in the circumpstance of looming corporate failure, some managers opt for either assets or manpower downsizing, the question is, has this been an effective strategy for bringing life back into the organisation or does it end up making things worse?
I think downsizing if occur in a firm makes it worse specially if it loose its talented employees with their tacit knowledge.
I agree with you on that Ra'ed, laying off employees whose tacit knowledge have not been made explicit can constitute huge loss of intellectual capital. Thank you.
My co-authors and I published a paper in SMJ, titled "Creating Value in the Face of Declining Performance: Firm Strategies and Organizational Recovery", that might help. We developed theory to explain how firms that have experienced declining performance (operationalized as 2 years of at least meeting market expectations followed by at least 1 year of below investor expectations, using Jensen's alpha). Our results show that firms that recombine existing resources or acquire new ones were more likely to recover than those that pursued other strategic actions. Of note, while we found that one typical response by firms needing a turnaround, divestment of assets, did have performance-enhancing effects, we also found strategic actions that more effectively bundle and leverage existing resources, or new resources obtained by an acquisition, also result in outcomes that exceed investors’ expectations of performance. However, experiencing a recovery may not be enough; firms that are able to turn around declining performance must seek continued improvement. In this way, while firms experiencing a recovery move from ‘bad to good’ performance, they often desire to move from ‘good to great’ performance (see Collins, 2001 book for more). These firms will try to design strategic actions to build up the firm and lead to breakthroughs, while also enhancing the mix of resources controlled by the firm.
Hope this is helpful.
http://onlinelibrary.wiley.com/doi/10.1002/smj.579/abstract
Thank you so much Tim, your answer is encompassing. i am asked to pay for access to read the article; let me see how that goes. thanks.
Ra'ed, I feel that any organisation that lays off such employees has not gone about it the right way. There are procedures for effective change management. Even in circumstances where such people opt for voluntary redundancy, they can be prevailed upon to continue staying. Yes, downsizing can work if it is applied correctly.
- Badges
- Science topic