Challenges Associated with Downsizing and Outsourcing - Coursework Example

Downsizing and Outsourcing Name Course Instructor’s Name 11th May 2010 Summary In the reconstruction of an organization some employees’ contracts are always cut off due to the reduction of work force. It’s mainly caused by an increase in the production of goods and services or a decline need of the goods or services, economy and revenue. Factors to consider while downsizing includes fairness; should consider the well being of individuals, transparency; the organization should communicate to the workers in advance, and agenda; the main reason for termination of contracts should be well laid down. Challenges associated with downsizing includes it affects the employers and also affects the down sizing survivors. Outsourcing is the act of transferring some work to other companies whose offer is cheaper, although faced by some challenges. Necessity before outsourcing should be an understanding between the two parties on the issue of contracts so as to avoid inconveniences. Some challenges associated with outsourcing include reliable outsourcing partner, offshore site, lack of enough knowledge from the partner, insecurity of the outcome, language barrier, time factor and law restrictions. Recommendation on outsourcing and downsizing include organizations objectives should be clearly explained, should know more about the company providing the service, and the organization should be convinced that the results would be excellent. In conclusion, it is very important for every organization to know that there are some serious challenges linked with downsizing and outsourcing although the working patterns of the organizations seem to be improving and the results appear to be encouraging thus increasing productivity. On the other hand outsourcing and downsizing requires the organizations personnel’s to be psychologically prepared for any negative results from the contract partners, the workers too needs to be well equipped with knowledge and skills incase of any arising issues Table of Contents Table of Contents 3 Introduction 4 Downsizing 5 Factors to consider while downsizing 6 Outsourcing 10 Necessity before outsourcing 11 Challenges 12 Challenges associated with outsourcing 14 Challenges of outsourcing for the organization 17 Challenges of downsizing for the staff 18 Challenges of downsizing on the leadership 19 Recommendations 20 Conclusion 22 References 23 Introduction In the restructuring of an organization there are several situations that take place. These could be laying off the workers, downsizing or outsourcing (Susskind, 2007). Laying off workers refers to termination of employees where by the work in the organization has reduced and they are therefore now laid off. Laying off could be temporary for they can be rehired if opportunities arise again. This normally occurs in construction industries in the seasons when work reduces. Downsizing on the other hand refers to the situation where employees are released because of changes in the organization that render what they did in the organization unnecessary. It is normally necessitated by things in the organization being reorganized or restructured. It leads to elimination of some jobs. This they normally call it a reduction in force mainly done by government or military forces (Susskind, 2007). Outsourcing is also known as off shoring. It means that the work is being transferred to another organization which could be domestic or even overseas. This paper will address the challenges associated with the activities of an international air carrier that is planning and implementing a downsizing exercise and outsourcing of its aircraft maintenance. This has been necessitated by a drop in finances due to global financial crises. It will also explain the successful change elements that need to be put into place so as to allow the organization to do well. This paper will entail recommendations to the airline organization. Downsizing Down sizing in any company could be caused by several causes. One major cause can be increased productivity. Decrease in the demand of the products or the services that an organization produces calls for reduction in the workers of the company. As a result it also calls for downsizing in the organization (Susskind, 2007). The demand of a company’s products always dictates the level of activities in the company or organization. This is the case in the airline company as in the global international crises people reduced their demand of the airline’s services. Decline in the economy or declined in revenue also leads to downsizing of firm’s activities and this is also in the global economic crises that rocked the world. It could result from either a poor economy in the nation or increase in the foreign competition. Factors to consider while downsizing Whenever a company wants to lay down some of its workers there are normally rules and regulations the management team of the company has to put into consideration. This is because they have to comply with all the recommendations as well as the standing orders by the labor department (Bean & Hamilton, 2006). Other than the laws and regulations by the government and the labor department there are other recommendations that are given by the human rights activists as well as the labor organizations. I would therefore recommend to the employer and the management team of the airline company to employ the following points before they lay down the workers. 1. Fairness - This is enforced by the statutes and especially the civil rights statutes. Fairness is further reinforced by the employment statutes that seek to protect employees from any uncomely treatment by their employees. The employer in the instance of downsizing should always make sure that he/she is not biased against the protected minorities. The protected minorities are such groups as women, the disabled, veterans, workers who are over forty years in age and the racial minorities (Sronce & McKinley, 2006). The employer should ensure that his decision is only based on what the business requires. This could be laying down all the functions that can no longer be supported in the job system. The airline company should thus ensure that it puts into practice the fairness concept to avoid biased decisions on who to be affected by the down sizing. 2. Transparency - In addition to fairness the airline company’s terminating group should ensure that they communicate openly the criterion that is employed when laying down the employees. This will cause a clear understanding among all the workers so that if a worker is laid down they will understand the reason why. This will cause further visibility among the workers (Susskind, 2007). For example the terminating employer could decide to use qualifications such that the most junior employees according to ranks are terminated. This should be communicated to the public. This transparency allows fairness to be visible. The airline carrier should put this into practice too (Burke & Cooper, 2000). 3. Communications - Communication is also a very important tactic that should be employed by the management team that is in charge of the downsizing process. This communication should be both to the staff that will be retained after downsizing as well as to the departing employees (Bean & Hamilton, 2006). This is mainly done so as to ensure that the goodwill of the employees who are departing from the organization is maintained. It is a very critical element because the services of these employees could be needed again. The retained staff also needs to be communicated to by the management so as to ensure that their morale is built up. This is due to the uncertainty resulting from the changes in the company (Hargroves & Smith, 2005). 4. Timing - The airline company team that is in charge of the downsizing process should also be very keen about the timing of the communication to the employees. The statutes clearly indicate that the communication should be done well in advance so as to avoid inconveniences to the laid down employees (Burke & Cooper, 2000). They should not be laid down without prior notice. The law provides such recommendations. An example is the US laws like the Worker Adjustment and Retraining Notification Act (WARN) that recommends a prior notification of at least six months. Some employers however argue that announcing the intention to lay down the employees in advance will affect their productivity and so they always prefer to communicate the decision right about the time of termination. Timing could also refer to such issues as the dates of the termination communication. For example communicating the date just before Christmas not before Christmas would be considered as inhuman (Lewis, Thornhill & Saunders, 2003). 5. Agenda - The airline company should also announce to the laid down workers how they intend to help them and the dues and packages that they will be entitled to as they leave the company. This could be such issues as getting for them help from employment agencies and giving them the sufficient information on how they should fill the forms for the unemployment benefits available to them (Bean & Hamilton, 2006). This will further improve the communication and the confidence as well as improve the workers goodwill towards the company. This step could also involve counseling for the workers who are leaving the company. This should be done by some qualified staff who will prepare these workers to face the world out there. This will avoid many psychological problems like workers falling into depression and other associated problems. The agenda should also involve such issues as helping these workers to prepare resumes that will land them in good companies so as to create goodwill as well as providing for them leads on the available and well paying jobs for them (Sronce & McKinley, 2006). The last step that the airline company management should do should be to provide for them recommendation letters as many employees seek for these letters as they add to the credibility of the workers. 6. Severance fee - I will advice the airline company to pay a severance fee to its workers who are affected by the downsizing (Ceri, 2007). This is normally is a week or two weeks payment for each year that the employee has given the company. In some cases this is usually inclusive of any extended benefits and also assistance for the out placement. 7. Exit interviews - I will advice the airline company to ensure that it conducts exit interviews for the employees who are now exiting. This is important so as to understand the image, of the company to those employees as well as to those outside of the company’s setting. It will also be used for improving the standards in the company. Outsourcing This is transferring work to another organization which could be in the same nation or even overseas. It could be transferred overseas, if labor is available overseas, at lower costs. Outsourcing normally occurs when an organization desires a more innovative and a less costly production. It also occurs when organizations want to maximize revenue as well as cut down on their expenses like in the case of the airline company (Susskind, 2007). Outsourcing opens up doors for more specialized services as well as skills. There are however so many challenges that are associated with outsourcing and there fore I will advice the management of the airline to be careful so as to avoid the risks that are associated with outsourcing (Kakabadse, Bank & Vinnicombe, 2004). Necessity before outsourcing Before outsourcing they should seek enough information from the people they are outsourcing from so as to ensure that they are speaking the same language and that they understand each other. There should therefore be a question asking session so as to ensure that they are on the same page to avoid basing a contract on misunderstandings (Ceri, 2007). Challenges Outsourcing and downsizing is faced by numerous challenges and it is associated with a number of challenges that affects to organization, employees, staff and other stakeholders. Thus, some challenges associated with downsizing and outsourcing includes: Challenges associated with outsourcing 1. Appropriate offshore location - The company has to understand fully the political as well as the economic position of the country (Hargroves & Smith, 2005). They also have to understand the language of the local population and do enough research to ensure that they equip the staff to handle the challenge of the cultural features of that population. This will also call the company to really survey the infrastructure of that country and the telecommunications system. 2. Selection of the outsourcing partner - The selection of the outsourcing partner is also a challenge to the organization. The company always has to be careful in the selection so as to ensure that they always rise to the highest height (Farrell & Mavondo, 2005). In this option the airline company has to consider the price of the deal as well as the expertise of the industry. They also have to ensure that they study intently the integration capabilities of the partner as well as know whether the partner has the latest knowledge in technology and the appropriate devices. They should also intently study the partner’s information privacy. 3. In house problems of outsourcing - These include such things as ensuring that there has been enough preparation before projects are signed. If the contract is entered into without prior preparation it poses enough problems to the company (Archibald, 2009). I would ensure that I enlighten the airline company on the dangers and make sure that they understand the implications. In this same point I would make sure I enlighten them on the challenges associated with signing the deal for the wrong reasons. I would ensure that the deal is signed for the right reason so as to avoid problems associated with wrong reasons. The other challenge is ensuring there is sufficient legal and regulatory expertise (Sronce & McKinley, 2006). This will ensure that the airline company complies with all their legal rules and information. 4. Recruitment challenges - There are challenges that are associated with the recruitment of staff in the company. The airline company has to ensure that the new recruits are well versed with the needs and the expertise that is required in the company. 5. Management challenges - This challenge arises because the management was used to the old setting and now they are expanding and they there fore are expected to learn the new environment of operation and respond appropriately so as to avoid mismanagement or running things in the wrong direction (Archibald, 2009). 6. Cultural challenges - These arise due to the effect of cultural diversity that arises such as languages differing as well as different cultures behaving differently to a similar impulse (Liou, 2001). The company has to combat this challenge by ensuring that the employees are well versed with the different cultures. 7. Security challenges - As the airline company outsource it has to be very keen on the security of operation in its new environment. It has to put measures so as to combat any insecurity problems that could be encountered (Farrel & Mavondo, 2005). 8. Knowledge transfer - This also poses a challenge that would sometimes call for so many resources to be combated with. The airline company has to be well versed to counter this challenge (Liou, 2001). 9. Time zone challenges - The airline company will also have to combat the time zone challenges in the different zones that its operations will be based. 10. Legal issues - The airline company also has to ensure that it complies with all the legal issues so as to ensure it operates smoothly without defying the set legal issues (Ceri, 2007). Challenges of outsourcing for the organization 1. Financial challenge - Whenever the organization is downsizing, it releases large amounts of money to pay the workers who are leaving the organization. This is in the form of severance fees and any other benefits accruing to the workers (Bean & Hamilton, 2006). 2. Culture shock effects - The culture of an organization is most times affected when there is a downsizing effect. This occurs mainly when it is accompanied by an outsourcing effect (Sronce & McKinley, 2006). Challenges of downsizing for the staff 1. The retained workers sometimes feel discouraged and they may loose their trust on their employers. 2. It also brings a feeling of uncertainty. The survivors of downsizing may develop a fear of what if hey are laid off next. It usually results into a mixed feeling among the workers (Farrell & Mavondo, 2005). They are thankful and glad that they were not affected but they are fearful that they might be next. Therefore I will advice the airline company to invest in the counseling and in building trust with the staff most of whom loose trust with their current employers (Kakabadse, Bank & Vinnicombe, 2004). Challenges of downsizing on the leadership 1. The employers in the organization also experience some blues. This is because they are loosing some workers some of whom might even have been friends (Archibald, 2009). They might have established some bonds, with their employees and the parting is not always easy. 2. They have to cope with the loss of trust. The leadership has to ensure their remaining staff trusts them again and thus they have to employ counseling sessions (Sronce & McKinley, 2006). Recommendations 1. They should lay down clearly the goals of the organization as well as the objectives so as to avoid in competency after outsourcing (Lewis, Thornhill & Saunders, 2003). This should be done before the outsourcing process is done. Lack of proper outlining of goals and objectives before the implementation of outsourcing is a risk that could result in business failure. it is therefore core that the organization’s heads meet and clearly define the goals that they intend to achieve. It will ensure that the organizational goals are all geared towards the achievement of such goals and objectives (Archibald, 2009). 2. They should also have adequate information about outsourcing so as to avoid inconveniences in the operations of the business. This means that they should have an adequate business case development. The business case development will lay down all the strategies that are important and the information that is adequate. Adequate information allows for subsequent decisions to be informed decisions. The importance of this is that any decision that is reached before collection of right information could be a misleading decision (Susskind, 2007). 3. They should have the complete and audited information on all the internal costs and processes before coming up with the outsourcing decision. This will allow proper budgeting and a clear understanding of all the funds needed to carry out the project. Proper planning will ensure that the process pays off (Farrell & Mavondo, 2005). 4. They should also be careful not to announce the outsourcing decision before complete decisions or before finalization of the outsourcing decision. This is for morale or motivational issues. it is always good to complete the internal affairs and then proceed to external requirements (Hargroves & Smith, 2005). 5. They should also consider the environmental factors before reaching to the outsourcing decision. This will also include the regulatory factors and their impact on the outsourcing decision (Liou, 2001). 6. The airline company should also ensure that it has a risk analysis basis as well as a risk assessment plan. 7. They should also be sure that the functions which they are outsourcing are the desirable functions. If they do outsourcing for the undesirable functions then this will result into massive losses to the company Conclusion It is essential for every company to understand that there are challenges that are associated with downsizing and out sourcing. These two activities are meant to improve the performance of the organization. To a great extent they improve the performance of the company and ensure that the organization is doing better in terms of productivity and growth. However downsizing and outsourcing need the company’s management to be better prepared for the aftermath of the activities. They need to prepare the workers to be psychologically prepared and at the same time provide sufficient counseling skills to the affected parties. Companies willing to undertake the two activities there fore ought to put into practice all the strategic measures that will ensure they reap the best results from their activities. References Archibald, W. 2009. Globalisation, downsizing d insecurity: Do we need to upgrade Marx’s theory of alienation? Critical Sociology, vol. 35, no. 3, pp. 319-342 Bean, C. & Hamilton, F. 2006. Leader framing and follower sensemaking: response to downsizing in the brave new workplace. Human Relations, vol. 59, no. 3, pp. 321-349 Burke, R. & Cooper, C. 2000. The organization in crisis: downsizing, restructuring, and privatization. New York: Wiley-Blackwell. Ceri, H. 2007. Human resource management in Australia: strategy, people, performance, 3rd Ed. Sydney: McGraw-Hill Australia. Farrell, M. & Mavondo, F. 2005. The effect of downsizing redesign strategies on business performance: evidence from Australia. Asia Pacific Journal of Human Resources, vol. 43, no. 1, pp. 98-116. Hargroves, K. & Smith, M. 2005. The natural advantage of nations: business opportunities, innovation, and governance in the 21st century. New York: Earthscan. Kakabadse, A., Bank, J. & Vinnicombe, S. 2004. Working in organizations, 2nd Ed. New York: Gower Publishing, Ltd. Lewis, P., Thornhill, A. & Saunders, M. 2003. Employee relations: understanding the employment relationship. New York: Financial Times Prentice Hall. Liou, K. 2001. Handbook of public management practice and reform. New York: CRC Press. Sronce, R. & McKinley, W. 2006. Perceptions of organizational downsizing. Journal of Leadership and Organizational Studies, vol. 12, no. 4, pp. 89-108 Susskind, A. 2007. Downsizing survivor’s communication networks and reactions: A longitudinal examination of information flow and turnover intentions. Communication Research, vol. 34, no. 2, pp. 156-184. Read More