Employee Downsizing

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Due to the loss of experienced workers, companies incurred expenditure on overtime pay and employment of temporary and contract workers. It was reported that about half of the companies that downsized their workforce ended up recruiting new or former staff within a few years after downsizing because of insufficient workers or lack of experienced people. The US-based global telecom giant AT&T was one such company, which earned the dubious reputation of frequently rehiring its former employees because the retained employees were unable to handle the work load. AT&T frequently rehired former employees until it absorbed the 'shock' of downsizing. It was also reported that in some cases, AT&T even paid recruitment firms twice the salaries of laid-off workers to bring them back to AT&T. A former AT&T manager commented, "It seemed like they would fire someone and [the worker] would be right back at their desk the next day." Justifying the above, Frank Carrubba, Former Operations Director, AT&T, said, "It does not happen that much, but who better to bring back than someone who knows the ropes?" Very few people bought this argument, and the rationale behind downsizing and then re-hiring former employees/recruiting new staff began to be questioned by the media as well as the regulatory authorities in various parts of the world.

Meanwhile, allegations that downsizing was being adopted by companies to support the increasingly fat pay-checks of their senior executives increased. AT&T was again in the news in this regard. In 1996, the company doubled the remuneration of its Chairman, even as over 40,000 employees were downsized. Leading Internet start-up AOL was also criticized for the same reasons. The increase in salary and bonuses of AOL's six highest paid executive officers was between 8.9% to 25.2% during 2000. The average increase in salary and bonus of each officer was about 16%, with the remuneration of the CEO exceeding $73 million during the period. Shortly after this raise, AOL downsized 2,400 employees in January 2001. Following the demand that the executive officers should also share in the 'sacrifice' associated with downsizing, some companies voluntarily announced that they would cut down on the remuneration and bonuses of their top executives in case of massive layoffs. Ford was one of the first companies to announce such an initiative. It announced that over 6,000 of its top executives, including its CEO, would forgo their bonus in 2001. Other major companies that announced that their top executives would forgo cash compensations when a large number of workers were laid off were AMR Corp., Delta, Continental and Southwest Airlines. In addition to the above, companies adopted many strategies to deal with the criticisms they were facing because of downsizing.

Tackling the Evils of Downsizing

During the early 21st century, many companies began offering flexible work arrangements to their employees in an attempt to avoid the negative impact of downsizing. Such an arrangement was reported to be beneficial for both employees as well as the organization. A flexible working arrangement resulted in increased morale and productivity; decreased absenteeism and employee turnover, reduced stress on employees; increased ability to recruit and retain superior quality employees improved service to clients in various time zones; and better use of office equipment and space. This type of arrangement also gave more time to pursue their education, hobbies, and professional development, and handle personal responsibilities. The concept of contingent employment also became highly popular and the number of organizations adopting this concept increased substantially during the early 21st century. According to the Bureau of Labor Statistics (BLS), US, contingent employees were those who had no explicit or implicit contract and expected their jobs to last no more than one year. They were hired directly by the company or through an external agency on a contract basis for a specific work for a limited period of time.

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