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date: 09 December 2019

Abstract and Keywords

Although most of the selection literature focuses on how organizations choose outsiders to become members of their firms, this chapter addresses how organizations choose current employees to let go during downsizing. First, we address the factors that lead organizations to downsize their workforce. Next, we examine the organization's strategic decision about how to downsize. When do firms choose to downsize via vertical cuts (elimination of whole units), horizontal cuts (termination of some employees in each unit), early retirement incentive programs, and natural attrition with nonreplacement of personnel? Then, for each of these four strategies, we consider how firms use various criteria (e.g., merit, seniority, job type) to identify specific individuals to let go. In the following section, we consider the relative effectiveness of these four strategies for turning around firm performance and for maintaining the performance and morale of “survivors.” Finally, we discuss best practices in designing and implementing layoffs.

Keywords: layoffs, downsizing, workforce reduction, early retirement incentives, attrition

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