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Thirteen Alternatives to Downsizing

Research by Workforce and by others has shown that many companies that downsize end up with less productivity or less revenue than when they started. Here are several alternatives to consider.

January 31, 2001
Long-term Staffing Alternatives

  1. Hiring Linking to Vision
    The organization identifies the skills that will be needed to meet its goals, assuring that it is recruiting and hiring people who can meet future challenges.
  2. Cross Training
    By understanding the skill mix of staff today and linking it to the skills needed in the future, the organization allows individual employees to determine what they need to do in order to remain employed.
  3. Succession Planning
    Rather than leaving succession planning to chance, HR should work with line managers to identify likely candidates possessing the types of management and technical skills it needs in various positions.
  4. Redeployment Within the Organization
    Successful redeployment requires (1) a sophisticated career management process so that managers and employees are aware of open positions, and (2) career assessment and development activities that allow people to get ready for positions.
  5. Creating Value-added and Revenue-enhancing Opportunities
    This is an "Employee Buy Out" within the organization where a group of employees create a new business or line of service that the company can market.

Cost-Saving Strategies

  1. A Comprehensive Model
    Automakers, as well as other industries in Japan, have adopted a series of steps they use as an alternative to downsizing. If the first step doesn’t get the needed savings, they move to the next. Areas of focus include compensation, hours, wages and placement.
  2. Reduced Hours
    A policy is established that either places everyone in a particular job category on a flexible working arrangement or creates a flex-pool made up of volunteers from the department. The goal is to reduce the number of hours worked by each employee.
  3. Lower Wages
    Wages are reduced in order to save money.
  4. Attrition
    Waiting for people to retire or leave on their own can occur either through natural attrition or by offering voluntary retirement or similar packages.
  5. Alternative Placement
    Offer early retirement incentives to pension-eligible employees in a specific area.
  6. Leave of Absence
    People are offered a leave of absence with full benefits for a specified period of time to help an organization weather a downturn. Although people are promised a job upon completion of the leave, it may not be the same job or at the same pay level.
  7. Employee Buy-Outs
    The company allows employees to buy the operation that was slated for closing and set up their own businesses.
  8. Shared Ownership
    The company allows employees to trade pay increases or pay cuts in return for company stock.