MGT301A: Ethics and Sustainability - Staff Downsizing Scenario Report

This scenario report delves into the ethical considerations of staff downsizing, using the case of Wells Fargo as a focal point. The report begins with an executive summary and introduction, followed by a detailed description of the scenario involving Wells Fargo's workforce reduction plan following banking scandals. It then explores the stakeholder theory, analyzing how different stakeholders are impacted by downsizing and how their reactions can affect organizational outcomes. The report identifies effective practices for implementing layoffs, including thorough planning, diversity considerations, severance pay, and managing the post-layoff workforce. Moreover, the report offers alternative solutions to downsizing, such as cutting employee benefits, job sharing, and adjusting work schedules. The report concludes with key recommendations for businesses considering staff downsizing, emphasizing ethical treatment, communication, and consideration of all stakeholders. The report provides a comprehensive analysis of ethical downsizing practices and alternative strategies to minimize negative impacts.

Running head: SCENARIO REPORT 1
Scenario Report
Name of Author
Institution of Affiliation
Date of Submission

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Scenario Report
1. Executive summary
This paper provides discussion and analysis of how a business can ethically manage the
staff downsizing. The downsizing of employees is the process of terminating multiple workers at
the same time for the company to save money. It provides the summary of the scenario of Wells
Fargo being faced with difficulties in its operations aftermath of several banking scandals. Using
the case scenario of Well Fargo, the paper provides a scenario report by discussing stakeholder’s
theory and analysis of ethical downsizing. Besides, the report offers key recommendations that
businesses such as Wells Fargo can consider while downsizing the staff. Additionally, the report
offers three alternatives to downsizing that the management can use to cut operational costs.
2. Introduction
Reduction of employees is the process of terminating multiple workers at the same time
for the company to save money. It is a difficult process for both managers and workers. It is hard
for managers as they are required to make tough decisions and hard for other staffs who must
motivate and provide support for the existing workers and of course hard for workers who have
lost their jobs after a long working period in the same firm. Since downsizing of workers is a
hard process, treating staffs in an ethical manner during the process of a layoff can make the
process a bit easier and effective for everyone involved (Shaw & Barry, 2015).

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3. Summary of the scenario
Wells Fargo is facing “difficulties” in its operations aftermath of several banking
scandals. As a result, it announced a plan to downsize its workforces as much as 10 percent by
the year 2021. The top management of the bank has a plan to cut the number of workers from
267000 to 26700. According to their plan, the downsizing of their employees will be done via the
combination of layoffs and attrition of its current staff members. According to the company’s top
management, the objectives of the planned retrenchment are to help the firm to become more
streamlined and efficient in its operations. According to the bank’s spokesman Tom Goyda, the
reduction of the staff and other workers will aim to better the firm in aligning with the current
volumes after evaluating the market conditions and the consumer needs (Dennig et al., 2018).
While the planned retrenchment of employees has been made, it is not clear how the
process will be done and how it will hurt those who are involved. Besides, it is not clear whether
the firm plans to make cuts. The planned downsizing of staffs in Australia comes less than a
month after the bank had already cut 600 workers from its mortgage division mostly in Florida,
California and Colorado Springs (Barry et al., 2019).
4. Description of theory used for analysis
The scenario, in this case, is how Wells Fargo can ethically manage its staff
downsizing. Downsizing is more effective and efficient when planning takes place. A
downsizing plan should be included in all strategic management plans (Redman, 2016). Wells
Fargo’s program is to go through large scale organizational change, and thus, strong leadership is
required to make sure the employees successfully understand and accept such changes. Positive
communication, direction, and optimism are critical to maintaining productivity and focus of
worker force, which may become distressed and traumatized and uncertainty a result of losing

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their co-employees. During this period, organizations are unlikely to fulfill all the responsibilities
they have towards every stakeholder group.
The analyzed model that relates to downsizing and performance outcomes from the
stakeholder perspective is shown below. In summary, the model describes how the firm’s action
on downsizing can affect the evaluations of different stakeholders in the organization. This can
lead to different reactions from the stakeholders of the company, thereby impacting on the
organizational outcomes of profitability and survival. Positive responses will lead to high
profitability and corporate survival, while adverse reactions can result in loss.
Different downsizing approaches have been identified by various studies. According to
(Crane & Livesey, 2017), demonstrates that regardless of the downsizing method or the
performance indicators utilized, the downsizing is not typically linked with the performance
improvements as the reactions of workers and the organizational learning are usually negative.
The stakeholders are critical to any organization to the extent that their relationship with
the company is featured by the power to impact the organization’s outcome. The most crucial
stakeholders that may be affected by the downsizing process include the current workers, former
workers, the social community, the partners, and the stockholders (Jamieson & Gellermann,
2014).
While downsizing affects every stakeholder in the organization, it has been established
that the key stakeholders who are most affected by are the workers who are dismissed and have
to leave the organization. The impact the downsizing may affect the layoff workers in various
ways. The layoff workers may be forced to start searching for alternative employment. Besides,
the workers may become despondent as a result of psychological impact as a result of the loss of
job and have financial constrain if they cannot find alternative employment. As a result of such

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impacts on downsizing of staff members, there is the need for businesses like Well Fargo to look
for ethical ways that can help them manage staff downsizing by decreasing such impacts to
stakeholders.
5. Analysis
There are situations where the firm is in a very hard situation to operate and thus firing
some of the workers become the only option in order to avoid bankruptcy like in the case of Well
Fargo. In these situation layoffs are justifiable but what is highly needed is from the
organization’s management is to try to take alternative measures which are considered ethical
during the process of layoff. In most cases, downsizing of employees impacts the significant
number of workers, which not only affects the individuals fired but also results in a problem for
the whole community. Besides, when the management announces downsizing, the stock
exchange receives this news, and the changes in the stock market value in numerous well-
established firms occurs (Trevino & Nelson, 2016).
Ethical treatment of employees during downsizing is crucial as it aims at avoiding
discrimination lawsuits. It is all about treating all workers who leave and who stay behind fairly.
By applying the golden rule to downsizing, one can do what requires to be done without any
complications, especially to the staffs who are affected (Datta & Basuil, 2015).
Ethical downsizing means treating every worker fairly and respectfully. During downsizing, the
management must keep in mind the ethical expectations of all stakeholders, including workers,
local communities, and customers.
One of the ethical factors that management is supposed to consider during retrenchment
is communication. First, the administration should respect the privacy of workers or staffs who
are being laid off and talk to them privately. A personal approach is more important, especially

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in small and medium-sized businesses rather than inviting the consultant to or expert to lay off
the staffs. The management should be honest and clearly explain to the employees the motives of
downsizing. Besides, the firm is supposed to consider conveying general appreciation to the
workers as well as motivating them in their future endeavors.
Also, the firm should include a follow-up plan after a layoff. In some states,
organizations are legally required to offer a few days of severance during the time of layoffs. In
such situations, both the workers and the local communities often feel the company have an
ethical obligation to provide some compensation as well as ongoing benefits coverage to help the
workers who are affected after the layoff. Some firms also consider paying for employment
services as a way of supporting the workers who have been laid off.
Likewise, the management is supposed to consider the remaining employees with regards
to their needs ethically. Many employees who remain after downsizing may feel concern that
their jobs are in danger. Furthermore, downsizing can indicate that the company is in a dying
situation, thereby making the remaining workers opt to leave for other alternative jobs. As a
result, the top management should intervene for a meeting to explain the situation and address
these rumors. This will provide assurance to the remaining workers that the firm will still remain
operating as it looks on the best strategies in becoming stable (Andresen & Nowak, 2014).
The other step in ensuring ethical downsizing is to make an offer of a voluntary
retirement package for these under the same category. These under the same category may refer
to the number of years they have served the company. Also, the job positions left vacant by those
who wish to retire voluntarily should be preoccupied by the existing workers (Carroll &
Buchholtz, 2014).

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6. Effective practices in implementing layoffs
For the human resource professionals to effectively make downsizing a success they
should ensure all legal and humanely procedures are followed. Some of the effective practices
that the top management can follow the implementation of layoffs described below:
One of the effective ways or practices in implementing layoffs consists of the thorough
planning of the steps of laying off. The management is required to ensure all actions that are
included during dismissal are carefully planned by considering the stakeholders who are
involved. Secondly, the management is supposed to include diversity concepts while making
layoff selections to ensure there is no discrimination of gender, race, or ethnicity. Also, the
administration should address the needs of who is laid off and how the organization will provide
the compensations and benefits (Goesaert, Heinz & Vanormelingen, 2015).
The other effective practice in ensuring effective implementation of layoff is to provide
severance pay. In this case, the employers or top management may offer severance pay through a
welfare benefit plan. Furthermore, the company is supposed to deal with the emotional impact as
downsizing may be a corporate vision of change for the workers. The management should help
in various ways in ensuring the laid-off workers can confront the challenges that are ahead of
them. Additionally, the administration should effectively manage the post layoff workforce
(Cascio, 2015).
7. Identification of 3 alternative solutions
Downsizing is sometimes necessary, but it is not always taken lightly. This is because it
sends a negative message to other employees; investors and stockholders as well as consumers
that the company is struggling; thus the firm mighty soon stop its operations. Downsizing also

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contributes to lower staff morale and may make the remaining workers be concerned about the
stability of their job. As a result of such impacts caused by downsizing, the management can
come with other alternatives that can trim the costs of the business operations (Altmann, 2017).
One of these alternatives includes cutting back on employee benefits. Most of the staffs
require their health insurance benefits, but other minor benefits such as sick leave or vacation
pay may be trimmed down. The trimming of these benefits can be done by revisiting and
revising the policies to make them more cost-effective for the company. For an instant, the
policy can be revised to require employees to worker under certain hours to accrue for the paid
vacation, thereby spreading the costs out over time.
The other alternative that the management can use instead of downsizing of staffs is to
offer job sharing. This involves the combination of skills of two workers in the same position.
The approach can help both workers to keep their jobs but will cut their hourly wage costs. The
third option is to change the workweek by allowing the business to operate four days a week
instead of five to save wages as well as the operating costs.
8. Recommendations
There are important recommendations that Wells Fargo and other businesses should take
while considering downsizing of workers. First, the management should respect the privacy of
workers or staffs who are being laid off and talk to them privately. A personal approach is more
important, especially in small and medium-sized businesses rather than inviting the consultant to
or expert to lay off the staffs (Agwu et al., 2014).
The management should also be honest and clearly explain to the employees the motives
of downsizing. Besides, the firm is supposed to consider conveying general appreciation to the
workers as well as motivating them in their future endeavors. The other recommendation is the

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management to address the needs of who are laid off and how the organization will provide their
compensations and benefits (Habel & Klarmann, 2015).
Conclusion
Downsizing is considered ethical if it has been utilized by the organization as the only
option to reduce the costs of its business operation. For the human resource professionals to
effectively make downsizing a success, they should ensure all legal and humanely procedures are
followed (Crane & Livesey, 2017). Ethical treatment of employees during downsizing is
important as it aims at avoiding discrimination lawsuits. It is all about treating all workers who
leave and who stay behind fairly. By applying the golden rule to downsizing, one can do what
requires to be done without any complications, especially to the staffs who are affected.

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Reference list
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organizational management: A case study of Nigerian banks. International Journal of
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Conversation.
Barry, D., Brown, S., Geason, C. A., Melehan, R., MacDonald, A., Rosano, L., & Santos, P. H.
(2019). To cite this report, please use.
Cascio, W. F. (2015). Managing human resources. McGraw-Hill.
Carroll, A. B., & Buchholtz, A. K. (2014). Business and society: Ethics, sustainability, and
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