What Makes the Issue of Downsizing Ethical?
In a separate discussion about the Most Common Reasons for Downsizing the Labor Force, we examined each reason and the underlying causes. However certain ethical issues concerning downsizing have to be considered, because it is often decided or recommended by management in order to protect the interests of the shareholders and their profits.
Is this objective ethical? In a business sense, it is; but management’s responsibility doesn’t end in the execution of its decisions. There should be equal value placed on the company’s moral responsibility to ensure the welfare of the employees after making such decisions.
After all, a pronouncement to downsize may indicate an admission of management’s failure to make sound business decisions or to foresee and forestall the worsening of a condition that necessitated the resolution to cut down the labor force.
The employees merely carry out the management’s business projections and forecasting. Hence there should be careful evaluation of whom to lay off in order to determine the extent of the company's moral responsibility. Laying-off the workforce of an entire plant facility may be necessary, but management should not overlook the value of the services rendered by those who contributed positively to its previous successes.
Otherwise, those who are deemed as survivors to the downsizing syndrome could be demoralized by the company’s insensitivity to the value of the hard work that workers have exerted. In the long run, the objectives of downsizing would not be achieved if the remaining workforce becomes less efficient or seeks other sources of livelihood. The company then is bound to suffer from productivity loss or to meet additional costs in recruiting/hiring or both.
It is a known fact that not all downsizing decisions have produced positive results since the companies also went into bankruptcy or closure even after the layoffs. It strengthens the beliefs of those who do not support downsizing that other factors contribute to business failure and that focusing only on labor costs is not the ultimate remedy. Based on the outcomes of downsizing as solutions to financial dilemmas, there are certain lessons to be learned.