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Alternatives to Organizational Downsizing: A German Case Study

In the past few years, a new wave of downsizing has been observed. This wave began during the economic recession of the early 1990s and has continued during the subsequent years of economic growth. While the espoused purpose of this wave of downsizing is to reduce costs and increase “competitiveness,” empirical research raises doubts about whether these goals have actually been achieved. Downsizing may also have serious negative consequences for the employees who lose their jobs, for their families, and for the employees who survive the restructuring process. Despite these outcomes, downsizing appears to have become institutionalized among executives as a taken-forgranted way of managing organizations. The cognitive rigidity that this suggests makes it important to discuss alternatives to corporate downsizing. The Volkswagen (VW) Company is an important example of such an alternative, because of its innovative policy of preserving employment in Germany. This paper describes the genesis and implementation of that personnel policy, showing that discontinuities in the corporate environment do not always have to be dealt with by means of mass layoffs. Profits and social responsibility do not necessarily have to be competing goals, but can sometimes be jointly accomodated by using appropriate human resource management programs.