Hal Hudson owns a hot dog stand, known as Hal's Hot Dogs, which serves customers inside the Pelican's Baseball Stadium in Palm Beach, Florida. So that Hal can serve the maximum number of customers in the shortest amount of time, he structured his organization with a high level of work specialization. Eleven employees work at the stand and each has a very specialized job.
For instance, there is one worker whose only job is to put onions on the hotdogs and a different worker whose job it is to add relish. Hal's business was doing great when the season started, but the Pelicans have been on a losing streak lately, and fewer customers are coming to the ballpark and buying hot dogs.
Hal's hotdog stand has started losing money, and in order to continue operations, Hal will have to make some difficult decisions regarding the structure of his organization. What will Hal do? Before we learn how Hal Hudson handles his hotdog hardship, let's define organizational structure. Organizational structure defines how tasks are divided, grouped and coordinated in organizations.
When the management of an organization determines that their organization is not operating at peak efficiency, they typically look for ways to make the organization more productive. This is frequently accomplished via organizational downsizing, which is a reduction in organizational size and operating costs implemented by management in order to improve organizational efficiency, productivity and/or the competitiveness of the organization.
Organizational downsizing affects the work processes of an organization since the end result of the downsizing is typically fewer people performing the same workload that existed before the downsizing took place. The act of downsizing results in two categories of people: Victims, the people who involuntarily lose their jobs due to organizational downsizing, and survivors, the employees who remain after organizational downsizing takes place.
As a member, you'll also get unlimited access to over 84,000 lessons in math, English, science, history, and more. Plus, get practice tests, quizzes, and personalized coaching to help you succeed.
Get unlimited access to over 84,000 lessons.
Try it nowIn order for an organizational downsizing to be most effective, management must communicate openly and honestly with their employees regarding the reason for the downsizing and the downsizing plan. Managers also need to listen to employees and provide comfort when necessary in order to keep the morale high among the survivors of the downsizing.
When Hal's customers first began to decrease, he realized that he could no longer afford to pay 11 workers to work at his hot dog stand due to the declining profits. Before talking to his workers, Hal developed a downsizing plan to eliminate the workers who had been with him for the least amount of time.
Hal explained the situation to his workers and told them that due to decreasing sales, he was going to have to let the three newest employees go. This downsizing resulted in changes to the work process at the hot dog stand. Hal reduced the amount of work specialization and combined tasks among the survivors so that each worker was now responsible for more than one task. For example, the worker who used to put onions on the hot dogs was put in charge of onions, relish and sauerkraut.
In order to successfully downsize an organization, it is also important that management take steps to prepare the workforce in advance of the downsizing. Proper planning includes outplacement strategies, which is the process of assisting former employees in finding new employment and training and re-skilling the remaining workers into their new jobs. By treating the victims of downsizing fairly and compassionately, the survivors of the downsizing are more likely to remain loyal to their organization.
Hal's initial downsizing reduced the amount of money his hotdog stand was losing, and he expected that lowering his labor cost would make him more profitable. Unfortunately, the Pelicans kept losing, customers continued to stay away and Hal soon realized he would need further downsizing in order to bring his hotdog stand back to profitability.
Before this second wave of downsizing, Hal was able to find jobs for four of his workers as ushers at the baseball park. The act of outplacing his former workers showed the remaining survivors that Hal cared about what happened to his former workers and helped increase the organizational commitment of the survivors. Hal was now operating with four workers, less than half of the workforce he started the season with, and everyone was performing at least two tasks instead of one.
Even the most successful organizational downsizing can result in problems among the surviving employees. Some employees may feel overwhelmed by the additional workload, which can cause irritability and reduce worker motivation and productivity. Survivors of organizational downsizing sometimes experience survivor guilt, which is a feeling of despair felt by those who survive an organizational downsizing due to the feelings of sympathy for the victims of the downsizing and concern for their own well-being.
In order to reduce the feelings of anxiety and guilt by survivors of organizational downsizing, managers should continue to communicate with laid-off workers and listen to the concerns of the survivors who remain. It is important for management to show appreciation to the survivors for shouldering their increased workload and to try to keep them focused on the positive aspects of the downsizing, such as the more secure future that lies ahead.
After the two rounds of downsizing, Hal's remaining workers feel that they are doing twice the work they used to do for the same pay. They are unmotivated and wondering if there will be additional downsizing, and if there is, who will survive the next round of cuts.
Hal sensed the discontent among his remaining workforce and took them all out for pizza after work one night to thank them for their hard work and for remaining loyal during the downsizing. Hal let the workers know that due to the necessary downsizing, the hot dog stand was starting to make a profit and that no further downsizing should be required.
Let's review. The structure of an organization defines how tasks are divided, grouped and coordinated in an organization. When the management of an organization determines that the organization is not operating at peak efficiency, they may decide to alter the organizational structure via organizational downsizing. Downsizing is a reduction in organizational size and operating costs implemented by management in order to improve organizational efficiency, productivity, and/or the competitiveness of the organization.
Victims are organizational members who involuntarily lose their jobs due to organizational downsizing. Survivors are employees who remain after an organizational downsizing takes place. Survivors of organizational downsizing sometimes experience survivor guilt, which is a feeling of despair felt by those who survive an organizational downsizing due to feelings of sympathy for the victims of the downsizing and concern for their own well-being. It is important for management to prepare the workforce in advance of the downsizing and to treat the victims of the downsizing well in order to keep the surviving workers motivated and loyal to the organization.
After watching this lesson, you should be able to explain why an organization may decide to downsize their operations and the effects it has on the employees.
To unlock this lesson you must be a Study.com Member.
Create your account
Already a member? Log In
Back