Downsizing the largest employer in Kota Tinggi, Johor Bahru, International Fores

Question

Downsizing the largest employer in Kota Tinggi, Johor Bahru, International Forest Products Company(IFP) is an important part of the local economy. Kota Tinggi is a mostly rural area in Johor Bahru. It employs almost 10 percent of the local workforce, and few alternative job opportunities are available in the area. Razman, the human resource director at IFP, tells of a difficult decision he once had to make. According to Scott, everything was going along pretty well despite the economic recession, but he knew that sooner or later the company would be affected. "I got the word at a private meeting with the president, janet Low that we would have to cut the workforce by 30 percent on a crash basis. I was to get back to her within a week with a suggested plan. Iknew that Ms. janet Lowwas depending on me to provide at least a workable approach. "First, I thought about how the union would react. Certainly, workers would have to be let go in order of seniority. The union would try to protect as many jobs as possible. I also knew that all of management's actions during this period would be intensely scrutinized. We had to make sure that we had our act together. "Then there was the impact on the surrounding community to consider. The economy of Kota Tinggi had not been in good shape recently. Aside from the influence on the individual workers who were laid off, I knew that our cutbacks would further depress the area's economy. I knew that there would be a number of government officials and civic leaders who would want to know how wc were trying to minimize the harm done to the public in the area. "We really had no choice but to make the cuts, 1 believed. First of all, 1 had no 1 choice because Ms. Janet Low said we were going to do it. Also, 1 had recently read a 1 news account that one of our competitors, JM Corporation in Pahang, had laid off several hundred workers in a cost-cutting move. To keep our sales from being further depressed, we had to ensure that our costs were just as low as those of our competitors. The wood products market is very competitive and a cost advantage of even 2 or 3 percent would allow competitors to take many of our customers. List the elements in the company's environment that, will affect Razman suggested plan. How legitimate is the interest of each of these? Is it true that Razman should be concerned firs, and foremost with protecting the nterests of the shareholders? Discuss.

Explanation / Answer

1. There are internal factors as well as external factors that needs consideration and will affect Razman's plan.

The first factor or the element is the worker's union. No worker's union will welcome the decision to downsize and cut the workforce. The interest of the workers and the union is a legitimate one. Workers will find it difficult getting another job as the economy of Kota Tinggi is not in a good shape.

The next factor or element is an external factor. As the company is an important part of the local economy, there will be pressure from government officials and civic leaders. These officials would want to minimise the damage as IFP employs around 10% the local workforce. If 30% of these people are laid off, it will mean that 3% of the local force will lose their jobs. This will have a negative impact on the society and the economy. So, their interest is also legitimate.

2. Razman is the HR director. So, he has the ultimate responsibility of all the employees at IFP. As the HR director he has to keep a balance between the interest of the employees and the strategic requirement of the organization. So, it cannot be said that Razman should be concerned first with the shareholder's interests. His foremost concern is protection the employee's interesr as he is the HR director.

But as already said he has to maintain a balance between the interest of the employees and the strategic requirement of the organization. In this situation, the company is in desperate need to downsize and cut few jobs in order to be in business. So, here the situation demands that Razman gives higher importance to the needs of the organization and thus that of shareholders.

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