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    Downsizing: Abhishek Karekar Purva Kaushike

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    Abhishek Karekar
    Jet Airways downsized its workforce in 2008 in response to financial difficulties. It laid off around 1,100 employees over two days in October 2008, though the CEO reinstated employees after backlash. In November 2008, Jet cut pilots', engineers' and some staff salaries by 20%. Questions were raised about why lower grade staff were primarily affected and the accountability of the organization to employees. Jet Airways returned to profitability in the fourth quarter of 2014 due to one-time gains from asset sales and leasebacks. Downsizing can help reduce costs but also damages a firm's reputation as an employer.

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    Downsizing: Abhishek Karekar Purva Kaushike

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    Abhishek Karekar
    67 views11 pages
    Jet Airways downsized its workforce in 2008 in response to financial difficulties. It laid off around 1,100 employees over two days in October 2008, though the CEO reinstated employees after backlash. In November 2008, Jet cut pilots', engineers' and some staff salaries by 20%. Questions were raised about why lower grade staff were primarily affected and the accountability of the organization to employees. Jet Airways returned to profitability in the fourth quarter of 2014 due to one-time gains from asset sales and leasebacks. Downsizing can help reduce costs but also damages a firm's reputation as an employer.

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    Downsize in ethics

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    Downsizing

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    Jet Airways downsized its workforce in 2008 in response to financial difficulties. It laid off around 1,100 employees over two days in October 2008, though the CEO reinstated employees after backlash. In November 2008, Jet cut pilots', engineers' and some staff salaries by 20%. Questions were raised about why lower grade staff were primarily affected and the accountability of the organization to employees. Jet Airways returned to profitability in the fourth quarter of 2014 due to one-time gains from asset sales and leasebacks. Downsizing can help reduce costs but also damages a firm's reputation as an employer.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    67 views11 pages

    Downsizing: Abhishek Karekar Purva Kaushike

    Uploaded by

    Abhishek Karekar
    Jet Airways downsized its workforce in 2008 in response to financial difficulties. It laid off around 1,100 employees over two days in October 2008, though the CEO reinstated employees after backlash. In November 2008, Jet cut pilots', engineers' and some staff salaries by 20%. Questions were raised about why lower grade staff were primarily affected and the accountability of the organization to employees. Jet Airways returned to profitability in the fourth quarter of 2014 due to one-time gains from asset sales and leasebacks. Downsizing can help reduce costs but also damages a firm's reputation as an employer.

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    © All Rights Reserved
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    of 11

    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.

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