Employment Downsizing and its Alternatives

1 SHRM Foundation s Effective Practice Guidelines SeriesStrategieS for Long-term SucceSS Employment Downsizing and its AlternativesSponsored byright managementWayne F. CascioStrategieS For Long-term SuCCeSS Employment Downsizing and its AlternativesSHRM FounDAtion S EFFE ctivE PRActicE GuiDElinES SERiESSponsored by Right ManagementThis publication is designed to provide accurate and authoritative information regarding the subject matter covered. Neither the publisher nor the author is engaged in rendering legal or other professional service.

2 If legal advice or other expert assistance is required, the services of a competent, licensed professional should be sought. Any federal and state laws discussed in this book are subject to frequent revision and interpretation by amendments or judicial revisions that may significantly affect employer or employee rights and obligations. Readers are encouraged to seek legal counsel regarding specific policies and practices in their book is published by the SHRM Foundation, an affiliate of the Society for Human Resource Management (SHRM ).

3 The interpretations, conclusions and recommendations in this book are those of the author and do not necessarily represent those of the SHRM Foundation. 2009 SHRM Foundation. All rights reserved. Printed in the United States of publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the SHRM Foundation, 1800 Duke Street, Alexandria, VA SHRM Foundation is the 501(c)3 nonprofit affiliate of the Society for Human Resource Management (SHRM).

4 The SHRM Foundation maximizes the impact of the HR profession on organizational decision-making and performance by promoting innovation, education, research and the use of research-based knowledge. The Foundation is governed by a volunteer board of directors, comprising distinguished HR aca-demic and practice leaders. Contributions to the SHRM Foundation are tax deductible. Visit the Foundation online at For more information, contact the SHRM Foundation at + Downsizing and its Alternatives09-0971 contentstable of Employment Downsizing and its Alternativesv Forewordvii Acknowledgmentsix About the Author1 Employment Downsizing and Its Alternatives .

5 Strategies for Long-Term Success 2 Why Downsizing Happens 2 When Is Downsizing the Answer And How to Do It Right 13 Alternatives to Downsizing 15 Consequences of Employment Downsizing 19 Conclusion21 Glossary of Terms23 References29 Sources and Suggested ReadingsvDear Colleague:Many organizations have faced or will face the decision to downsize their workforce. Especially in tough economic times, companies struggle with how to best manage their most valuable resource their human resources while staying viable as a business.

6 It is this challenge that led us to prepare this Effective Practice Guidelines report, Employment Downsizing and Its Alternatives . In 2004, the SHRM Foundation developed the Effective Practice Guidelines series, a resource that we believe is one of the best available for busy HR professionals like you. Recognizing that you have little time to keep up with results of academic research and let s face it, some of it is challenging to wade through as well we created this series. By integrating the latest research findings on what works and expert opinion on how to conduct effective HR practice into a single publication, we make theory and practice accessible to reports in this series, all available online, include Recruiting and Attracting Talent, developing Leadership Talent, retaining Talent and Human Resource Strategy.

7 This report on Downsizing is the 10th in the series. For each report, a subject matter expert is chosen to be the author. After the initial draft is written, the report is reviewed by both academics and practitioners to ensure that the material is research-based, comprehensive and presented in an easy-to-use format. We also include a Sources and Suggested Readings section as a convenient reference tool. This series supports our vision for the SHRM Foundation to maximize the impact of the HR profession on organizational decision-making and performance by promoting innovation, education, research and the use of research-based knowledge.

8 Overall, the Foundation has a strategic focus on initiatives designed to help organizations maximize leadership talent. We are confident that the Effective Practice Guidelines series takes us one step closer to making our vision a reality. Feel free to let us know how we are doing!Mary A. Gowan, Chair, SHRM Foundation Research Applications Committee Dean and Professor of Management Elon UniversityForewordviiAcknowledgmentsThe SHRM Foundation is grateful for the assistance of the following individuals in producing this report: content editorMary A.

9 Gowan, and Professor of Management Martha and Spencer Love School of BusinessElon UniversityreviewersDaniel C. Feldman, Dean for Research and International Programs Terry College of Business University of GeorgiaLyle S. Hanna, SPHRP resident Hanna Resource GroupMerry Lee Lison, SPHR, GPHRD irector, Human Resources TRC Global Solutions, Miller, SPHRP resident Venture HRO, LLCJ enee LeBlanc OlivierHuman Resources Director Sigma Engineers and ConstructorsProject ManagerBeth M. McFarland, CAE Manager, Special Projects SHRM FoundationThis report is sponsored by Right Management.

10 Additional funding for the Effective Practice Guidelines series is provided by the HR Certification Institute and the Society for Human Resource Management. ixAbout the Author: Wayne F. Cascio Wayne F. Cascio holds the Robert H. Reynolds Chair in Global Leadership at the University of Colorado Denver. Dr. Cascio has consulted with more than 200 organizations on six continents and is an elected Fellow of the National Academy of Human Resources, the Academy of Management and the American Psychological Association. He has authored or edited 22 books on human resource management, including Investing in People (with John Boudreau, 2008), Managing Human Resources (8th ed.)