Contemporary Issues in Human Resource Management
Case Study 5 Downsizing and Restructuring
A nonprofit organization of 2,000 people has experienced a decline of demand in their second division and an increase in their third division. The personnel in the second division cannot perform all the duties of the third division, however, the third division can perform all the duties of the second division. Therefore, this company has to figure out what to do with the increase demand of the third division and the decrease in the second division.
This company is wanting to be proactive in their structuring by downsizing one division and reactively restructuring in the other division. Downsizing happens when the company experiencing a decrease of demand and income, therefore the company has to come up with a solution to the loss of volume in production and income. However, rightsizing is the strategy of having the right amount of people with the right amount of skill in their position (Vollmann, T., Brazas, M., 1993).
The solution to this problem is to eliminate the unnecessary position in the second division. This will allow to cut unnecessary over head in the second division. However, there is still a need to increase the personnel of the third division. Thus, the company can move the personnel that they cut form the second division in to the third decision. These personnel will need to be trained in the third division because they will not be qualified to do everything in the third division. This will cause an increase of cost by training these individuals, however, this increase of cost will be less than training someone off the streets.
This solution helps reduce the amount of layoffs the company has to deal with. Layoffs can reduce the labor in a company, however, it can cause the company to pay severance packages. Another issue the company may have to deal with when they are laying off personnel is the morale of the individuals who are still...