Strategic Human Resource Management

Section Four
Downsizing strategies, which often involve layoffs, along
with other approaches such as attrition and hiring freezes, have
been widespread throughout the U.S. economy. Nonetheless,
companies sometimes find that downsizing and associated
layoffs begin a vicious cycle. Typically, the cycle is initiated by
more intensified competition that cuts into the company’s
revenues. Lower revenues then lead to efforts to quickly cut
costs and some employees are laid off. Although the company
is left with fewer employees, the workload remains constant.
“Survivors” often experience overwork, stress, frustration, and
declining morale as they operate in crisis mode, attending only
to immediate problems. Additionally, remaining employees also
tend to become more risk averse and narrow-minded. As a
result, there are insufficient workers available to examine the
underlying causes of problems and fewer resources available
for research and developmental efforts. Because of these
detrimental effects, customer satisfaction wanes, causing
revenues to decline further, thus precipitating another round of
layoffs to cut costs. Another problem with downsizing strategies
is that companies frequently do not obtain the benefits of
reduced expenses, profitability, and increased return on
investment that they had hoped to achieve. Cost savings are
also wasted when consultants have to be hired to supply the
expertise lost from staff layoffs. Some observers have even