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Essay: Retrenchment

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  • Subject area(s): Business essays
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  • Published: 13 September 2015*
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  • Words: 2,415 (approx)
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Introduction: The employee relationship is the most important for making the effective communication between organization and external environment. The employee relationship defines by Curtis (1989) that ‘No organizational relationships are important as those with employees’. The strong employee relationship is deserved to have strong attention in today’s modern business in order to maintain the strong strategy of survival retrenchment. It is being studied that retrenchment has become crucial for the company’s survival in today’s competitive market. This trend has already witnessed strong momentum in America during the recession period as the total unemployment rate reached to all ‘time high of 10% in 2009, but this trend of retrenchment is also getting popular in developing countries like India, China and Indonesia. These countries have also reported some of their staff layoff during the recessionary phase. The current paper is also explained the retrenchment strategy of Indian airline company Jet airlines during the slowdown phase in Indian aviation sector.
The main objective of the paper to understand the reasons of retrenchment and the impact of retrenchment on the individual’s moral and how company negotiate with the retrenched staff. The study will also try to focus on maintaining strong organization- employee relationship after retrenchment to promote morale high for employees. In the current case, the employees has been demoralized and distressed with the retrenchment strategies of the Jet airways. The employees of the Jet Airways have a strong perception that company is lacking in maintaining the strong employee relationship. This resulted to poor image of the airlines in the public.
Recessionary condition propels retrenchment’
The employee perception towards retrenchment is the organizational change which is being resisted by them mainly due to a higher level of uncertainty. Most of the employees have a negative perception towards the designing and implementation of retrenchment (Sparks et al., 1997). Most of the employees also mentioned that the delay in retrenchment may cause negative perception regarding the objectives and ideas of retrenchment. Similar perception was also observed among the employees of Jet Airways as most of them have claimed that they entered into the contract with a company but none of them received their appointment letter. In fact, some of them signed the papers after completion of their training but still they have not received the copy of their appointment as management intentionally delayed their letter. This has created the apprehensions among the employees regarding the intention of the management. The management have relived around 270 members batch from their duties.
The retrenchment is rated as highly unwanted selection by management (Judge, Ilies, 2004). Most of the activities related to the recession were normally happening during the recession phase (Gulati et al. 2010). The year of 2007-2010 was considered as the worst period for global economy as many of the companies in US and Europe witnessed strong layoff and retrenchment of employees. As per the latest data of the Business Europe Employers Association, more than 5 million people lost their jobs on the account of recession in 2009. Earlier, countries like the United States was famous for strong job providers, but they also reported more than six thousand hundreds of unemployment during the 2009-10 (Shukla, 2009). The data world bank stated that around 31 % of the youth in South Asia , 24% in Europe and 15% in the OECD were reported to be unemployed from the total number of youths ( World Bank, 2012). The study of Economist stated that almost 290 millions of youth were remained unemployed in 2012. The pressure of workload rises during the retrenchment as employees have to work long hours to fulfill their jobs. This would make the person, a job stressor. The extra work hours also disturb the both family and work life of the individual. Tzafrir et al. (2006) mentioned that the systematic retrenchment is helpful for the organization tom improve their performance and efficiency in the long run. This was also one of the main aims of the Jet airways to maintain their operational cost by reducing their manpower cost. However, the designing and implementation of its retrenchment policy has been strongly criticized by public (issue of debate in the parliament) and protested by employees (agitation by employees).
Impact of the Retrenchment On the company
There are some negative results of retrenchment in company and also on the employee relationship. The first important consequence is being related to the level of uncertainty among the employees. After the retrenchment, both the survivors and the victims also experiencing the level of uncertainty. And most of them traumatized due to the organization’s process of downsizing. This will remain persist until the company gives complete clarity about the job profile of retained employees. The issues of termination to that of reorganization and the position of the employee’s place within the organization (Tourish et al. 2004). The poor of perception among employees is also having the negative consequence. The research performed by Tourish et al. (2004) stated that there is a tendency of the senior members in the organization to receive information about the organization and also have the knowledge of job changes during the process of retrenchment compared to other employees. This becomes the main issues for the middle level manager as they are the ultimate person for implementing all the changes and important job work in the organization. A similar thing was also seen in Jet airways when one of the rostered off the Delhi- Jammu ‘Sri Nagar flight has not been informed about the new changes in the organization. The rostered is having the strong function in the flight, but he has been de-rostered from the flight without any proper communication with top- management.
The post ‘ retrenchment process, the survivors in the company may begin to loose trust from their seniors. However, they still tried to make a trust on all their colleagues in the same level to make a strong union between them. This was important for the employees to deal with management, if the new round of retrenchment happens in the organization. The negative perception of those left the organization may have contagious effect on other employees in the organization (Tourish et al. 2004). The retrenchment reduces the career opportunities of the employees (Bonzionelos , 2001). The employees of the organization perceived that retrenchment will peg the growth of an individual in terms of promotion and better job opportunity. Similar reaction was also observed by the employees of the Jet airways as they realized that retrenchment in their company means poor growth in the aviation sector and limited job opportunities. This was also considered as the major setback for young crew members, who have just started their career.
The most of the survivors also experienced strong occupational stress after the retrenchment of their colleagues in the organization. The feeling of occupational stress rises if the demand of the current job increases beyond the capability of individual (Devin, Reay, Stainton and Collins- Nakai, 2003). It has been observed that re-creation of the organization after the completion of the retrenchment process in the organization, can have a strong negative influence on the employee morale. This will also reduce the productivity of the employee as they are not able to perform their job efficiently. Fong and Kleiner (2004) stated that mounting stress, accidents and depression situations are only happens due to extreme work load on the employee. The survivors of any trauma incidence will also have negative results in terms of negative emotions, which is known as survivor syndrome. Most of the countries have reported a strong surge in the suicide cases during the recessionary period.
Survivor Syndrome, Psychological Contract and Retention measure the employee relationship’..
The term ‘survivor syndrome ‘has been widely used in all the organization to explain the impact of redundancies on those members of the organization who survives where other member’s employment relationship has been terminated. The biggest impact is on the surviving members when their colleagues relived form their duties (Simone and Kleiner, 2004). The survivors of jet airways employees also realized the same feeling when some of their co-partners relived from their job on short notice. A violation of the psychological contract will also have the negative impact on the attitude and perception of the employees as they were highly disillusioned and breach of psychological contract also impact the efficiency of both individual and organizations. A breach is developed due to direct ‘ indirect actions and the degree of reaction for which only seniors of the organization are responsible. This may also reduce the commitment of the surviving members of the organization and they opt for better job in the market. The research conducted by Pate et al. (2003) stated that there is a poor or negative correlation between the psychological contract violation and change in the behaviour of the organization. Another possible reason is the sluggish disparity between the employee and employer. Therefore, psychological contract is the most important tool to analyse the employee relationship.
The issue related to retention is also important for measuring the employee relationship. Frank et al. (2004) stated that the retention can only be affected by lack of trust and demolished loyalty. Both these components are causing a higher number of layoffs. Lee (2001) stated that the experience of survivors during the retrenchment period will determine their willingness to continue with the same organization. Therefore, most of the organizations are focusing more on the ’employee retention’ to retain talented employees to attain the organization’s long term objectives.
Managing the retrenchment professionally is the duty of senior members ‘..
The retrenchment of the human capital is the most critical decision for the organization as it will demonstrate the core vale and reputation of the organization in the public domain (Turnley and Feldman, 1998). The organization must also understand that if the retrenchment process is not properly managed by the organization, the feelings of demotivation and discontent will spread like a virus across the department of the organization and also hamper the productivity and morale of other employees. It is the job of the senior members in the organization to negotiate the organizational change or retrenchment. The only self- motivated and well informed leaders can easily negotiate with the retrenchment staff. The some of the tactics adopted by these organizations are like discussing about the retrenchment scenarios to provide the opportunity to individuals to understand the need of downsizing. When the Meg Whiteman, chief executive of Hewlett-Packard announced the layoff of 27000 staff, she recommended a few things to their staff, namely stay calm, discuss with your family, gather information about the reason and set new goals of your life.
The organization must plan appropriately for the process by giving the training to their managers in terms of union education and employee support. The main purpose of coaching and training to their seniors is to reduce the negative impact of the retrenchment process on the organization. It is essential for managers or seniors to manage their emotions at both personal and official level will successfully implement the retrenchment process. The organization must express through some considerate treatment for those employees who are leaving and through a new level of commitment to survivors. It is important to give the commitment to survivors that it is the ethical business practice and responsible action by the organization. The organization must have intervention programs in terms of group workshops and management mentoring to have the strong acceptance of the process.
The most important for the organization is to engage with government to lay off the managed professionally. The organization must approach the social and environmental affairs (SEA) department to clear their plans related to layoff. The Adidas group also did the same thing in the past as they presented their plans of layoff to SEA as a redundancy plan. The redundant plan should decide the method for selecting the staff to be redundant. This includes the name and position of the staff, their factory id and contract status. The organization must provide the severance plan for the government (SEA) which includes the calculation of severance for those being made redundant along with their final payment settlement. The severance plan must fulfill all the requirement of the local labour laws along with years of service. The organization must also share the communication plan regarding how the decision of layoff plan is to be transmitted to the whole employees of the organization, to the union and also the employees selected for redundancy.
Role of Government and Union members to resolve the retrenchment
It is important for both the government and Union members to ask the senior management to make effective communication system to ask all the decisions related to retrenchment in advance to all the employees. This will also have the inclusions of all explanations and steps of retrenchment process. The government must ensure the organization that they should follow all the major guidelines related to retrenchment. This can only be possible by presenting the severance plan by organization to the government. The union members also asked the organization prepare the redundancy plan in the systematic manner to define the designation and name of the redundant employee. The union members also instructed the senior management to make all the arrangement related to final payment settlement of the redundant employees.
Conclusion: The current study concluded that situation of the retrenchment is being occurred due to the weak economic situation of the company and the economy. A similar situation was also placed in Jet Airways as company inclined towards retrenchment process mainly due to poor economic situation of the Indian economy and mounting cost pressure on the airline industry. Therefore, Jetairways was not solely responsible for the retrenchment decision. It was the fragile demand situation of the Indian aviation sector who instigated the company to reduce some staff cost by reducing the staff of the company. On the other side, the decision of the youth to go for agitation was also not the poor step as they were worried about their future growth in the organization.
However, the study also concluded that effective policies and strategies of organization to deal with retrenchment staff will make the working conditions of the organization remain similar after the implementation of retrenchment process. The study also added that lack of managerial skill to negotiate with the retrenchment staff made the situation worse for the Jet airways. It is important for the Jet airways to create the strong communication with all employees, union and government before the implementing the process. The organization must understand their legal duties to meet all the legal obligations including consultation, notification and payment of severance to workers who are laid off.

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