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Organizational Downsizing: Denition,

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UExcel Organizational Behavior:
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Lesson Transcript
Instructor: John McLaughlin

In this lesson, you will learn why organizations choose to downsize their operations and
about the implications that organizational downsizing has on organizational members.

What Is Organizational Downsizing?

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.

1 - The Evolution of Organizational

Behavior (/academy/topic
/the-evolution-of-organizationalbehavior.html)

2 - Management and Organizational

Behavior (/academy/topic
/management-and-organizationalbehavior.html)

3 - Foundations of Individual Behavior

(/academy/topic/foundationsof-individual-behavior.html)

4 - Personality and Behavior in

Organizations (/academy/topic
/personality-and-behaviorin-organizations.html)

5 - Emotions and Moods in the

Workplace (/academy/topic/emotionsand-moods-in-the-workplace.html)

6 - Attitudes and Values in the

Workplace (/academy/topic/attitudesand-values-in-the-workplace.html)

7 - Ethics in the Workplace (/academy

/topic/ethics-in-the-workplace.html)

8 - Perception and Attribution

(/academy/topic/perceptionand-attribution.html)

9 - Learning in the Workplace (/academy

/topic/learning-in-the-workplace.html)

For instance, there is one worker whose only job is to put onions on the hotdogs and a
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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 dicult decisions regarding the structure of his organization. What will
Hal do? Before we learn how Hal Hudson handles his hotdog hardship, let's dene
organizational structure. Organizational structure denes how tasks are divided, grouped
and coordinated in organizations.
When the management of an organization determines that their organization is not
operating at peak eciency, 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 eciency, productivity and/or the competitiveness of the

10 - Employee Motivation (/academy

/topic/employee-motivation.html)

11 - Individual Decision Making in

Organizations (/academy/topic
/individual-decision-makingin-organizations.html)

12 - Workforce Diversity (/academy/topic

/workforce-diversity.html)
13 - Organizational Communication in
Business (/academy/topic
/organizational-communicationin-business.html)

14 - Groups and Work Teams (/academy

/topic/groups-and-work-teams.html)

15 - Group Decision Making (/academy

/topic/group-decision-making.html)

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.

Preparing for Downsizing

In 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 rst began to decrease, he realized that he could no longer afford to

16 - Conict in the Workplace (/academy

/topic/conict-in-the-workplace.html)
17 - Leadership in Organizational
Behavior (/academy/topic/leadershipin-organizational-behavior.html)

18 - Leadership Theory in Organizational

Behavior (/academy/topic/leadershiptheory-in-organizational-behavior.html)

pay 11 workers to work at his hot dog stand due to the declining prots. 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

19 - Leadership Styles in Organizational

Behavior (/academy/topic/leadershipstyles-in-organizational-behavior.html)

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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

20 - Organizational Structure and Design

(/academy/topic/organizational-designstructure.html)

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 nding 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 protable. 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 protability.
Before this second wave of downsizing, Hal was able to nd 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.

How to Mitigate Problems After Downsizing

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.
Continue reading...

Organizational Structure:
Denition and Inuence on
Organizational Behavior
(/academy/lesson
/organizational-structuredenition-and-inuenceon-organizationalbehavior.html)

6:51

Organizational Design and

Structure (/academy/lesson
/organizational-designand-structure.html)

7:43

Mechanistic & Organic

Organizational Business
Structures (/academy/lesson
/bureaucratic-organizationsmechanic-organicbureacracies.html)

7:09

Work Specialization in
Organizations (/academy/lesson
/work-specializationin-organizations.html)

5:10

Authority in Centralized &

Decentralized Organizations
(/academy/lesson/authorityin-centralized-decentralizedorganizations.html)

4:59

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Types of Traditional
Types of Contemporary
Organizational Designs: Simple,
Organizational Designs: Matrix,
Functional & Divisional Designs
Team & Network Designs
(/academy/lesson/types(/academy/lesson/typesof-organizational-structuresof-contemporary-organizationalfunctional-divisional-matrixdesigns-matrix-team-networkteam-network.html)
designs.html)

7:46
8:41

Bureaucracy: Max Weber's

Theory of Impersonal
Management (/academy/lesson
/bureaucracy-max-weberstheory-of-impersonalmanagement.html)

5:00

The Boundaryless Organization:

Structure and Advantages
(/academy/lesson
/the-boundaryless-organizationstructure-and-advantages.html)

8:29

Characteristics of Informal
Organizations: The Grapevine &
Informal Groups (/academy
/lesson/characteristicsof-informal-organizationsthe-grapevine-informalgroups.html)

5:52

Organizational Downsizing:
Denition, Strategies &
Business Impacts (/academy
/lesson/organizationaldownsizing-denitionstrategies-businessimpacts.html)

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7:40

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The Organizational Life Cycle

7:25
(/academy/lesson
/the-organizational6:27
Next Lesson
life-cycle.html)
Strategy and
Organizational
Technology: How Organizations
9:21
Structure
Turn Inputs to Outputs
(/academy/lesson
(/academy/lesson/technology/strategy-and-organizationalhow-organizations-turn-inputsstructure.html)
to-outputs.html)
Organizational Size: Impacts on
Structure and Design of an
Organization (/academy/lesson
/organizational-size-impactson-structure-and-design-of-anorganization.html)

9:25

Lean Organizational Structure

(/academy/lesson/leanorganizational-structure.html)

5:21

Organizational Design and

Organizational Behavior
(/academy/lesson
/organizational-designand-organizationalbehavior.html)

8:57

E-Business Enhanced and

E-Business Enabled
Organizations (/academy/lesson
/e-business-enhanced-and-ebusiness-enabledorganizations.html)

5:24

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Go to Organizational Structure and

21 - Job Design (/academy/topic

Design (/academy/topic
/job-design.html)
/organizational-designstructure.html)
Job Design: Denition and
6:50
Purpose (/academy/lesson
/job-design-denitionand-purpose.html)
Fredrick Taylor & Management:
Maximizing Productivity &
Eciency (/academy/lesson
/fredrick-taylor-managementmaximizing-productivityeciency.html)

7:52

Behavioral Approaches to Job

Design (/academy/lesson
/behavioral-approaches-to-jobdesign.html)

5:00

Social Information Processing:

Denition and Importance in
Job Design (/academy/lesson
/social-information-processingdenition-and-importancein-job-design.html)

5:24

An Interdisciplinary Approach
to Job Design (/academy/lesson
/an-interdisciplinary-approachto-job-design.html)

6:08

Empowerment and Job Design

(/academy/lesson
/empowerment-and-jobdesign.html)

4:11

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Hackman & Oldham's Job

Characteristics Model
(/academy/lesson/hackmanoldhams-job-characteristicsmodel.html)

5:53

Types of Job Redesign: Job

Enrichment, Enlargement &
Rotation (/academy/lesson
/types-of-job-redesignjob-enrichment-enlargementrotation.html)

6:17

Job Flexibility in the Workplace

(/academy/lesson/job-exibilityin-the-workplace.html)

5:59

Reengineering Jobs for

Continuous Improvement
(/academy/lesson
/reengineering-jobs-forcontinuous-improvement.html)

5:12

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Go to Job Design (/academy/topic

/job-design.html)

22 - Organizational Culture (/academy

/topic/organizational-culture.html)

23 - Organizational Change and

Organizational Behavior (/academy
/topic/organizational-changeand-organizational-behavior.html)

24 - Managing Workplace Stress

(/academy/topic/managing-workplace-

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stress.html)
25 - Career Management (/academy
/topic/career-management.html)

26 - Global Implications of
Organizational Behavior (/academy
/topic/global-implicationsof-organizational-behavior.html)

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