DOWNSIZING

Abhishek Karekar
Purva Kaushike

Case
As of June 2008, it operated over 370 daily flights to
about 68 destinations both in India and abroad
The retrenchment drama unfolded on October 16,
2008, when Jet announced that it would lay off nearly
1,100 of its staff a day after it had already laid off
around 800 of its cabin crew members.
Amidst great furor and opposition by various
organizations and political parties, Naresh Goyal ,
chairman of Jet, reinstated the employees a day later
the great emotional drama.

Case
November 2008, Jet decided on a 20% cut in the
salaries of its pilots, engineers, and some other staffs.
Employees were FIRED with no PRIOR NOTICE
The entire force of unconfirmed staff was being laid
off on a 30-day compensation package

Company took action only against lower staffs.

Questions.
Where would those 1900 employees go?
Why took action only against lower grade staffs?
Senior management was very less affected.
Why did the Jet CEO enter the competitive market,

instead of playing down after foreseeing risks?

Some quotes made by higher officials..

"A total of 1,900 people are being served separation notice. 800 have already
been served notice. In the next few days the others will also be served notice. It
is an attempt to save the jobs of remaining 11,100 employees,
Saroj Datta (Exe Director)
It is a difficult decision but we had to take it,
Wolfgang Schaeur (CEO)
I apologize for all the agony that you went through, Mr Goyal said, his
statements directed at the retrenched staff.

It throws a serious question towards the accountability of

an organization to its employees.

Jet Airway swings to quarterly

profit on one-off gain(2014)
Jet Airways swung to a net profit in July-September
after six straight loss-making quarters.

The airline posted a net profit of Rs 69.82 crore

compared to a loss of Rs 891.01 crore in the same
period last year.

Sales increased 16% to Rs 4,402.76 crore

Reason for Jets profit

Jet Airways had last year sold its privilege
programme to its strategic partner Etihad Airways as
part of a deal under which the Abu-Dhabi based
carrier also bought 24% stake in Jet for Rs 2,059
crore.
The airline's profit from sale and leaseback of planes
also increased to Rs 243.47 crore, from Rs 73.07 crore,
also helping profit to increase.

What is Downsizing?
A downsizing strategy reduces the scale (size) and
scope of a business to improve its financial
performance.
A reduction of the workforce is one of only several
possible ways of improving profitability or reducing
costs.
Why do Firms Downsize?
Reduce costs.
Reduce layers of management to increase decision
making speed and get closer to the customer.
Generate positive reactions from shareholders in
order to improve valuation of stock price.
Increase productivity.

Downsizing Strategies
Workforce
reduction
-early retirement
-transfers

-buy-out packages

Organizational
Redesign
-eliminate functions
-cut hierarchical
levels

-attrition

-consolidate or
merge units

-lay-offs

-reduce work hours

Downsizing effects
Mixed effects on firm performance: some short-term
costs savings, but long-term profitability & valuation
not strongly affected.
Downsizing forces re-thinking of Employment
Strategy.
Lifelong employment policies are not credible after a
downsizing.
Example: IBM abandoned lifelong policy after several
layoffs in early 1990s.

 Firms reputation as a good employer suffers.

Example: Apple Computers reputation as good employer
declined after several layoffs in 1990s.