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Training and Development in an Era of
Downsizing
Franco Gandolfi
Abstract
Downsizing as a restructuring strategy has been actively implemented for the last three decades. Whileemployee reductions were utilized mainly in response to crises prior to the mid-1980s, downsizingdeveloped into a fully-fledged managerial strategy for tens of thousands of companies in the mid- tolate-1980s. Since then, downsizing has transformed the international corporate landscape and affectedthe lives of hundreds of millions of individuals around the world. While the overall effects of downsizinghave been widely reported, many misconceptions surrounding the concept of downsizing have remained.This conceptual paper focuses on the role of training and development (T&D) during the downsizingprocess. In particular, the research depicts the current body of literature associated with the function ofHR and its plans, programs, and policies that firms adopting downsizing must provide to their survivingworkforces. Finally, the paper offers concluding comments regarding effective downsizing practices thathave emerged in the literature.
Keywords: Downsizing, survivors, survivor syndrome, training and development
INTRODUCTION
Back in the 1980s and in the early days of the
1990s, downsizing was viewed as an indicator of
organizational decline. Over the past decade or so,
however, downsizing has been able to shed that
stigma and gained legitimacy as a reorganization
strategy (Fisher and White, 2000). Despite
considerable evidence showing that many
downsized firms have failed to achieve their
economic and organizational goals, downsizing has
continued to be adopted around the world evenin the best of economic conditions (Gandolfi,
2007). Clearly, downsizing has been popular and
enduring, but not always effective, productive, or
valuable (Macky, 2004). This is evidenced in a
substantial body of literature showcasing that
downsizing has profound human consequences on
the workforce, the so-called aftereffects of
downsizing (Littler, Dunford, Bramble, and Hede,
1997). Downsizing survivors, those individuals that
remain with the firm, have become of particular
concern since they are faced with increased
workloads and job responsibilities, on the one
hand, and since they have shown to exhibit a
number of dysfunctional downsizing-related
illnesses, such as the survivor syndrome, on theother hand (Gandolfi, 2006). Human Resource
(HR) practitioners and scholars assert that the
ignorance of the impact of downsizing on
survivors is one of the key reasons for the failure
of many downsizing activities and their ensuing
long-term problems (Cameron, 1994; Kinnie,
Hutchinson and Purcell, 1998; Farrell and
Mavondo, 2004).
This conceptual paper examines downsizing in the
context of the management of a firms human
resources during downsizing. It presents the maintheories, assertions, and empirical findings
Franco GandolfiDirector MBA/EMBA ProgramsRegent UniversitySchool of Global Leadership & Enterpreneurship1000 Regent University DriveVirginia Beach, VA 23464-9800
Journal of Management ResearchVol. 9, No. 1, April 2009, pp. 3-14
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regarding the role of the HR function, in general,
and training and development (T&D), more
specifically. As such, the paper reviews the existing
body of literature associated with the HR plans,
programs, and policies that firms adopting
downsizing must provide their surviving
workforces. Finally, the paper presents a number of
concluding comments regarding effective
downsizing practices that have emerged in the
literature.
DOWNSIZING AND THE HR
FUNCTION
The adoption of downsizing as a strategy produceseconomic, organizational, and human
consequences. Empirical and anecdotal evidence
suggest strongly that highly anticipated economic
and organizational gains have not materialized
(Sahdev, 2003; Zyglidopoulos, 2003). Moreover, the
occurrence of various sicknesses experienced by
the surviving workforces has drawn a great deal of
attention (Devine, Reay, Stainton and Collins-
Nakai, 2003). The perceived breach and violation
of the old psychological contract is likely to have
contributed to and magnified the failure of many
downsizing efforts (Gandolfi, 2006). Interestingly,HR practitioners and scholars believe that the
prevalence of the survivor syndrome and other
related symptoms constitute a barrier to
productivity (Maki, Moore, Grunberg and
Greenberg, 2005). Given the absence of financial
successes following downsizing coupled with the
finding that downsizing firms are frequently left
with a narrow-minded, self-absorbed, risk averse,
and depressed workforce (Campbell-Jamison,
Worrall and Cooper, 2001; Sahdev, 2003), it
remains of significance to provide a theoreticalexplanation as to why downsizing has failed to
produce positive outcomes.
There is substantial evidence supporting the notion
that firms are poorly prepared for downsizing. An
American Management Association (AMA) report
showed that more than 70% of surveyed firms had
downsized with no downsizing-related HR plans,
policies, and programs in place and more than half
of the downsized firms had failed to provide
adequate support plans for survivors to minimize
the negative effects of cutting back (Beylerian and
Kleiner, 2003). There is considerable empirical
evidence suggesting that firms offer little support
for survivors (Amundson, Borgen, Jordan, and
Erlebach, 2004), who are believed to be ignored
throughout the downsizing process. This
corroborates an earlier study postulating that
British firms had neglected the needs of the
remaining workforce revealing that less than 50%
had provided support for the survivors, while
nearly 80% of firms had provided professional
outplacement services for the downsized victims
(Doherty and Horsted, 1995).
Clearly, the blatant ignorance of the impact of
downsizing on survivors is one of the major
reasons for the failure of many downsizing efforts
and their ensuing long-term problems (Devine et
al., 2003). The decline of firms during downsizing
is largely attributable to the neglect of the human
capital (Hitt, Hoskisson, Harrison and Summers,
1994). During periods of downsizing, top
management is preoccupied with short-term
operational decisions and long-term commitments
are thus postponed or neglected. The key to
successful downsizing is to focus on people (Allen,1997) which is consistent with the notion that
survivors were kept because they are the cream of
the crop (Allen, 1997) and the linchpins of future
profitability (Appelbaum, Delage, Labibb and
Gault, 1997). While it has been noted that
organizations generally prepare well for the victims,
they certainly do not anticipate or prepare for the
survivors (Appelbaum et al., 1997). Thus, it can be
alleged that most downsizing efforts have not been
planned, managed, and implemented effectively
(Cameron, 1994) causing a great deal ofresentment among survivors (Amundson et al.,
2004).
There is some understanding that the root cause of
the survivor illnesses is a profound shift in the
psychological employment contract between the
employee and the firm. Under the old employment
contract, employees viewed their jobs as a lifetime
entitlement and offered loyalty, longevity, and
commitment to their companies. In return, firms
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provided great benefits, security, training, career
progression, and lifetime employment. Under the
new employment contract, however, loyalty to a
firm has been replaced with loyalty to an
employees work (Amundson et al., 2004). This
suggests that lifetime employment and reciprocal
loyalty are obsolete and that the traditional career
is therefore dead (James, 1999). Another shift is the
move away from the concept of employment
towards employability (Doherty and Horsted,
1995), whereby the individual embraces personal
career ownership, owns his or her own skills and
experience, and aspires to attain skills that are
transferable, thereby, attempting to remain
marketable and flexible (Lawes, 1996). Also, firmsused to view their employees as long-term assets
that had to be nurtured, developed, and cultivated,
while there is now a tendency to consider
employees as short-term costs to be reduced and a
variable in the production equation that can be
discarded at any time. Therefore, since most
current survivors were employed under the old
employment contract, where loyalty and
commitment prevailed, the announcement and
implementation of downsizing signifies a perceived
breach and violation of the covenant between the
firm and its employees. The paradigm shift from
the old to the new covenant and the one-sided
breach of the psychological contract is believed to
be the root of survivor-related illnesses (Allen,
1997; Zyglidopoulos, 2003).
As HR is primarily concerned with advising firms
on the effective allocation and management of its
people, what is the role of HR during downsizing?
What does research suggest? Cameron (1994),
drawing upon a systematic four-year study of
downsizing, found that certain strategies were morelikely to succeed than others concluding that the
most critical factor for downsizing success was the effective
management of the HR system. This raises the
fundamental issue as to what constitutes effective
HR practice? Over the many years of inquiry and
study of downsizing, a number of studies have
been carried out asserting the specific role of HR
during the downsizing process. Some of the
following findings that have emerged are of
normative, prescriptive nature:
Firms must amend their HR policies and
practices during and after downsizing
recommending that four components to be
rigorously incorporated: integrating
information, communication, and
transparency; providing support for survivors
and victims; adjusting the performance
management system, and providing training
and development (Kettley, 1995).
Effective HR policy during downsizing must
encompass the following four elements:
professional advice; support; counseling; and
training. Such an approach enables survivors
to cope with downsizing more successfully in
that the four HR aspects potentially mitigate
or neutralize the debilitating effects of the
survivor syndrome (Doherty and Horsted,
1995).
Firms need to pursue a strong,
communication-based approach in times of
major change providing an environment of
effective change and a meaningful strategy to
cure survivor sicknesses. HR plans must
include open, two-way communication
channels; a shared vision; participativedecision-making; the conduct of perpetual
job redesign; and the provision of training
(Allen, 1997).
Firms need to focus on employee
empowerment as a remedy to the emergence
of the survivor syndrome. The way the firm
interacts with its employees plays a vital role
in the successful implementation of change
in that communication is the glue that binds
a firm together. Thus, effective HR practice
must comprise frequent, frank, and consistentcommunication; information about the
process and progress of downsizing; the
articulation of a clear vision; employee
participation; and training (Appelbaum, Close
and Klasa, 1999).
Survivors frequently experience a post-
downsizing drop in morale. The results of a
Canadian study show that although there was
not a single best approach, some successful
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practices have the following components:
advance planning; open and honest
communication; training; information; and
communication about the companys new
vision (Dolan, Belout, and Balkin, 2000).
Downsizing has created a phenomenon titled
the cycle of failure involving a chain of
consequences beginning with employee
dissatisfaction and ending with organizational
inefficiency and decreased profitability. Thus,
there must be a strong focus on training for
survivors in that training enables survivors to
cope with the new responsibilities and tasks
(Makawatsakul and Kleiner, 2003).
Downsizing yields dysfunctional human
effects, including decreased levels of morale,
motivation, and trust. Likewise, the
emergence of survivor sicknesses has a direct
and adverse impact on work productivity.
Thus, recommended personal development
interventions are: counseling; training; and
transition management workshops (Sahdev,
2003).
Firms must introduce downsizing-related HR
programs that foster employee empowerment;
build recommitment to the firm; and
encourage greater employability. Specific
survivor programs need to align survivors
with the firms new vision, mission, and
strategic objectives; incorporate coaching and
mentoring programs; and encourage ongoing
skills development and training opportunities.
A strong emphasis must be placed on T&D
assuming that the pursuit of an
organizational learning ethic can create a
strategic competitive advantage (Farrell and
Mavondo, 2004).
Table 1: HR Components for Successful Downsizing
Kettley Doherty & Allen Appelbaum Dolan Makawatsakul Sahdev Farrell &
(1995) Horsted (1997) et al. et al. & Kleiner (2003) Mavondo
(1995) (1999) (2000) (2003) (2004)
Advance
planning
Information, Communication Communication, Communication,
communication, information information
transparency
Vision Vision Vision Vision, mission,
and strategic
objectives
Support for Counseling, Counseling Coaching and
victims and support, and Transition mentoring
survivors professional management programs
advice workshops
Performance Job redesign
management
system
Respect for the
seniority rights and
depersonalizing
of layoffs
Participative Part icipat ion
decision-making & involvement
Training & Training Training Training Training Training Training Training & skills
Development development
(T&D)
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Table 1 presents a non-exhaustive overview of
some of the main studies conducted and their
respective findings in regards to HR components
for successful downsizing.
Interestingly, while Table 1 depicts an incomplete
picture of the theoretical constructs leading to
successful downsizing, all proposed elements
correspond with Camerons (1994) original list of
critical factors leading to successful downsizing,
including employee involvement; teamwork;
sharing of communication and information;
provision of rewards; conduct of performance
appraisals; articulation of a vision; administering
of downsizing in a trustworthy and fair manner;
and training. Notably, training is the HR
component advocated by all scholars and
professionals included in this review.
Unfortunately, the academic work to date has
remained at an abstract, theoretical level and there
is limited empirical research published asserting the
relationship between HR components and
downsizing success. Nonetheless, two main studies
are of significance:
Gandolfi (2001) carried out case study research
examining the role of T&D in the context ofdownsizing. He found that Australias largest banks
were ill-prepared for downsizing and had failed to
implement T&D in an effective manner. Study
cases pursued reactive rather than proactive T&D
approaches. Gandolfi (2001) concluded that T&D
must play a significant role during downsizing and
recommended that firms must engage in proactive
T&D, embrace an eclectic T&D approach
combining generic with firm-specific training, and
provide personal development preceding
downsizing.
Right Associates carried out a major US survey
reporting that while survivors were informed about
the likely effects of downsizing, very little was
done to introduce new HR programs to promote
survivors re-engagement with the firm. The study
showed that 88% of firms had failed to implement
programs to help improve the survivors
performance and confidence levels. Firms forfeited
such programs since they felt that they were caught
in a dilemma. While firms downsize for primarily
monetary reasons, instituting programs for the
survivors would require additional financial
resources that firms were not willing to spare.
Firms were also so concerned about their financial
resources that they often overlooked the adverse
impact of second-order (i.e., human) consequences
(Beylerian and Kleiner, 2003).
DOWNSIZING AND T&D
Why should there be a continuation of downsizing
research? Apart from the presented research gaps,
there are clear developments justifying the pursuit
of academic inquiry, including:
the ongoing popularity of downsizing sincethe late 1980s,
the frequency and magnitude of reported
downsizing failures,
the occurrence of survivor-related sicknesses,
the assertion that the adoption of downsizing
will continue, and
the plea of experts for the development and
introduction of proactive HR programs.
Examining and asserting the role and relevance of
HR during downsizing is of great importance with
the following questions at the heart of future
academic inquiry:
1. What is the specific role and relevance of
T&D during downsizing?
2. Can T&D positively influence the outcomes
of downsizing?
3. Does T&D constitute an underpinning of the
survivor syndrome remedy?
While the previous section presented
recommended HR components for successful
downsizing, more work needs to be carried out on
the role of survivor programs. For example, there
is a shortage of evidence demonstrating the
effectiveness and efficacy of survivor programs for
survivors. Correspondingly, a lack of evidence on
the role of T&D during downsizing is also
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Table 2: Empirical Findings of T&D Elements in the Context of Downsizing
Empirical Finding Researcher
Most firms do not attempt to establish a social environment conducive to the Zemke (1990)
development of the workforce, and, ultimately, to the companys prosperity in a
period of organizational change.
Most surveyed firms have implemented downsizing without any HR policies or Lee (1992)
programs in place.
Most f irms fail to anticipate the human consequences of downsizing. Cascio (1993)
Firms that downsized most effectively had changes in the HR system that Cameron (1994)
preceded and followed the implementation of downsizing.
The decline of downsized firms is attributable to the neglect of human capital. Hitt et al. (1994)
HR departments are often the primary target of cost-cutting efforts. Clark & Koonce
(1995)
Downsizing fails to achieve its alleged benefits due to the fact that companies lose Evans, Gunz,
core competencies by cutting muscle instead of fat. & Jallad (1996)
Survivors are largely ignored before, during, and after downsizing. Appelbaum et al.
(1997)
Firms do not ensure T&D before, during, and after the downsizing. Appelbaum et al .
(1997)
The adverse impact on survivors is one of the major reasons for long-term Kinnie et al. (1998)
problems of firms associated with downsizing.
Firms will continue to downsize well into the next century. Either way, whether Mitchell (1998)
downsizing or rehiring, companies must train their people.
Surveyed firms were ill-prepared for downsizing and failed to implement T&D in Gandolfi (2001)
an effective manner.
Survivors are driven to work harder after downsizing. Firms frequently fail to provide Makawatsakul &
training to survivors. Kleiner (2003)
Downsizing does not produce superior organizational performance in the long term Zyglidopoulos
and surviving employees frequently do not receive the necessary training. (2003)
Downsized firms frequently neglect the surviving workforce. Hareli & Tzafrir
(2006)
Surveyed firms were ill-prepared for downsizing and survivor syndrome. Gandolfi (2007)
Survivors were ignored and left to their own devices.
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apparent. These aspects constitute research gaps
and merit further academic study.
Evidently, T&D must play a critical role in thesuccessful planning and execution of downsizing.
This assertion corroborates Camerons (1994)
finding of a US firm that had successfully
introduced and upgraded training policies for all
employees one year prior to the announcement of
downsizing (Cameron, 1994). It is clear that a
decidedly proactive approach to HR, in general,
and T&D, in particular, represents a key factor.
While the role of HR in association with
downsizing remains under-researched (Hareli and
Tzafrir, 2006; Gandolfi, 2007), some empirical
findings of T&D elements in the context of
downsizing have nonetheless been published. Table
2 presents a non-exhaustive overview.
Having reviewed the body of literature, the
following can thus far be concluded:
Downsized firms have implemented
downsizing without adequate HR systems in
place (Lee, 1992; Cascio, 1993; Appelbaum et
al., 1997; Gandolfi, 2007)
Downsized firms have ignored survivorsbefore, during, and after downsizing
(Appelbaum et al., 1997; Hareli and Tzafrir,
2006; Gandolfi, 2007)
Downsized firms have failed to ensure T&D
before, during, and after downsizing
(Appelbaum et al., 1997; Gandolfi, 2006).
The decline and ill-performance of
downsized firms is attributable to the neglect
of survivors (Hitt et al., 1994; Hareli and
Tzafrir, 2006; Gandolfi, 2006)
Survivors are forced to take on new job
responsibilities from departing employees and
faced with increased overall workloads
(Zemke, 1990; Allen, 1997; Mitchell, 1998;
Dolan et al., 2000; Makawatsakul and
Kleiner, 2003; Gandolfi, 2006).
This rather dire situation poses a number of
questions. For example:
How are survivors able to successfully cope
with the new circumstances following
downsizing?
How are survivors able to perform the new
job responsibilities in the absence of
adequate training?
How does an ill-experienced and inadequately
trained workforce excel in the long run?
These issues will need to be considered and
empirically studied in future research. Finally, the
following paradox has emerged: A seemingly
indifferent management attitude towards
downsizing survivors needs to be reconciled withthe much-publicized and eloquent mission
statements portraying the workforce as the most
important aspect of a firm. For example, back in
the 1990s, a firms workforce was portrayed as the
most important capital (Sofo, 1999), the most
valuable resource (Harrington, 1998), the most
important asset (Sunoo, 1998), the most valuable
asset (Darling and Nurmi, 1996), and a national
resource (McMorrow, 1999). Have managers
decided that the workforce, which was seen as so
critical in the 1990s, is now a liability rather than
an asset? Do employees constitute an expense anda cost that is readily expendable? More work will
need to be carried out to reconcile the paradox.
The Benefits of T&D
Why then should firms invest in T&D? What are
the alleged benefits? A brief review of the T&D
literature research depicts the benefits of T&D to
be manifold. Table 3 presents an incomplete
historical overview of some of the published
findings.As Table 3 depicts, the alleged benefits of T&D
for both the firm and the individual employees are
distinct, manifold, and diverse. For instance, T&D
is at the core of a firms organizational success
(Mitchell, 1998) and an absolute necessity (Clarke
and Koonce, 1997) for a firms long-term survival.
Sadly, empirical evidence also indicates that not
every firm recognizes the value of using T&D for
strategic ends (Berry, 1990) and as a means of
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Table 3: The Benefits of T&D
Source Findings
Poulter (1982) Benefits for the individuals are the opportunity for promotion and self-
improvement, improved job satisfaction through increased job performance,
the chance to learn new things, and adaptability (i.e., the ability to adapt to
and cope with change).
Possible benefits for the firm are increased levels of productivity, profitability,
efficiency, and effectiveness, as well as reduced rates of absenteeism, labor
turnover, accidents, and errors.
T&D constitutes an insurance policy (p 7) for an organization.
Commerce Clearing House Employees are more likely to successfully cope with major change, crises,
(1985) and critical incidents.
Rabey (1990) T&D has two main purposes. First, it ensures that work meets required
standards of quality, quantity, cost, and time. Ideal ly, this translates into higherlevels of productivity, effectiveness of operations, and a safer and more
harmonious work environment. Second, the development of employees meets
the foreseeable needs of the firm and seeks to realize the potential of each
individual.
Ocholla (1995) T&D leads to a competitive advantage.
Davidson (1996) T&D has the capacity to increase overall profitability.
Kramar, McGraw, & Positive correlation between T&D and organizational performance in that T&D
Schuler (1997) has the capacity to improve a firms performance in at least three key areas:
labor productivity, overall quality of output, and the firms ability to adapt to
and cope with change.
Sofo (1999) T&D enhances employee performance, productivity, and efficiency, and
improves the quality, structure, and processes of firms. T&D is positively associated with empowerment, participation, and recognition.
Clarke & Koonce (1997) Positive correlation between T&D and improved organizational performance
indicators and individual growth.
Berge et al. (2002) T&D leads to higher levels of competitiveness.
T&D leads to sustainable competitive advantages.
Farrell & Mavondo (2004) T&D results in potential source of a competitive advantage.
Gomez, Lorente, & T&D is one of the most significant processes within the strategic management
Cabrera, (2004) of human resources.
Critical role of training in maintaining and developing individual and
organizational capabilities.
Capacity of training to substantially contribute towards the process oforganizational change.
T&D is a strategic capability.
Stone (2005) T&D is a signif icant source of competit ive advantage.
Saks & Belcourt (2006) T&D leads to higher levels of employee productivity.
Marshall (2007) Positive correlation between T&D and organizational performance.
T&D leads to improved ability to cope with change.
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gaining a competitive advantage (Farrell and
Mavondo, 2004), thus ensuring its future (Marshall,
2007). Most importantly, Table 3 shows that
scholars have recognized the possible correlation
between T&D and employees ability to adjust to
and cope with major change (Poulter, 1982;
Kramar, McGraw and Schuler, 1997; Gomez,
Lorente and Cabrera, 2004; Marshall, 2007). This
particular finding has at least three implications:
1. T&D has the potential to prepare an
organizational system and its employees for
downsizing in a proactive, strategic fashion;
2. T&D has the potential to enable the
survivors to cope with altered job tasks andresponsibilities and increased workloads
effectively; and
3. T&D has the potential to enable the
survivors to cope with survivor syndrome
and other downsizing-related illnesses.
Surprisingly, the study of the role and relevance of
T&D during the downsizing process has received
little academic attention to date. In one of the few
empirical studies conducted on the subject, it was
concluded that T&D had the potential to positivelyimpact downsizing outcomes and that T&D also
had a positive impact on survivors and survivor-
related illnesses (Gandolfi, 2001). Significantly
more work needs to be conducted to verify the
findings and to extend the study.
Effective HR-related Practice During
Downsizing
Finally, is there a best HR practice during
downsizing? Are there HR-related elements that
have shown to impact downsizing positively?Downsizing scholars have come up with lists of
effective HR practice during downsizing.
Accordingly, successful downsizing practices may
have some of the following HR characteristics:
1. Downsizing needs to be implemented from
the top with recommendations from lower-
level employees and based upon job and task
analyses of how work is organized (Cameron,
1994; Makawatsakul and Kleiner, 2003).
2. Executives need to develop a change-
management plan with a clear vision of thefuture organizational identity and specific
steps to conduct and oversee the transition
(Macky, 2004).
3. Management needs to pay special attention to
the survivors through training, counseling,
regular information, and two-way
communication (Allen, 1997), while victims
generally receive outplacement, severance pay,
and counseling services (Gandolfi, 2001).
4. Firms need to identify redundancies, excesscosts, and inefficiencies. This can be achieved
through internal data gathering and
monitoring (Makawatsakul and Kleiner, 2003;
Schraeder, Self and Lindsay, 2006).
5. Leaders should facilitate downsizing by
preparing for a high level of activity,
including rallying people with a vision of a
better firm, offering transition management
training, acknowledging uncertainties and
concerns, communicating plans and actions,
telling the truth, involving people inmanaging the transition, and establishing a
safety net for transition victims
(Makawatsakul and Kleiner, 2003).
Finally, survivors frequently experience feelings of
anger, resentment, stress, and apathy, which lead to
decreased levels of morale, motivation, and
productivity. HR leaders have the opportunity to
add value to the downsizing process by taking an
early leadership role before, during, and after
downsizing to address the healing of the survivors.
A potent, effective downsizing plan must includestrategies for all six fundamental HR areas,
including employee involvement, communication,
support programs, selection processes, HR
management tools, and T&D (Weakland, 2001;
Gandolfi, 2006). The latter component, in
particular, is considered to be of primary
importance and in line with the findings and claims
of this current paper.
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CONCLUSION
This conceptual paper examined downsizing in the
context of the management of a firms humanresources. It presented the main theories,assertions, and empirical findings regarding the role
of the HR function in general and T&D, morespecifically. The paper reviewed and analyzed theexisting literature in relations to HR plans,
programs, and policies that downsized firms hadprovided to the survivors.
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