Strategies for Retrenchment: Reconciling Individual and Organizational Needs

Strategies for Retrenchment: Reconciling Individual and Organizational Needs

Cynthia Hardy McGill University

Introduction Retrenchment - cutting back on human, material and financial resources - has become a familiar problem in many countries. Unemployment rates in both Europe and North America have risen dramatically, indicating redundancies in both public and private sectors, and in blue-collar, white-collar and managerial ranks, as the result of adverse economic conditions, government expenditure policies and technologcal change. Sterile statisti- cal data, however, hide a very human problem: employees are having to come to terms with the loss of their jobs through no fault of their own. A number of studies have emerged recently emphasizing the importance of accommodating employee needs during cutbacks. Such pleas may be ignored, however, in a climate of cutback when organizational needs often taken precedence in efforts to save costs.

If employers are to be persuaded to take into account employee needs, they need to be made aware of the commercial advantages associated with such an approach, while the researcher needs to acknowledge the importance of organizational concerns during cutbacks. This article explores some economic reasons for recognizing individual concerns and presents a framework to help managers design retrenchment strategies which accommodate the needs of both organization and employee. A study of eight organizations, which embarked on a variety of cutback programs involving different ranks of employees, is discussed, showing how the framework can be put into practice.

Organizational and Individual Needs During Retrenchment Retrenchment is a strategy that is employed in response to organizational needs. For whatever reasons - declining markets, government funding cuts - cost cutting is called for. In such circumstances, attention tends to be focussed on the organization rather than the individual. Sometimes the problems precipitating retrenchment are severe enough to put the

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organization in a state of crisis, in which case decision making is likely to be reactive (see, for example, Whetten, 1980). Even if this is not the case, the fact that factories are being closed, jobs phased out and departments cut back may make managers feel that they have enough to worry about without having to take into account individuals who will shortly cease to be employees. Advance notice, severance pay and outplacement aid may be dismissed as representing additional expenditures which the company can ill afford. Voluntary severance will meet with similar disapproval: not only is there the additional cost of the incentive but the organzation runs the risk of losing its most experienced and talented personnel. Managers will be looking for ways to fire workers, close plants, save costs and remove overhead as cheaply and as quickly as possible. They will want to maintain as much control over the process as possible - orchestrating who leaves and when, and keeping those with critical skills in the organization (see, for example, Bluestone and Harrison, 1982; Batt, 1983; Harrison, 1984; Price and D’Aunno, 1983).

Studies which simply cite the moral duty of organizations to care for the wellbeing of their personnel would appear unlikely to convince employers to change their behaviour, if the literature on some of the more “insensitive” examples of handling layoffs is to be believed (for example, Buss and Redburn, 1983; Levie et al., 1984). All too often, it seems, altruisticvalues are low on the list of priorities when financial concerns become pressing constraints. Many employers will need to be convinced that ignoring employees will have a detrimental effect on the future of the firm; they must be convinced that accommodating their needs is not simply a humanitarian gesture and will provide very real benefits for the organization.

There are many reasons why employee concerns should not be neglec- ted. The impact of retrenchment on continuing employees is often ignored. Many organizations facing retrenchment are not going out of business completely: they are cutting back in some areas to protect the viability of the enterprise as a whole. Consequently, suruival is as important as retrenchment, and survival depends on the employees who remain. These individuals are expected to be productive and creative even though they have seen the jobs of their colleagues disappear, and may face an uncertain future themselves. Morale will be fragile, and unlikely to withstand many unsympathetic or insensitive actions on the part of management (Greenhalgh, 1983; Luce, 1983).

Surviving employees quickly learn how their peers have been dismissed. Some studies have suggested that, if perceived to be victims of unfair practices, the morale and commitment of continuing employees suffers. This can translate into an exodus of employees when economic conditions per- mit or recruiting problems if prospective candidates learn of the company’s record (for example, Stybel, 1978; Morin and Yorks, 1982).

Union resistance is another factor to be taken into consideration. Factory occupations have occurred in Britain where workers have attempted to prevent closure or win better conditions by delaying plans, impeding the sale

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of assets, interfering with the the transfer of production and generating media and public disapproval (Hemmingway and Keyser, 1975; Clarke, 1979; Hardy, 1985a; 198513). Union disapproval can also take the form of strikes, difficult contract negotiations, noncooperation and political initia- tives (Gordus et al., 1981).

The organization has to consider its public image. Unfavourable publicity can provoke political intervention and leave customers and other employees worried about the future of the organization. Finally, organizations which violate their social responsibilities can face legal action (Lehr and Middlebrooks, 1984; Eves, 1985).

Ignoring the short-term impact of retrenchment on employee attitudes because of a preoccupation with saving money or exercising control in the short term will translate into long-term costs. If the problems discussed above arise they will make the implementation of cutbacks more difficult and more expensive. Since retrenchment is the key to survival, managers will be compromising the future ofthe enterprise. So whether for long-term commercial considerations, or as a result of humanistic values, managers need to pay considerable attention to the human resource element of retrenchment.

A Framework for Retrenchment How can managers reconcile a commitment to the individual with organizational needs? The latter will be important if short-term constraints limit the freedom of action, for example, in the event of a very bad economic situation, the lack of financial reserves or the threat of losing highly quali- fied personnel. Meeting individual needs is often necessary to protect the longevity of the organization. This section shows how retrenching organizations are faced with these long- and short-term pressures (see Figure l ) , and how strategies can be devised to accommodate them.

In Figure 1 [ 11 represents a situation in which individual needs are considered important, while the organization is unconstrained by cost and control issues. This might be typical of a large company which, while need- ing to rationalize operations, has sufficient resources to be able to circum- vent short-term pressures. Since operations are continuing, the morale of survivors is important; they will not provide the necessary commitment if they have seen their colleagues badly treated and are worried about their own future. Managers may also be reluctant to antagonize unions or attract publicity that could shake customer confidence or provoke government intervention. As a result, they are willing to conduct a gradual reduction and provide support.

In Figure 1, [2] reflects the situation in which managers must reconcile both economic and social considerations. For reasons such as those given above, it is important to maintain favourable attitudes among employees while at the same time being constrained by cost and control factors. The competitive and financial situation may be so bad that action must be taken immediately, with little money available to cushion the blow for those affected,

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Short-Term Organization Needs

I Important Unimportant

(21 I Important 111 + Individual Needs

Unimportant [41

FIGURE 1

or if future success depends on keeping people with critical skills in the organization then layoffs must be carefully controlled to prevent market- able people leaving the organization.

In the third situation [3] employee attitudes are considered unimportant, leaving the organization free to pursue economic goals. Such a situation may characterize a company which is going out of business completely. Here the pressure of bankruptcy makes short-term needs paramount, while the complete discontinuance of operations means that maintaining effective employee relations is largely irrelevant.

In [4] the situation exists where management is constrained by neither issue. This may characterize some “asset stripping” and divestment decisions of large conglomerates. If an entire business is being divested, there is little pressure on management to accommodate employee needs, and if the divestment is occurring solely to make a financial gain (as opposed to restoring competitiveness and profitability), Short-term pressures would be minimal.

Of particular interest are situations [ 11 and [2] in which managers have defined the protection of employee needs as crucial to the success of the downsizing exercise. This requires amore critical appraisal of the retrenchment methods: cuts cannot be made solely on the basis of economic criteria; their impact on employees must now be taken into consideration. As a result, the choice of retrenchment strategy becomes problematic. Figure 2 illustrates this issue.

In situation [ 11 the organization, since it has time on its side, should consider alternative methods of retrenchment such as attrition, early retirement and worksharing to protect employee needs. Attrition is one of the least painful ways of reducing personnel and should be one of the first responses to theneed for cuts (Hammerman, 1964; Hercus, 1978; Ellig, 1983). However, since it is a relatively slow process, its use is confined to those organizations with enough lead time to allow for the reduction of personnel. Early retirement is a way to speed up attrition and has the advantage of not being pefceived as a redundancy program (Hammerman, 1964; Hercus, 1978; Ellig, 1983; Gravitz, 1983). I t can also be used to reduce the number oflayoffs. Worksharing is aresponse that has attracted alot ofattention (see,

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Short-Term Organization Needs

Individual Needs

Unimportant

- alternative methods Important - voluntary dismissals

- support measures

Unimportant - free choice

FIGURE 2

141

Important

- voluntary dismissals with conditions

- enforced dismissals - support measures

131

- enforced dismissals - no support

for example, Eleen and Ashley, 1971; Hercus, 1978; McNeff et al., 1978; Sadlier-Brown, 1978; Meltz et al., 1981; Benson, 1982; Blyton, 1982). It reduces the need for layoffs, enabling skilled employees to remain with the organization and maintaining a workforce should demand improve. Pro- ductivity may increase through reduced absenteeism and increased flex- ibility and commitment.

If redundancies become necessary, the company can afford voluntary severance which has considerable social benefit in that only those workers who so choose leave the organization. Those staying on will view a voluntary program much more favourably - perceiving the terminations as a matter of choice rather than an arbitrary decision by the firm - which will protect morale and commitment. Support measures, including advance notice, severance pay, consultation and communication, outplacement, redeployment and retraining, should be used to offset the impact of redundancies.

Advance notice has stirred up considerable controversy. Employers have objected on the grounds that productivity and morale fall, layoffs or closure appear not to be final and could be reversed, and it results in people leaving before final production requirements have been met. However, most of these fears do not appear to materialize. People do not leave early on any significant scale, which is hardly surprising given that so many layoffs are linked to adverse economic conditions which make other jobs difficult to find, and severance benefits are often tied to a specific termination date. Employees derive considerable benefit from advance notice: it improves the chances of re-employment; it allows layoffs to be staggered and provides time for assistance in outplacement or retraining to be organized; it provides a cushion for the shock of displacement; it gives the community a chance to adjust, which may be particularly important in the event of a plant

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closure in an isolated or depressed area. (See Weber and Taylor, 1963; Shultz and Weber, 1966; Stern, 1967,1969; Ullman, 1969; Portis and Suys, 1970; Eleen and Ashley, 1971; Sexton, 1974; Carrothers etal., 1979; Gor- dus et al., 198 1 ; Morin and Yorks, 1982; Batt, 1983.)

Consultation and communication help LO dispel the rumours and myths that inevitably accompany layoffs and show that the company is trying to be honest with its employees (Stybel, 1978; Greenhalgh, 1983; Sutton, 1983). Consultation between management and employees can be a useful way to address the problems associated with layoffs, such as o r r tp l acemand

Outplacement aid helps employees to find new jobs and shows that the company does care about its employees and is prepared to carry out certain responsibilities, even towards those who are leaving, allaying the fears and insecurities of continuing employees. These services are often not very costly. (Also see Hammerman, 1964; Foltman, 1968; Stem, 1969; Ullman, 1969; Por- tis and Suys, 1970; Hercus, 1978; Fuller et al., 1982; Levine, 1983, Perigoe, 1980.) Retraining is a more complex way of helping the employee find a new job, requiring more commitment and money on the part of the company. The employer pays forthe cost of retraining, which may be done by a professional agency, a government department, or inhouse. The travel costs and living expenses of the individual while retraining may also be paid. (See, for example, Monthly Labour Review, 196 1; Hammerman, 1964; Burke et al., 1983). Transfers reduce job losses through the redeployment of workers to other parts of the company. Relocation expenses are usually provided and additional financial assistance may be available. Employees may be offered a free trip to evaluate the new location (Lipsky, 1970).

Severance pay is compulsory in Britain, although only minimal pro- visions exist in North America. It helps compensate individuals who have lost their jobs, providing a cushion while they are looking for a new job. Severance pay is important not only in the financial assistance it provides, but also in demonstrating that the company values its employees and cares for their well-being (Luce, 1983).

In situation [2], the organization has to weigh the need to make quick and effective cuts against the need to protect employee morale. Short-term constraints preclude the adoption of alternative methods of downsizing. Voluntary dismissals may be possible with conditions which prevent the loss of key skills or experience. Enforced dismissals may be necessary if voluntary measures fail to provide sufficient control or fail to make the necessary cost savings quickly enough, or if the company is unable to give lucrative incentives for voluntary severance. Enforced dismissals are cheaper since incentives are unnecessary. They also afford more control over who is terminated, allowing skills and performance to be protected or specific departments to be phased out. If selective dismissals are used, some form of support will be required, such as those discussed above. These help mitigate the trauma of enforced job loss, helping those who are terminated and reassuring continuing employees.

grievances, creating trust and understanding. -\

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In situation [3], the company feels it can afford to disregard employee needs it will choose those action that best serve organizational needs. Cost, time and control contraints will lead to enforced dismissals and an absence of support measures. Minimum standards as dictated by law may be the only protection for employees. Britain has fairly comprehensive protection for the employee. Employers must give three months notice if more than 100 redundancies are involved. They must pay compensation of one-half a week‘s pay per year of service to employees aged eighteen to twenty-one, one week‘s pay to employees aged twenty-two to forty, and one-and-one- halfweek‘s pay to employees aged forty-one to sixty-five. Employees must have two years service to qualify and can receive up to a maximum of twenty years service. The state reimburses 4 1 percent of this amount from a fund set up in 1965. In Canada, federal legislation provides for some compensation and advance notice of up to sixteen weeks. The provinces differ, with Quebec and Ontario being the most progressive. In the U.S., legislation is, for the most part, nonexistent although some states, such as Maine, have attempted to introduce plant closing legislation (for details see, for example, Sexton, 1974; Carrothers, 1979; Bluestone and Harrison, 1982; Car- roll, 1984; Harrison, 1984).

In situation [4] employers are free to choose the retrenchment program they desire, subject to legislative requirements.

TABLE 1 The organizations Imperial Chemical Indusmes ICI the British chemical manufacturer announced the timetable for the closure of “Mountside” works in 1976, to take place over the following five years, with the works closing in 1980. The factory, situated in the northwest of England, employed more than 1,000 blue- and white-collar workers, the bulk of whom were to leave between 1976 and 1978.

In June 1983, CIL, a divisionalized Canadian manufacturer and distributor of chemical and allied products, announced the partial closure of an explosives factory in an isolated community in Northern Ontario. 176 people were involved, mainly blue-collar employees, of whom 53 would continue to work in the ongoing part of the operation.

“Whitefields”;, a manufacturing multinational offered, in November 1983, a voluntary early retirement option to all levels of employees with twenty-five or more years of service in its Canadian operations. Of some 1,200 eligible employees, 432 accepted the offer.

Air Canada, the state owned airline, offered voluntary serverance to all levels of mana- genalstaffinAugust 1982aspartofaseriesofcostcuttingmeasures. Nearly 18 percent, more than 600 people, took advantage of it.

“Andersons” is an engineering multinational. In 1978, it announced the loss of 1,000 white- and blue-collarjobs ina Scottish factory. Attempts to bring in anew product to save the remaining 500 jobs failed, and the factory closed completely in 1980.

Atomic Energy of Canada Ltd. (AECL), the state owned nuclear agency, was forced to lay off more than 500 employees in its Candu (manufacturing) operations in 1983, in response to an industry-wide recession.

Midville Area Health Authority (AHA), part of the British National Health Service (NHS), was responsible for the closure of Withybrook hospital, a small hospital treating mainly chest patients. The closure was proposed in August 1977, in an attempt to save money at a time of government spending cuts and was subsequently given ministerial approval in 1979.

In September 1976, Northville AHA tried, but failed, to close Main Road Maternity Hospital over a two-vear period in a bid to reduce a f 1 million defiat and cut the number of maternity beds.

~~

* The names of Whitefields, Andersons, Northville and Midville have been disguised at the request of their managers.

28 1

The Study This section documents the experiences of eight organizations (see Table 1) to illustrate how the framework can be put into practice: showing how strategies were adopted to respond to the organization’s particular pressures (see Figure 3).

Unimportant

CIL

[11

Important

Importan

Air Canada Middle

PI Individual Needs

Unimportant [41 [31

Northville

FIGURE 3

[ 11 Focussing on Human Relations ICI management considered it crucial to protect employees needs. Of particular concern was union resistance which could escalate to other factories and damage the division as a whole. Resistance would also jeopardize the complicated rundown schedule which had been devised to allow the transfer of production to other sites. ICI had no wish to alienate the unions with the prospect of other closures in the near future. Cost issues, however, were less pressing. ICI had beenvery profitable in the late 1970s (Pettigrew, 1985) and d’ivisional managementwas willing to subsidize the closure. The works manager had considerable latitude in how he carried it out, admitting that he was “very liberal with the company’s money.”

So, how was this money spent? The company had issued a statement shortly before the closure was announced, saying that enforced dismissals would occur “only as a last resort.” The reduction of personnel was handled by voluntary severance - payments of around two to three times the state minimum were accepted by 40 per cent of the employees. The remaining reduction was accommodated by attrition and redeployment.

A committee was set up, consisting of managers and senior stewards, to protect employees needs. In this way the stewards were able to have a posi- tive impact on the rundown process. The company provided support to those employees who left the company. A redeployment manager was appointed to help these people find other jobs. He set up a ‘3ob shop” where vacancies were posted. The company advertised on behalf of its employees, and provided paid time off to attend interviews, help with applications, investment counselling and retraining.

As a result, the closure proceeded according to the timetable, accepted by the unions who considered ICI one of the better employers in this respect.

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NO industrial amion was taken, all discussions were handled at the local level, and there were no grievances. Productivity remained stable, absenteeism and customer complaints fell. Employees had no criticism of how the company had handled the closure and were grateful for what had been done for them.

CIL was concerned about employee attitudes for a number of reasons. Managers were anxious to avoid sabotage, nor did they want to alienate the union when contract negotiations were coming up. The morale of continuing employees was an important factor, given the continuation of part of the operation. As with ICI , there was a prospect of further cuts and, in fact, the remaining operation was subsequently closed in 1985. Finally, the company wanted to avoid bad publicity. An earlier closure, handled by a sub- sidiary, had attracted considerable criticism from the press which, it was felt, had damaged CIL’S reputation in the eyes of its employees, its customers and the public. The cost of the program did not present any major problems. Divisional management were committed to providing a package which would protect their employees and had secured approval from the senior executive level for the amount of money (close to $1 million) which it would cost.

CIL provided a minimum of $4,000 to all employees regardless of age or service, since many were of relatively short service, and all would have difficulties in finding alternative work in such an isolated community. The layoffs were dictated by seniority, according to the collective agreement. However, the company also offered an early retirement package to free up some of those jobs. Placement committees, with employee and management representation, were established to deal with outplacement needs. In this respect, job search counselling and expenses were provided, relocation expenses paid, and time off to attend interviews made available without loss of pay.

As a result of these measures, the partial closure was carried out without sabotage or union resistance. Productivity rose and the scene was set for the successful closure of the remaining part of the operation.

The main factor guiding Whitefields was its full employment practice which effectively guaranteed no enforced layoffs and which the company was unwilling to compromise. As a result, the downsizing exercise was carried out in a purely voluntary manner and in such a way that it was not viewed by staff as a form of layoff. An early retirement scheme was considered the only way to achieve this.

Management was committed to this approach and the cost involved - two year’s pay over the following four years. In addition, had insufficient num- bers applied, the company was willing to carry the additional overhead rather than invoke more drastic measures.

[2] Balancing Individual and Organizational Needs Air Canadawas anxious to protect employee needs since layoffs &ed out under aprevious administration in the early 1970s had provoked considerable

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criticism. With the arrival of the new CEO in the mid-1970s attempt was made to improve employee relations. Management was unwilling to compromise the new human relations philosophy with enforced dismissals and, as a result, offered a completely voluntary program. However, the company did have to address one organizational concern: the loss of people with key skills to the competition. This led to the company placing res- trictions on redundancy and reserving the right to refuse some applications. While there was an effort to keep these refusals to aminimum, some people (around twenty) were not able to take advantage of the program.

Severance pay of one month’s pay per year of service, up to eighteen months was provided. This cost was not considered a problem for the company as long as it could be demonstrated that it would be recouped with the reduction in managerial overheads. Outplacement aid was not considered necessary because the program was voluntary and most of the people were, in effect, taking early retirement and so were not looking for other work.

Andersons tried to save jobs by conducting an international search to find a buyer for the factory and equipment. While this proved unsuccessful, a local worksearch indicated a demand for the engineering skills of the employees and the company helped set up a small subcontracting firm on the site of the original factory, providing jobs for around 200 employees. Managers embarked on an extensive dialogue with unions to explain the reaons behind the closure, and provided redundancy compensation of around twice the state minimum.

The company took these steps to avoid union resistance. Employees at the plant had a reputation for militancy - 4 percent and 18 percent of available hours had been lost due to industrial action in 1976 and 197 7 . The factory was located in an area which had been associated with a number of factory occupations in the early 1970s. Local stewards had secured pledges of support from other British factories and so the prospect existed for local opposition to escalate into a company-wide strike. Short-term constraints dictated firm and speedy action. The loss of $256 million (us) in 1978 had put the company in a precarious financial situation, and the increasing ner- vousness of investors had put pressure on management to find a way to reduce overhead and improve the company’s balance sheet.

AECL managers were conscious of the difficulties their employees would experience in dealing with layoffs. Many professional employees were involved who had previously been immune to redundancies and who would find it difficult to adjust to this new state of affairs and find new jobs in the depressed industry. Management was also anxious to avoid undue publicity which might provoke awkward political questions. AECL also had to accommodate organizational needs, in particular the loss of specialized skills which it considered crucial to the future success of the streamlined operation. Another constraint was cost: a voluntary program was initially ruled out because of the additional funds management felt would have been necessary to provide an attractive enough incentive for people to leave.

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AS a result of these concerns, the decision was made to select individuals for redundancy on the basis of keeping critical skills in the organization. To help those who lost their jobs, compensation was paid and an extensive outplacement operation put into effect. This program provided job search techniques, “ad-tracking,” secretarial services, advertising on employees’ behalf, the posting of vacancies, and the organization of a job fair in which prospective employers were invited on site to interview employees. A Joint Planning Committee was set up to involve employees, as required by federal legislation; the company also established Joint Manpower Adjust- ment Committees for each of the four employee groups to resolve their specific outplacement needs and grievances.

Midville managers were anxious to avoid any action that might provoke resistance to the closure. Recommendations for hospital closures are made by managers and voted on by the AHA, which consists of a number of different interest groups. (This was the situation following the 1974 Reorgan- ization of the NHS.) One of the more powerful groups is local councillors making up one-third of the membership. These individuals are elected locally and, as a result, are considered susceptible to public opinion. Con- sequently, public outcry at a proposed closure may translate into a large block voting against management. In addition, if the Community Health Council (CHC), which represents the interests of the patients, objects to a proposed closure and submits an alternative plan, it must be taken into account. If the AHA still wishes to go ahead with the closure, it must refer the decision to the regional level of the NHS and, if the CHC’S proposals are no1 accepted there, to the secretary of state, who may or may not confirm thc decision to close. As a cabinet member, the minister is influenced by a veq different constituency. During the mid-l97Os, a number of proposed hospital closures had led to occupations by doctors, nurses and ancillary staff which had caused the government considerable embarrassment. Had ar occupation been threatened at Midville, management felt that ministeria approval would have been unlikely. Managerial actions were constrained however, by national policies on redundancy, compensation and unior negotiations. In addition, the E l million deficit put considerable financia pressure on the area.

The first step taken to avoid resistance was extensive consultation Management also offered all employees of the hospital the choice betweei redundancy (permanent layoff) with compensation or a new job with th same conditions (e.g., hours, shifts, type of patient, etc.) as far as it was POS

sible. These actions built credibility for management, providing an indica tion that they were trying to do the best they could for their employees, an’ uith respect to the unions. Management was careful not to antagonize th doctors and offered them, in compensation, new wards in anothe hospital.

So, although the CHC opposed the closure and sent the decision up to th minister, management was able to maximize the changes of approval.

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I thought that there was a good chance of this being accepted by the minister: the case was well made out; the local opposition was un- derstandable; and there was no real threat of the union behaving in such a way that would embarrass the government (manager).

[ 31 Ignoring Individual Needs Northville, on the other hand, incurred considerable resistance. The staff at the hospital tried to stop the closure by setting up an action committee. They wrote to GPS, lobbied MPS, appeared on television and radio, spoke at a local trades council meeting, contacted the press, and presented the chair- man of the AHA with a petition of 10,000 signa:ures against the closure. The action committee worked with the two CHCS in the area. The union ex- pressed “serious concern” at the proposal, and one of the doctors at the hospital took a public stand against the closure. The combined opposition of staff, unions, doctors and the public led the AHA, in August 197 7 , to vote to retain the hospital, against management’s recommendations and at a cost of f500,000 a year at a time of severe financial problems.

Much of the blame lay with management. It was criticized by a committee of inquiry for its previous bad handling of other hospital closures and for its refusal to consult with the unions. These actions had produced alienation among a variety of groups which considered the standard of management to be “abysmal” and who were not convinced of the need to close the hospital.

Conclusion: Using the Strategies Effectively Seven of the organizations perceived individual needs to be crucial in terms of both the successful implementation of the cutbacks and the longer term survival of the company. Three were relatively uncontrained by short-term constraints and so relied on alternatives to enforced dismissal where possible and provided support measures. Where organizational needs constrained the room for manoeuvre, managers were forced to place some conditions on the layoff process. Nevertheless, with the use of limited con- trols, consultation, outplacement and other support measures, they were able to successfully balance organizational and individual needs.

Northville provides a very different example. Short-term cost and control issues were considered paramount: the budget deficit had provoked a flurry of cutback activity in which two thirds of the hospitals in the city had been threatened with closure, reduction or redesignation. Employee needs received less consideration. Ironically, this lack of attention provoked the opposition which ultimately prevented managers from realizing their plans and making the required cost savings. In effect, Northville incorrectly dismissed the importance of employee needs.

The article has emphasized the importance of maintaining a broad and long-term perspective when assessing the organizational implications of individual concerns, arguing that the willingness to accommodate employee needs translates into such benefits as increased productivity and commitment,

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/md improved industrial relations. Ignoring them CZUI be counterproduc- tive, as Nofiville clearly shows. It has also shown that responding to these needs can be achieved without compromising more immediate organizational needs, if retrenchment strategies are chosen correctly.

In Some situations, managers may accurately conclude that employee needs are irrelevant to the achievement of organizational goals, in which case the framework suggests that companies should seek to minimize the cost of downsizing. One would hope that such organizations would recog- nize an obligation to employees and provide aid, but this is not always the case, as the literature clearly shows (for example, Batt, 1983; abuss and Red- burn, 1983; Levie et al., 1984). This problem focuses on the role of government, underlining the importance of providing some basis of legislative protection for employees affected by layoffs.

In focusing on the reconciliation of employee and organizational needs, the article has concentrated on one part of the matrix. A more profound study of the remaining situations would seem profitable for future research. The discussion has drawn some tentative conclusions about how organizations in these circumstances might act. However, more work is needed to ascertain: (1) the conditions under which organizations can and should ignore employee needs from a business perspective; (2) the retrenchment strategies which are available to them; and (3) the ethical issues that are raised by such business practices.

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Resume Le retranchement, c’est-a-dire la rkduction des resources humaines, mati rielles et financieres est devenu un probleme familier dans plusieurs pays. L taux de chdmage a augment6 de facon dramtique en Europe comme en Amkr que du Nord, indiquant des redondances dans les secteurs public et privk ain que chez les cols bleus, les cols blancs et les cadres la suite de conditior kconomiques dkfavorables, de coupures gouvernementales et de changemen technologiques. Les statistiques stkriles cachent cependant un probleme tri humain: celui des employks qui doivent accepter la perte involontaire de leL emploi. Plusieurs ktudes parues rkcemment accentuent l’importance des bc soins des employks lors des coupures. Les demandes peuvent cependant &ti ignorkes dans un climat de coupures lorsque les besoins de I’entreprise 01 prkckdence dans un effort de reduction des couts.

Pour sensibiliser les employeurs aux besoins des employks, ils doivent &ti inform& des avantages commerciaux associks A cette approche, alors que 1c chercheurs doivent reconnaltre l’importance des prkoccupations de l’emloyet en pkriode de coupures. Cet article explore certaines des raisons economiquc justifiant l’interet pour les preoccupations individuelles et prksente un cadi destink a aider les cadres a concevoir des strategies de retranchement qui tiel nent compte a la fois des besoins de l’entreprise et de l’employk. Une etude c huit entreprises qui ont adopt6 une variktk de programmes de coupures imp1 quant des employks de divers niveaux est discutke, demontrant comment (

cadre peut Stre appliquk.

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Strategies for Retrenchment: Reconciling Individual and Organizational Needs

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