for trained staff. If the employees feel that they are being paid or given perks according to the market standards, they might become dissatisfied with their jobs and even the young employees might switch to other companies. Thirdly, changing the promotion criteria and promoting only the younger employees can disappoint the other employees and they would definitely resist such changes which are not fair and in their interests. Lastly, if the management makes the life of the employees difficult by rewriting the job description and position description, it might end up formulating unpractical or unachievable goals for its employees. Unachievable goals might cause job dissatisfaction amongst the employees and might also foster a wrong behaviour in the minds of the employees, which they might demonstrate to achieve the goals (Harro, 2012).
The plan prepared by Bobbi and Sam to make the work life difficult for the employees will definitely have a negative impact on the job satisfaction of the employees, which would ultimately lead to high employee turnover rates and a spoiled market reputation in terms of human resource management and the way in which the company treats its employees.
Downsizing is the action taken by a company to reduce the number of employees in order to bring down the operational costs or when their services are no longer required (Rouse, 2005). In general, an organisation that decides to remove the redundant employees does so by using four downsizing techniques.
The first technique is attrition. In attrition, the management does not hire a new employee to replace the employee who is leaving the company. It ensures that the employees have the opportunity to decide whether they would leave or stay, which ultimately reduces the chances of conflict between the management and the employees. On the other hand, a negative side of attrition is that the management might experience serious workforce problems because attrition is unplanned and cannot be easily controlled (Whatishumanresource.com, 2015).
The next downsizing technique is voluntary termination. In voluntary terminations, a buy-out offer is extended to the employees, which gives the employees a chance to choose. The conditions or the benefits offered in a buy-out plan are the key factors that can help the employees in dealing with the stigma that is associated with the loss of a job (Moneyforce.org.uk, n.d.). This is one of the best downsizing techniques as it has been used by some of the top multinationals, such as Ford Motor Company and General Motor, to reduce their redundant workforce and have achieved success. General motors were able to slash around $5 billion in costs by offering buy-out cheques ranging from $35,000 to $140,000 to its employees (Cascio, 2004).
The third downsizing technique is early retirement incentives, also known as ERI. In early retirement incentives, a company offers more generous retirement plans to employees who promise to leave the company at a certain time in the future. ERI technique is generally used by companies when they have to buy-out a very large number of employees. Early retirement incentives can also cause a mass exodus but with some retention bonuses and different quit dates, the issue can be addressed. The positive aspect of ERI is that early retirement opens up more opportunities for the younger workers and poor performers easily take ERI as they lack confidence about a hike in their salaries. The negative aspect of ERI is that the number of older workers who would take an ERI cannot be assured.
The fourth downsizing technique is compulsory termination. This is the last and the final technique of downsizing when no other technique works. This strategy is a typical strategy that is used by companies during the closure of a plant or when there is a wholesale elimination of departments or business units. The managers that chose this strategy have an advantage of designing and implementing the decision according to the needs of the business (Moneyforce.org.uk, n.d.). Further, elimination of entire business units reduces the chances of employees filing lawsuits against the company for discrimination (Cascio, 2004).
Downsizing can have some serious consequences for an organisation from a legal point of view while it means loss of job for the employees. Thus, downsizing should be avoided as far as possible and companies should try to resort to alternative solutions to downsizing. Some alternatives to downsizing are discussed below:
Redeployment à redeployment is one of the simplest alternatives to downsizing in which the redundant employees by deploying them in some other parts of the organisation. Redeployment is a strategy that is most extensively used in organisation in order to deal with redundant workforce. To carry out redeployment, an organisation would require a lot of sophisticated career management techniques and personnel to bring out the best results (Workforce Magazine, 2016).
Furloughs and reduced hours to cut costs à furlough, in simple words, is defined as the leave of absence. This particular alternative to downsizing allows business organisations to share the burden of downsizing broadly with the employees and other parts of the organisations. In this technique, the management keeps its talented employees while it furloughs its redundant employees (Workforce Magazine, 2016).
Pay cuts and pay cuts with incentives à pay cuts is another alternative to avoid layoffs and downsizing by reducing the labour costs and still preserving jobs. The problem with pay cuts is that it can lead to a decline in the morale of the employees, which can lead to lower productivity. In some traditional managements, the managers cut off the incentives that are offered to the employees while the base pay remains untouched. In some organisations, the cut offs are implemented according to the job positions in the hierarchy.
Work sharing à work sharing is an alternative to downsizing and layoffs in which a company can reduce the work hours of the employees in order to compensate them for the lost pay. The cuts in pay and reduction in working hours can vary from company to company but the companies following this alternative are required to maintain health and retirement benefits and get the plan approved from related unions before its implementation (Ackoff, 1995).
Shared ownership à shared ownership, also known as employee stock option plan, aims at avoiding downsizing or layoffs by compensating the employees for the cuts in their pays by offering them a small amount of stock of the company or an ownership in the stake of the company (Sozofirm.com, 2016).
A comprehensive model à a number of automobile companies have been using a comprehensive model to avoid layoffs and downsizing in their companies. A comprehensive model contains a series of steps that the management of companies can take to avoid downsizing as much as it can. In the first step, the management can reduce the compensation is reduced by a certain percentage while the remaining compensation is awarded on the basis of performance. The second step is to cut the number of working hours for the employees. The third step is salary cuts and the last step is placement in which the management make arrangements with other employers to hire the workers that would be displaced (Workforce Magazine, 2016).
Alternative placement à alternative placement is one of the best methods so far which can help a company in achieving a win-win situation in severe conditions. In this alternative, business organisations can make arrangements with other companies that are either into the same business line or are closely related to offer placements to the employees who are being planned for separation. A variation of this technique was adopted by AT&T after it announced its intentions of downsizing the workforce. The company ran ads to other companies that a large pool of talented men and women were available for recruitment and got a great response in return (HR Online, 2009).
Silvertail Airlines is going through a crucial phase in its business timeline where the competition is on its rise and the company needs a talented pool of people that can help the company in holding onto its market reputation and a strong image. The plan prepared by the Recruitment manager of the company and the Cabin Crew Director is not a properly planned strategy, which can be seen from the fact that both of them still had a number of questions unanswered in the end of their conversation. Their intention to make the job difficult for the entire workforce would not only dissatisfy the employees from their jobs but would also result in a loss of productivity and a possible rise in the employee turnover rates. Therefore, the company should think of some alternative solutions that would help it to avoid downsizing and also prevent the productivity from falling down.
Training and development à As the human resource management of the company is feeling a lack of enthusiasm and innovation in the older employees, it should first of all try to address the issue by alternative solutions as downsizing should be considered only when the company expects an economic crisis. One of the best ways to address the situation is to design training and development programs for the older crew members so that they learn and develop new skills that would enable them to become as effective as the younger crew members. Training and development programs would also increase the interest of the older employees in their jobs and they might even become enthusiasts once they join back their work (Managementstudyguide.com, n.d.).
Human resource planning à the company might address the issue by resorting to some alternative solutions but the change of tide makes it crucial for the company to start practicing human resource planning. The management of the company should carefully analyse and forecast the human resource needs of the organisation in the coming years and should start to fulfil the human resource demands in the best possible way. If the management feels that it would have to lay off a number of employees in the coming years, it should design buy-out plans or early retirement incentives for the employees right away so that a similar situation can be avoided in the future. Further, continuously analysing the human resource demands of the organisations and finding out the right staffing techniques to fulfil the demands will help the company in keeping the workplace staffed with adequate number of employees. It would also ensure that neither there are excess numbers of employees at any point of time nor there is a shortage of human resource experienced by the organisation (Managementstudyguide.com, n.d.).
Performance management system à in times when the competition is tough and the company wants to outperform its competitors, it is best to have a performance management system in place. A performance management system helps in fostering a workplace environment where the main focus is on performing better and contributing more towards the achievement of organisational goals and objectives. The human resource management of the company should come up with a carefully designed performance management system that would be aimed at analysing the performance of the employees during a specific period of time. The performance results of the employees would make it easier for the organisation to choose an appropriate alternative to downsizing if a similar situation arises in the future and even consider the low performers for a planned seperation. Another thing that the management should keep in its mind is that the goals or the performance standards fixed in the performance management system are practical, achievable and clearly communicated to the employees so that the management gets the result that it wants. If the performance standards are unachievable or not practical, they can cause more harm to a company’s productivity and overall performance that the potential benefits of an efficient performance management system (Managementstudyguide.com, n.d.).
Silvertail Airlines is facing a great change in the industry in which it operates and heavily relies upon its human resources to help it remain competitive. The issue that the company faces is also severe but the plan being prepared by Bobbi and Sam lacks reason and can have some serious consequences for the company in the longer run. As a result, the company should hold regular meetings and should discuss some alternative ways that can be implemented to deal with the problem rather than considering older employees for layoffs or making the jobs and tasks difficult for the entire workforce.
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