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Downsizing as a restructuring strategy has been actively implemented for the last three decades. While
employee reductions were utilized mainly in response to crises prior to the mid-1980s, downsizing
developed into a fully-fledged managerial strategy for tens of thousands of companies in the mid- to
late-1980s. Since then, downsizing has transformed the international corporate landscape and affected
the lives of hundreds of millions of individuals around the world. While the overall effects of downsizing
have been widely reported, many misconceptions surrounding the concept of downsizing have remained.
This conceptual paper focuses on the role of training and development (T&D) during the downsizing
process. In particular, the research depicts the current body of literature associated with the function of
HR and its plans, programs, and policies that firms adopting downsizing must provide to their surviving
workforces. Finally, the paper offers concluding comments regarding effective downsizing practices that
have emerged in the literature.
There is substantial evidence supporting the notion There is some understanding that the root cause of
that firms are poorly prepared for downsizing. An the survivor illnesses is a profound shift in the
American Management Association (AMA) report psychological employment contract between the
showed that more than 70% of surveyed firms had employee and the firm. Under the old employment
downsized with no downsizing-related HR plans, contract, employees viewed their jobs as a lifetime
policies, and programs in place and more than half entitlement and offered loyalty, longevity, and
of the downsized firms had failed to provide commitment to their companies. In return, firms
Kettley Doherty & Allen Appelbaum Dolan Makawatsakul Sahdev Farrell &
(1995) Horsted (1997) et al. et al. & Kleiner (2003) Mavondo
(1995) (1999) (2000) (2003) (2004)
Advance
planning
Participative Participation
decision-making & involvement
Training & Training Training Training Training Training Training Training & skills
Development development
(T&D)
Gandolfi (2001) carried out case study research • the plea of experts for the development and
examining the role of T&D in the context of introduction of proactive HR programs.
downsizing. He found that Australia’s largest banks Examining and asserting the role and relevance of
were ill-prepared for downsizing and had failed to HR during downsizing is of great importance with
implement T&D in an effective manner. Study the following questions at the heart of future
cases pursued reactive rather than proactive T&D academic inquiry:
approaches. Gandolfi (2001) concluded that T&D
must play a significant role during downsizing and 1. What is the specific role and relevance of
recommended that firms must engage in proactive T&D during downsizing?
T&D, embrace an eclectic T&D approach
2. Can T&D positively influence the outcomes
combining generic with firm-specific training, and
of downsizing?
provide personal development preceding
downsizing. 3. Does T&D constitute an underpinning of the
survivor syndrome remedy?
Right Associates carried out a major US survey
reporting that while survivors were informed about While the previous section presented
the likely effects of downsizing, very little was recommended HR components for successful
done to introduce new HR programs to promote downsizing, more work needs to be carried out on
survivors’ re-engagement with the firm. The study the role of survivor programs. For example, there
showed that 88% of firms had failed to implement is a shortage of evidence demonstrating the
programs to help improve the survivors’ effectiveness and efficacy of survivor programs for
performance and confidence levels. Firms forfeited survivors. Correspondingly, a lack of evidence on
such programs since they felt that they were caught the role of T&D during downsizing is also
in a dilemma. While firms downsize for primarily
Most firms do not attempt to establish a social environment conducive to the Zemke (1990)
development of the workforce, and, ultimately, to the company’s prosperity in a
period of organizational change.
Most surveyed firms have implemented downsizing without any HR policies or Lee (1992)
programs in place.
Most firms fail to anticipate the human consequences of downsizing. Cascio (1993)
Firms that downsized most effectively had changes in the HR system that Cameron (1994)
preceded and followed the implementation of downsizing.
The decline of downsized firms is attributable to the neglect of human capital. Hitt et al. (1994)
HR departments are often the primary target of cost-cutting efforts. Clark & Koonce
(1995)
Downsizing fails to achieve its alleged benefits due to the fact that companies lose Evans, Gunz,
core competencies by cutting muscle instead of fat. & Jallad (1996)
Survivors are largely ignored before, during, and after downsizing. Appelbaum et al.
(1997)
Firms do not ensure T&D before, during, and after the downsizing. Appelbaum et al.
(1997)
The adverse impact on survivors is one of the major reasons for long-term Kinnie et al. (1998)
problems of firms associated with downsizing.
Firms will continue to downsize well into the next century. Either way, whether Mitchell (1998)
downsizing or rehiring, companies must train their people.
Surveyed firms were ill-prepared for downsizing and failed to implement T&D in Gandolfi (2001)
an effective manner.
Survivors are driven to work harder after downsizing. Firms frequently fail to provide Makawatsakul &
training to survivors. Kleiner (2003)
Downsizing does not produce superior organizational performance in the long term Zyglidopoulos
and surviving employees frequently do not receive the necessary training. (2003)
Downsized firms frequently neglect the surviving workforce. Hareli & Tzafrir
(2006)
Surveyed firms were ill-prepared for downsizing and survivor syndrome. Gandolfi (2007)
Survivors were ignored and left to their own devices.
Source Findings
Poulter (1982) • Benefits for the individuals are the opportunity for promotion and self-
improvement, improved job satisfaction through increased job performance,
the chance to learn new things, and adaptability (i.e., the ability to adapt to
and cope with change).
• Possible benefits for the firm are increased levels of productivity, profitability,
efficiency, and effectiveness, as well as reduced rates of absenteeism, labor
turnover, accidents, and errors.
• T&D constitutes an “insurance policy” (p 7) for an organization.
Commerce Clearing House • Employees are more likely to successfully cope with major change, crises,
(1985) and critical incidents.
Rabey (1990) • T&D has two main purposes. First, it ensures that work meets required
standards of quality, quantity, cost, and time. Ideally, this translates into higher
levels of productivity, effectiveness of operations, and a safer and more
harmonious work environment. Second, the development of employees meets
the foreseeable needs of the firm and seeks to realize the potential of each
individual.
Ocholla (1995) • T&D leads to a competitive advantage.
Davidson (1996) • T&D has the capacity to increase overall profitability.
Kramar, McGraw, & • Positive correlation between T&D and organizational performance in that T&D
Schuler (1997) has the capacity to improve a firm’s performance in at least three key areas:
labor productivity, overall quality of output, and the firm’s ability to adapt to
and cope with change.
Sofo (1999) • T&D enhances employee performance, productivity, and efficiency, and
improves the quality, structure, and processes of firms.
• T&D is positively associated with empowerment, participation, and recognition.
Clarke & Koonce (1997) • Positive correlation between T&D and improved organizational performance
indicators and individual growth.
Berge et al. (2002) • T&D leads to higher levels of competitiveness.
• T&D leads to sustainable competitive advantages.
Farrell & Mavondo (2004) • T&D results in potential source of a competitive advantage.
Gomez, Lorente, & • T&D is one of the most significant processes within the strategic management
Cabrera, (2004) of human resources.
• Critical role of training in maintaining and developing individual and
organizational capabilities.
• Capacity of training to substantially contribute towards the process of
organizational change.
• T&D is a strategic capability.
Stone (2005) • T&D is a significant source of competitive advantage.
Saks & Belcourt (2006) • T&D leads to higher levels of employee productivity.
Marshall (2007) • Positive correlation between T&D and organizational performance.
• T&D leads to improved ability to cope with change.
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