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Factors Influencing the Decision to Downsize Factors Influencing the Decision to Downsize
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Four Strategies for Downsizing Four Strategies for Downsizing
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Vertical Cuts Vertical Cuts
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Horizontal Cuts Horizontal Cuts
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Early Retirement Incentives Early Retirement Incentives
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Downsizing via Natural Attrition and Nonreplacement Downsizing via Natural Attrition and Nonreplacement
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How Do Firms Select Specific Individuals to Lay Off? How Do Firms Select Specific Individuals to Lay Off?
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Vertical Cuts Vertical Cuts
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Horizontal Cuts Horizontal Cuts
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Early Retirement Incentives Early Retirement Incentives
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Downsizing via Natural Attrition and Nonreplacement Downsizing via Natural Attrition and Nonreplacement
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The Effectiveness of Different “Selection Out” Strategies The Effectiveness of Different “Selection Out” Strategies
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Vertical Cuts Vertical Cuts
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Horizontal Cuts Horizontal Cuts
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Early Retirement Incentives Early Retirement Incentives
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Natural Attrition and Nonreplacement Natural Attrition and Nonreplacement
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Best Practice in Managing Layoffs Best Practice in Managing Layoffs
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Make Strategic Decisions before Operational Decisions Make Strategic Decisions before Operational Decisions
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Reengineer Work Processes before Laying Off Workers Reengineer Work Processes before Laying Off Workers
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Put Defensible Performance Measurement Systems in Place before Layoffs Put Defensible Performance Measurement Systems in Place before Layoffs
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Consider Citizenship and Counterproductive Behavior in Layoff Decisions Consider Citizenship and Counterproductive Behavior in Layoff Decisions
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Attend to the Legal Environment of the Downsizing Attend to the Legal Environment of the Downsizing
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Be Realistic in Assessing the Transaction Costs of Layoffs Be Realistic in Assessing the Transaction Costs of Layoffs
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Reconsider the Mix of Incentives Used to Generate Voluntary Exit Reconsider the Mix of Incentives Used to Generate Voluntary Exit
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Do Not Underestimate the Signaling Effects of Layoffs Do Not Underestimate the Signaling Effects of Layoffs
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Discussion Discussion
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Macrolevel Strategic Choices about Downsizing Macrolevel Strategic Choices about Downsizing
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Mesolevel Operational Choices about Downsizing Mesolevel Operational Choices about Downsizing
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Microlevel Choices about Downsizing Microlevel Choices about Downsizing
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Conclusions Conclusions
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References References
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37 Selection Out: How Firms Choose Workers to Lay Off
Get accessDaniel Feldman, Professor Emeritus of Organizational Behavior, University of Georgia
Thomas Ng, Faculty of Business and Economics, University of Hong Kong
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Published:21 November 2012
Cite
Abstract
Although most of the selection literature focuses on how organizations choose outsiders to become members of their firms, this chapter addresses how organizations choose current employees to let go during downsizing. First, we address the factors that lead organizations to downsize their workforce. Next, we examine the organization's strategic decision about how to downsize. When do firms choose to downsize via vertical cuts (elimination of whole units), horizontal cuts (termination of some employees in each unit), early retirement incentive programs, and natural attrition with nonreplacement of personnel? Then, for each of these four strategies, we consider how firms use various criteria (e.g., merit, seniority, job type) to identify specific individuals to let go. In the following section, we consider the relative effectiveness of these four strategies for turning around firm performance and for maintaining the performance and morale of “survivors.” Finally, we discuss best practices in designing and implementing layoffs.
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