A property management company operating 30 residential properties in 10 states has been suffering thanks to the recent slump in the housing market. In an effort to improve profits, the company quickly put together a reorganization plan that resulted in a 20% reduction in work force. Unfortunately, not all of the eliminated employees were in positions whose work could be eliminated. In many cases, the work of laid off employees was added to the responsibilities of the existing employees. Now the remaining staff is beginning to feel the strain of the additional responsibilities. Due to the weak economy, these employees have not left because they feel they will have difficulty finding other jobs.
Downsizing is a common tactic among companies wishing to improve their financial position. Many companies do not realize the anticipated increase in profits because the remaining employees suffer from low morale. Any company considering the option of downsizing should take steps to lesson the effect of a downsizing on the remaining employees. Some companies have found that providing support for remaining employees has gone a long way toward staving off poor performance brought on by low morale. Company-wide meetings with the remaining staff, small group question and answer sessions with executive managers, and frequent one-on-one meetings with supervisors are some ways that companies try to boost employee morale (Dessler, 2008).
The property management company probably took the wrong tactic when deciding to reduce its work force. Instead of reducing the total number of jobs across the board, the company should have focused on strategic cost reduction. After all, the purpose of removing 20% of the work force was to reduce the company’s cost of operation. Dan Delmar (2002) notes that many companies make this mistake. The more appropriate action for any company wishing to improve its financial position is to examine the business segments it is currently investing its resources in and choose to eliminate those that it cannot become a market leader in. In the case of the property management company with 30 residential properties, the prudent action would be to examine all the properties and sell of those that make the least profit or cannot be made profitable (Delmar, 2002). In fact, the company might have found that no reduction in force was necessary if the right properties were sold off and the employees moved to other, more profitable locations.
Delmar, D. (2002). Strategic cost reduction. Westchester County Business Journal, 41(52), 38. Retrieved June 21, 2009, from MasterFILE Premier database.
Dessler, G. (2008). Human resource management (11th ed.). Upper Saddle River, NJ: Pearson.