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This case is about Utilities Company slashing 120 jobs by stating tough market conditions and increasing heat from its competitors. Utilities Co wanted part of middle management and senior management to go as the CEO thought that they were stagnant and were blocking Utilities Co to move in the direction of his visions. First, they gave voluntary options for people to go hoping that those middle management as well as senior management people whom they wanted to drop will apply for voluntary retirement. This move failed as most of the Start Performers applied for that as they stated that they now felt insecure about their future in Utilities Co.
Also, Labor Union went into action and gave a notice regarding Industrial action. They tried to negotiate but all the meetings were increasingly futile. There were increasing reports of bad customer service and sales dropped, but CEO didn’t budge from his stance and went all out to release those employees. The HR Manager Maree was also concerned about this development and at the end gave his resignation when things were going out of control and CEO refused to listen to anybody’s voice. The reason given for lay off employees was to make the company leaner and fast approaching towards the future goals set by CEO. But, this had led to decrease in employee morale and increase in tensions of job insecurity which led to higher Occupational Health and Safety problems but also low levels of customer satisfaction. The HR department was also incapable of coping with the situation as they were very less informed about the decision and also very less time was given to them on preparing themselves for the layoff and its antecedents. Also, there was a plan on step by step approaching towards this layoff plan with taking Union , Employees and Top management into confidence but the CEO override all authorities and pressed for a fast movement so that they can achieve desired outcomes as early as possible (Palmon, Sun & Tang, 1997).
Implications of Layoff
These implications always come along with announcement of layoff. These were:-
- Insecurity among employees
This has led in increasing insecurity as employees didn’t know about their future and whether they can be fired or not. This will let them down and lower their motivation to do work.
- Lower employee Morale
The insecurity will lead to lowering the employee morale as they will be increasingly concerned about how to save their job and will not be motivated to work for Utilities Co. This will lower their job performance and will lead to decreasing service quality.
- Increase in Stress and other anxiety problems in employees due to compounding of problems and tensions of layoff
The lower job morale and increasing customer complaints will compound anxiety problems for employees. Any employee wants better corporate environment to work so that he can perform his duties better as well as manage the work very well. This stress will reflect in their work quality as well as overall corporate environment (Addison, 1989).
- Star performers leaving organization to look for a secure and bright future
The future of any organization is in the hands of its future workhorses. These are the Star performers which are the best performers and drive organization towards path of increasing sales and higher revenue. These Star Performers will need a stable and secure environment to thrive and grow in an organization, but with organization looking to lay off people, they will also be insecure about their future. They will look for further opportunities in other companies and all those companies will also look to hire them which will also damage Utilities Co as they will make the competition stiffer.
- Decrease in Customer Satisfaction
The lower employee morale as well as tress will reflect in the job quality of Utilities Co. This will be reduced and will then compound to higher customer dissatisfaction. The customer complaints will rise and due to staff inefficiency, these complaints will rise and keep on compounding and will lead to more and more stress and anxiety for Staff.
- Dissent among other stakeholders
The stakeholders will be worried about corporate reputation of Utilities Co in Share market as well as talent market. The shareholders will take a hit drastically and new talent will be resistant to join Utilities Co which will only increase the problems for them. The Stakeholders will not conform to the policies of CEO and this will not help in moving Utilities Co forward.
- Increase in Occupations health and safety problems
The increase in anxiety, stress will increase other problems for employees who are related to occupational health and safety. This will not only be dangerous to employees of Utilities Co but also to Utilities as any bad incident will damage the repute of Utilities Co.
- Pressures of industrial action from Labor Unions
Labor Union will also strive to protect staff from getting fired. The Labor Union has already given notice of industrial action to Utilities co and any action like Strike and lesser work house will create problems for already struggling utilities Co. The negotiation talks have failed which has also worsened the problems for Utilities Co
Layoffs never work in the benefit for Organizations. This is the result of any organization trying to forget his “institutional memory” by laying off employees to save few bucks of salary, but many a times, they lose their wisest performers in the drive which damages his company in the long term. This only sends the waves of insecurity in the workplace and deteriorates the environment. The ideal worker always works proactively and thinks independent, which makes him an entrepreneur within the organization. Layoffs reduce employee morale and reduce creative thinking within the employees. Any new idea or creativity also bears a great risk of failure and failure in the depressing times can lead to job loss. Any employee in the times of layoff will not try to move towards any new front. Layoffs always destroy innovation within the organization. This happened in the Great Recession as it destroyed the ability of new products which will in turn generate demand in the market and generate newer jobs. Lesser employees which are frightened always generate no innovation for any organization.
There has been an underestimation in corporate regarding the layoff effects as it will always reduce morale as well as increase the problems existing in the Workplace. As per the survey conducted by American Management Association, 90% of the organization which have to undertake downsizing had decline in employee morale. The survivors of downsizing will look for any chance to gain more stability in other organization as an when situation will improve. Also, it can lead to ugly consequences for organization. This “Active disengagement” within the organization will decrease employee as well as employer’s performance. The employees are likely to be unhappy and stressed which will increase the possibility of frauds and money laundering. Payroll reduction doesn’t necessarily translate in higher profits as stock returns also turn negative. The productivity should be equally compensated with compensation increase. The workers should also be given their fair share of success as they have fought hard to bring success to company. When conditions deteriorated, employers turn to employees as the pain point which will hit the stakeholder sentiment. This will also turn in reducing consumer spend and will negatively impact the overall economy (Palmon, Sun & Tang, 1997).Order Now