Is Labor in Short Supply?

Is skilled labor abundant? Or is there a shortage? The simple answer to both of these questions is yes. Of course, simple answers don’t adequately address the issue or begin to describe how both situations (a shortage and a surplus) can exist simultaneously. In the sections that follow, we’ll provide you with that explanation.

Why do organizations lay off workers?

Downsizing: An activity in an organization designed to create a more efficient operation through extensive layoffs.

At onetime, organizations followed relatively simple rule: In good times you hire employees; in bad times, you fire them. Since the late 1980s the rule no longer holds true, at least for most of the largest companies in the world in the world. Throughout the past decade, most Fortune 500 companies made significant cuts in their overall staff. Thousands of employees have been cut by organizations such as IBM, AT&T, Boeing, and Sears. In fact, in the fourth quarter of 2006 alone more than 255,000 jobs were cut in US companies nearly 1 million lost jobs in all of 2006.This downsizing phenomenon is also going on outside the United States. In India, many large companies like TISCO, SAIL, Hindustan Motors were forced to downsize as a response to liberalization and loss of the protectionist regime. Jobs are also being eliminating in almost all industrialized and newly industrializing nations.

Why this trend for downsizing? Organizations are attempting to increase their flexibility to better respond to change. Quality emphasis programs are creating flatter structures and redesigning work to increase efficiency. The result is a need for fewer employees. Are we implying that big companies are disappearing? Absolutely not! It is now they are operating that is changing. Big isn’t necessarily inefficient. Companies such as PepsiCo and HUL in India manage to blend large size with agility by dividing their organizations into smaller, more flexible units.

Rightsizing: Linking staffing levels to organizational goals

Outsourcing: An organizations use of outside firms for providing necessary products and services

Contingent workforce: Part-time, temporary, and contract workers who are available for hire on an as needed basis.

Downsizing as a strategy is here to stay. It is part of a larger goal of balancing staff to meet changing needs. When organization becomes overstaffed, they will likely cut jobs. At the same time, they like to increase staff if doing so adds value to the organization. A better term for this organizational action, then, might be rightsizing. Rightsizing involves linking staffing levels to organizational goals. Rightsizing promotes greater use of outside firms for providing necessary products and services—called outsourcing in an effort to remain flexible and responsive to the ever changing work environment. Hero cycles, for example, uses outsourcing extensively. The company has 225 vendors, 90 percent of whom are located within a 10 kilometer radius, thus allowing just in time deliveries. In doing so, they are attempting to create flexible and rapid response systems.

Why flexible and rapid response systems needed?

Thousands of organizations in the global village decided they could save money and increase their flexibility by converting many jobs into temporary or part time positions giving rise to what is commonly referred as the contingent workforce. Today, temporary workers can he found in secretarial, nursing, accounting, assembly line, legal, dentistry, computer programming, engineering, marketing, and even senior management positions.

Why the organizational emphasis on contingent employees? Many large companies are converting some permanent jobs into temporary ones. Organizations facing a rapidly changing environment must be in a position to adjust rapidly to those changes. A large number of permanent full time employees limit management’s ability to react.