An investigation into the effects of employee downsizing on business organizations in Kenya
Rori, Richard Nyakundi
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Employee downsizing is a complex and pervasive phenomenon that has drawn the attention of most Kenyans. It is a phenomenon that strikes fear and anxiety in the minds of many Kenyan employees. It has actually become a legitimate multi purpose tool to preserve and advance corporate interests. Employee downsizing has also been observed in other countries as rapid technological change, shifting markets, new competitors, revamped governmental regulations and increasing global competition have led organizations to seek lower labour costs and increased productivity. While employee downsizing has become a common activity, very little is known of its impact on the employer and the remaining employee during and long after implementation. This research investigated on the effects of employee downsizing on business organizations in Kenya. The interest was on the effects of employee downsizing on business organizations, as most business organizations continue to downsize their employees in order to cope up with the now turbulent, more competitive, and less predictable market place. A total of 20 business organizations were selected for investigation from a list of 30 large business organizations in Kenya that had downsized during the 1990s. Both secondary and primary data was collected from these business organizations for analysis. Two different types of questionnaires were used to guide the research's data collection. Data from the surviving employees and the employers in these organizations was obtained and analyzed using descriptive statistics and presented by use of percentages and tables. The study revealed that most business organizations in Kenya downsized their employees because they felt they were over-staffed, non -competitive, and their market place had changed dramatically. Downsizing of employees was thus a measure for their health and survival. However, the research found out that although there were several alternatives to employee downsizing, few business organizations considered them. The organizations used a variety of approaches including; induced retirements, involuntary retirements, separation with benefits, separation without benefits, induced pay to quit, retraining; few of these business organizations ever bothered to seriously address and identify the needed structural changes and strategic workforce planning to meet future challenges. This had led to critical employees being retrenched and organizations were being forced to re-hire. These organizations simply equate lowering operating expenses by employee elimination to show a greater profit. The study also revealed that except fro reduction of expenses for the business organizations and consequently increase in profits and dividends for shareholders, it has a negative impact on the morale of those employees who remain after downsizing as it causes a 'survivor syndrome' due to lack of sufficient information, loss and growing insecurity. The remaining employees, no longer believe in the concept of lifetime employment, and are concerned about their future chances for promotion and advancement, especially when they see their bosses or mentors being laid off. A fairly good number of them are also worried about their ability to function in a new environment as their jobs have been redesigned. Their feeling is that they will be the ones terminated next, so their attitude is one of "Why try to do the best since I am going to be the next one to be laid off". It was also found that, found that, although employee downsizing enables the organization to release appropriate numbers of people, it affects social networks at the work place. This is because, when a person is laid off, an entire personal network of internal and external relationship in the business organization is lost as well. It destroys informal bridges between departments, disrupts the information grapevine severs ties with customers. It even, eliminates the friendships that bond them to the workplace. A few of the organizations complained of cash flow difficulty, as funds had to be set aside for payment of termination benefits. Managers also complained of being behind schedule, and burnout. From the findings of the study, it was concluded that employee downsizing can lead to short-term improvements in profitability, however long term gains may be lost due to poor planning, implementation and monitoring. A good employee-downsizing programme, therefore, is one that is based on the business organization's mission and vision guided by a clear workforce strategy. Finally, the study has made a number of recommendations that may be considered for adoption by business organizations planning to downsize their employees in order to avoid the suffering from employee downsizing "success". It recommends that downsizing of employees should be done as a last alternative to reduce costs, increase profits, corporate strategy, or make the business more competitive. However, should employee downsizing be necessary, there is need to do an elaborate pre-downsizing analysis, have a comprehensive downsizing plan, do it with a humane face and as much as possible consider how the survivors shall be managed to avoid unnecessary survivor "syndrome".
- MST-Commerce