ORGANIZATIONAL RESTRUCTURING AND DOWNSIZING

Organizational Restructuring and Downsizing

Organizational Restructuring and Downsizing

Introduction

This paper is based on a case study of AT&T, the famous telecom firm that has been facing precarious situation right after the announcement that the organization intends to downsize the number of employees thus retaining only the competent workers to maximize productivity. It is a fact that Companies such as Cisco, Dell, Aetna, AT&T, General Motors, and many others have at various times implemented large-scale downsizing programs (Ashford, 2007).

In general, companies adopt a downsizing strategy to achieve one of three goals—to save, to improve, or to change the company. Downsizing to save the company may be undertaken when a financial crisis requires the company to reduce labor costs as a last resort before bankruptcy. Downsizing to improve the company may be undertaken as a preventive measure to reduce labor costs to fend off a looming financial crisis (Probst, 2008).

Discussion

Reducing staff is usually the fastest way to affect the bottom line because of accounting rules that allow all costs associated with downsizing to be expensed in one quarter, a tactic that is usually viewed favorably by financial analysts. Downsizing can also cause considerable stress and heartache for the individuals affected as well as those in management who must develop and/or implement the downsizing plan (Gilbert, 2006).

Downsizing to change the company may be undertaken through strategic staffing reductions, perhaps as part of a merger or acquisition, or in response to a decision to outsource a function. Many companies believe downsizing to facilitate organizational change will have a positive impact on their long-term viability; however, researchers have been unable to find consistent evidence that downsizing is positively correlated with future financial performance. Adopting a downsizing strategy is more ethically murky, therefore, when the company is performing well and is in no imminent financial danger (Probst, 2008).

As in AT&T's case, The pressures associated with downsizing can only be justified if it does in fact improve the company's performance; however, there is contradictory evidence as to the actual benefits. There are several ethical theories that may be applied to assess the morality of a downsizing strategy. Utilitarian theory contends that a decision is moral if it results in the greater good for the greatest number of people. This is the most commonly used justification for downsizing to save or improve the company.

There are many known antecedents and consequences of having a secure or, conversely, insecure position ...