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I think the ethics of laying off employees are dictated by economics as opposed to some moral imperative. Few, if any, would relish the process of laying off employees. I think that the need to downsize might be a product of economic reality, but might also be the result of a company seeking to "trim the fat" and increase competitiveness. I don't see this as an issue of ethics because its economic nature overtakes all. I believe that there is a role of ethics in business, but if the need of the company is to downsize in order to meet economic goals and fiscal ends to shareholders and other employees, downsizing might be an unavoidable reality. One can only hope that businesses are not laying off workers for the sake of doing so, or so that they can increase profit margins on their own end at the cost of workers. Perhaps, this is where the moral calculation is required and this would serve as a fundamental analysis of the nature of business and economic well- being.
I don't know what exactly you mean by "need to." A company will downsize whenever it feels that is the right thing to do economically.
When it comes to laying off employees, the ethical question is not really when you do it, it is how you do it.
The most important ethical aspect of laying people off is to be honest with them. You must tell them the truth about why they are being laid off. You should also avoid trying to discuss with them why they, rather than someone else, was laid off. Finally, you should lay out what benefits and support they may expect from your company.
But there is no easy way to lay people off. The only thing you can do is to be as honest as possible.
Downsizing refers to the practice of reducing the total employee strength, primarily with a the intention of getting the same work done by a smaller number of people than the number currently employed. This involves re organization and reassignment of work between employees so that under utilized employees are fully utilized. It also involves laying off orb, in, plain words, removal from employment. The ultimate objective of downsizing is to reduce the employee cost of the company, which is hopefully expected to improve profits.
I cannot imagine why companies would practice downsizing if they believed that they don't need to benefit from it. Only possibility that they would downsize when they really don't need is that they are making some error of judgement about what is in their interest. In that situation, it is more a case of management capability rather than ethics.
Ethical consideration of downsizing primarily revolve around the responsibility of employees to provide continued employment to the people who work for them. This responsibility could be legal, contractual, of moral. Usually laws of the land put some restriction on the power of companies to sack their employees. These restriction relate to the causes for which an employee may be sacked, the compensation to be paid to employee when asked to leave before his or her term of employment is over, and the criteria for selecting employees to be sacked for reasons other than misconduct of the employees concerned.
Thus we can say that though laying off may cause of hardships to some people, it is very much ethical when it leads to improved performance of the company, does not violate any of the companies legal and contractual obligations in letter or spirit, and is done compassionately to minimize the hardships to employees laid off.e implicit contractual obligations in in the form of company defined polices, rules, regulations and practices. These contractual obligations usually define among others, the age of retirement, the period of notice that the employees must be give if sacked before due time, and compensation to be paid.
Moral obligations are of course very difficult to pin down and often require balancing between conflicting requirements. For example though companies are expected to be compassionate about the fate of their employees they also have moral obligation to make profit for their shareholders. In some case the downsizing may be the only way to revive a heavily loss making company. In this case laying of of a small number of employees may ultimately save the jobs of greater number by avoiding the complete closure of the company.
Thus downsizing may cause hardships to the employees laid off and on that account raises valid ethical issues. However, downsizing is justifiable when it leads to significant and sustained improvement in company's performance, does not violate any legal or contractual obligations of the company in letter or in spirit, and is done compassionately to minimize the hardships to the employees laid off.
Employees take several measure reduce hardships of downsizing. The primary approach is to give employee a choice of voluntary retirement scheme The second approach is to give employees additional compensation beyond the legal and contractual requirements. Also it is important for the select the employees to be laid off carefully so that only the least productive ones are laid off unless they opt for it voluntarily.
Ethics in business in relationship to laying off an employee includes several components. The concept includes that one must lay off an individual with dignity and not deface or belittle the person in the process. Sometimes the candidates that are being laid off were not good job candidates in the first place. Other times an employee may have committed a fraction such as minor theft or loss of temperament in a company. The employee may have difficulty following the guidelines or job performance expectations.
Whatever the reason for dismissing the person, the supervisor must have a presentation that includes the problems which have led to the employee’s release. The action should take place away from the view of other employees with the exception of a witness in the event one knows that an employee is likely to become very angry or make false allegations. The best scenario is o have the supervisors supervisor present in these situations.
Positive and negative feed back should be offered to the employee. Personal opinions should be with held and the presentation should be as business like as possible in order to prevent the employee from believing that his employment is being ended due to personal conflict.
Rehearsing before terminating an employee is a good strategy that can help one to prevent blunders during the process.
"Downsizing when you really do not need to" as quoted is the equivalent of "cutting your nose to spite your face."
However, that being said, a company will not downsize just for the sake of downsizing. For the most part, they will do so as a matter of "survival" and, on other occasions, because it is imperative in order to prosper or achieve certain levels of efficiency for better competitiveness.
With respect to how you go about downsizing from an ethical standpoint, it's important 1) that you tell the truth about why it is necessary, 2) to be sure to convey to those being laid off that this is a "last resort" decision and that no other options are available, 3) to convey the message that individual employees are not a fault for the situation that the company is faced with, and 4) to reassure to all employees that the company will give priority consideration for future positions to those being laid off should circumstances so warrant.
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