"Managing a Downsizing Process"

Wayne Cascio and Peg Wynn

Human Resource Management

Winter 2004, pp. 425-438

This article identifies five "gaps" between knowledge and practice in employee downsizing efforts. Research shows that:

• Targeted cuts are the most profitable way to downsize, but practitioners often believe that attrition is more profitable
• Across the board cuts in workforce do not necessarily improve financial performance, but practitioners expect it to do so, without taking into consideration additional factors
• Involving employees in the process can be very beneficial, but practitioners often do not do this
• Breaching the psychological contract has serious consequences, but practitioners often act as if it does not
• It is important for employees to feel they have been treated fairly, but practitioners often act as if it does not matter

The authors also summarize what factors are likely to enhance the effectiveness of downsizing actions:

• Carefully consider the rationale behind employment downsizing
• Consider the virtues of stability
• Before making any final decisions about downsizing, executives should make their concerns known to employees and seek their input
• Top management should lead by example, and use downsizing as a last resort
• If employment downsizing is unavoidable, be sure that employees perceive the process of selecting excess positions as fair and make decisions in a consistent manner
• Communicate regularly and in a variety of ways in order to keep everyone abreast of new developments and information
• Give survivors a reason to stay and prospective new hires a reason to join
• Train employees and their managers in the new ways of operating
• Examine carefully all management systems in light of the change of strategy or environment facing the firm

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"Linking Goals to Monetary Incentives"

Edwin Locke

Academy of Management Executive

November 2004, pp. 130-133

The author of this article discusses four different methods of combining goal setting with incentives, and identifies the pros and cons of each of the four methods:

• "Stretch" Goals with Bonuses for Success—This method assigns people difficult (or "stretch") goals. Individuals receive a substantial bonus if the stretch goal is met, and they receive no bonus if the goal is not met.
  • Pros
    • Employees have strong incentives to attain the goals.
    • There is no ambiguity about exactly what must be accomplished to receive the bonus.
  • Cons
    • There is considerable incentive to take risky "short-cuts" to try to get the bonus.
    • There is considerable incentive to think short-term and sub-optimize long-term results in order to receive the bonus.
    • There is considerable incentive to cheat in order to receive the bonus.
    • It can be very demoralizing for hard-working employees who barely miss achieving the goal and get no bonus at all.
• Multiple Goal Levels with Multiple Bonus Levels—This method uses the approach that higher levels of bonus are received as higher levels of goals are attained.
  • Pros
    • Competent employees receive some level of bonus for their achievements.
    • There is less temptation to take risky short cuts or to cheat.
  • Cons
    • Employees may be less motivated to try for the highest level of performance.
    • There is no external motivation to exceed the top goal.
• A Linear System—In this method, the amount of bonus received is in proportion to the exact degree of performance achieved. Even small increments in performance improvement get some sort of reward.
  • Pros
    • There is no "loss" to the employee of just missing a goal level.
    • There is even less temptation to take risky short cuts or cheat than in the multiple goals method.
    • There is no upper limit on the bonus.
  • Cons
    • Some people would not be motivated to "stretch".
    • Some companies would have trouble compensating everyone for their achievements.
    • A meaningful linear system may be hard to design for some jobs, making certain employee perceive the system as unfair.
• Motivate by Goals but Pay for Performance—In this method, employees are given specific and challenging goals, but the level of bonus for the actual results is not set in advance. The actual bonus takes into consideration the full context of the situation in which the employee performed.
  • Pros
    • The flexibility of the method takes into consideration unanticipated events that may affect performance.
    • The comprehensiveness of the method looks at all relevant factors.
  • Cons
    • The boss must be knowledgeable about the full context in which the employee is performing.
    • The boss must be objective to minimize favoritism or bias.

The author concludes by providing a four-step plan to set up effective bonus systems. In Step 1, determine exactly what you want people to do or accomplish. In Step 2, set clear and challenging goals for desired outcomes. In Step 3, determine which goals will need to be integrated with other parts of the organization. In Step 4, pick the appropriate type of bonus, with full awareness of the pros and cons.

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"Managing Responsibility: What Can Be Learned from the Quality Movement?"

Sandra Waddock and Charles Bodwell

California Management Review

Fall 2004, pp. 25-37

A number of companies have focused their attention on the management of corporate responsibility. Pressures have been increasing to do so as a result of recent difficulties experienced by Enron, Nike, and others. This article argues that there are a number of similarities between the development of Total Quality Management and the current movement towards Total Responsibility Management. The authors define corporate responsibility as "the ways in which a company's operating practices (policies, processes, and procedures) affect its stakeholders and the natural environment."

The article compares quality management and responsibility management along the following dimensions:

• Multiple Meanings—Just as the word "quality" has had multiple meanings in the literature, the word "responsibility" also has multiple meanings, including "taking blame or accepting accountability for activities and actions", "taking charge of something", and "having the capacity for making morally acceptable decisions"
• Satisfying Stakeholders—Whereas the quality movement strives to satisfy customers, the responsibility approach strives to similarly satisfy stakeholders and engage them in dialogue.
• Measurement—In the early days of the quality movement, there were concerns about how to measure quality. How to measure responsibility has followed a similar pattern, and there are now a number of good measures.
• Making a Business Case—In the quality movement, some people questioned whether a focus on quality would generate more costs or profits. Similar questions are now being raised about responsibility management.
• Assurance Personnel—The separate quality structures eventually gave way to quality being seen as an essential role of everyone involved in production. A similar evolution is likely to occur for responsibility management.

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Running Today's Factory: A Proven Strategy for Lean Manufacturing

Charles Standard and Dale Davis

Hanser Gardner Publications, 1999

Co-author Charles Standard has recently joined the GP Deltapoint staff. To help celebrate this event, we would like to take this opportunity to introduce you to Running Today's Factory: A Proven Strategy for Lean Manufacturing, which was a winner of the Shingo Prize for Excellence in Manufacturing. The book is an especially clear presentation of the lean manufacturing approach. It is very understandable, yet avoids oversimplification. It is an excellent book for someone who wants to understand the full picture of why and how lean manufacturing works. Practical examples are provided throughout the book to illustrate the key points.

Chapters in the book include:

• Lean Manufacturing Overview—This chapter explains what lean manufacturing is, identifies the benefits of lean, discusses the origins of lean manufacturing and the Toyota production system, and introduces the crucial concepts of cycle time, value-added activity, production time line, and respect for humans.
• Manufacturing as a Management Strategy—This chapter covers the importance of manufacturing strategy in general, and focuses on the reduction of cycle time as a strategic source of competitive advantage. Guidelines are provided for reducing lead time.
• Operational Stability and Continuous Improvement—Under operational stability, this chapter discusses standardized work, supplier involvement, productive maintenance, robust process design, and robust product design. Overall system improvement, kaizen value-stream mapping and production flow diagrams are also addressed in the chapter.
• Just-In-Time Production—This chapter looks at level, mixed production (heijunka), takt time, single-piece flow, cellular manufacturing, line balancing, and just-in-time delivery.
• Pull Production Control—Push and pull systems are clearly contrasted in this chapter. Advice is provided on implementing pull systems.
• Achieving Quality at the Source—This chapter covers such topics as the cost of quality, quality strategies, approaching zero defects, and mistake-proofing.
• Quick Setup and Small Lot Production—The competitive advantages of small lot production are clearly delineated in this chapter.
• Measuring Today's Factory—Traditional measures are reviewed, and then the chapter provides a list of 45 "enlightened" measures that effective companies are now using to manage their factories.
• Transforming Today's Factory—Top management commitment is the most essential element of a successful transition. This chapter also provides practical advice on getting started, managing the transformation, and dealing with organizational culture and change.

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