Date of Award

1995

Document Type

Thesis

Degree Name

Master of Business Administration

Department

Business

First Advisor

Edward Griffin Smith

Second Advisor

William Gibson

Third Advisor

R. Patrick Akers

Abstract

This thesis will focus on the study of corporate downsizing and its impact on Americans and American businesses. Has it really been the cure-all that most top executives believe it to be, or is it simply a temporary fix that creates additional problems? Whatever the answer, this phenomenon, which began in the early eighties and still exists today, has changed the way corporations do business and the way Americans feel about their jobs.

Over the years executives have made many mistakes as they took a slash and burn type of approach toward eliminating jobs. They found that although this method cut staff, it often removed their most experienced and knowledgeable employees. Replacing them was costly and time consuming, and product quality often suffered as a result. Some executives learned from their mistakes, as they learned to plan well and communicate better to their employees and the communities. This helped companies achieve a smoother transition while downsizing, but it did not totally eliminate the problems it generated.

While downsizing temporarily decreased salary costs, it has been questionable about whether it actually increased the bottom line for American corporations. It is also not certain that it increased productivity or the quality of production. Job burnout and stress are problems that adversely affect these areas in particular, as downsizing continues. Workers are spending more time on the job and less time for leisure or family, which only adds to these problems.

The purpose of this study is to fully investigate the results of downsizing. Specifically, it is hypothesized that perhaps American executives have gone too far in their quest for the lean and mean corporation by continuing to displace workers. There may be a slight improvement to the company's bottom line initially after downsizing, but the true after effects, not only with the lives of many Americans, but also with the profits and productivity of the companies, are difficult to measure.

Since it was difficult to obtain statistics on downsized companies, it was necessary to use various sources to prove or disprove this hypothesis. Those sources included information on productivity, costs, and the affects that downsizing has had on the communities and the survivors. That material proved to be very valuable to this project.

It would be easy to reject the hypothesis if the researcher considered only the fate of the corporations that have practiced these procedures. Since downsizing has been effective for many companies, it is important to consider this fact while trying to make such an important decision. Even for those companies where downsizing did not increase profits, it may have helped them sustain fewer losses. Where would many Americans be today if their companies had failed because they did not downsize? From this point of view, downsizing appears to be a successful venture. From most of the material collected, however, apparently downsizing had just the opposite affect on the lives of millions of Americans and on many companies. It has been extremely costly in the way of production, quality, loss of experience, legal battles and in dealing the low morale of the survivors and their surrounding communities. These facts must be considered to obtain a true picture of the situation and their costs must be factored in when calculating true benefits to the downsized companies.

Another concern is the fact that millions of Americans are being pushed to the limit with their jobs because of a reduced workforce, which is a major consideration when regarding the mental and physical health of the population. Consequentially, it can be theorized that downsizing has started to adversely affect our society as a whole. Perhaps then, it becomes feasible to say that although a certain amount of downsizing was necessary and will continue to be, some corporations may have gone too far in their quests for efficiency and profit. It may be time for executives to look toward other means of making their companies more profitable during these times of increased global competition.

Download

Share

COinS