Effect of the Economic Downturn on a Manufacturing Company Essay

Effect of the Economic Downturn on a Manufacturing Company - Essay Example The essay "Effect of the Economic Downturn on a Manufacturing Company" talks about the economic problems in a manufacturing company and analyzes the actions of the management's team. The union, the main company's problem which strongly opposed the layoff of any employee, happened to guarantee their members job security, which was the main reason that nearly all the workers had joined up. A number of alternatives were suggested by managers during a brainstorming session, the most extreme being to lay off twenty percent of the workforce permanently. The least disruptive was to retain the full complement of employees and merely schedule them on a revolving four-day work week until the crisis is over and the company can return to full production. The management eventually decided to reduce the working hours of each production worker instead of laying off employees. They felt that dismissing workers from their jobs would be too disruptive, and before they could do so they would have to meet with the union members and negotiate who should be dismissed, according to the terms of their collective bargaining agreement. They expected stiff opposition and a possible court case if they were to insist on laying off people. Unfortunately, when the decision was implemented, many of the good employees lost interest in their jobs and filed for resignation when they were offered better-paying jobs by a competitor firm. The final decision achieved the objective to reduce labor costs by twenty percent.... A joint meeting of the executive and operations management committee was called, the finance manager briefed them on the need to reduce operations expense of which the labour cost is the largest, and the managers then brainstormed on the different alternatives that they felt were viable. Bounded rationality in the decision-making process Source: University of Portsmouth, 2005 The four best alternatives were as follows: Twenty per cent of the production employees across the board shall be laid off with two week’s severance pay. The managers should identify who are to be separated. Ten per cent of production employees shall be laid off, only from those departments that may be reduced, and some shifts reduced from the regular three to only two. Some departments may not be affected at all. Convince the employees to take a uniform fifteen per cent pay cut. In this case management will also take a pay cut to make up the difference from what employees save to what finance needs to ma ke up. Scheduled leaves will be given to the amount of the cut. Declare a four-day work week for all production employees, eliminating twenty per cent of the work hours and reducing production personnel’s pay by twenty per cent. There are a number of criteria that the management team considered in making the final decision. The top criterion is to absolutely reduce labour cost in production by twenty per cent. The number is not arbitrary. The finance department reasoned that twenty per cent of the production capacity is being suspended until demand picks up. Other than this, there are many uncertainties, such as the length of the suspension of operations, whether further reductions shall be necessary, and whether the firm will still return to full operations after the crisis