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costcuttingproceedures - Cost Cutting Cost Cutting Summary...

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Cost Cutting Cost Cutting Summary Downsizing is common practice in both the private and government sector. In an article written for Governmentexecutive.com writers Conrad Ciccotello and Major Steven Green write about the lessons we can learn from the history of industry downsizing. This article reviews the current status of the Department of Defense (DoD), Honda, and the computer industry. Just like any other business the DoD have their own costs to account for especially shaving some of the fixed costs associated with day to day operations. Some of these fixed costs include the salary of employees and permanent staff. During the cold war the DoD was under a constant threat so increasing staff and permanent employees was a must. Though the country is under a threat level most of the activities can be remedied with the use of computers, contract, and temporary employees. The fixed costs associated with permanent employees include a retirement fund, insurance, and time off, by utilizing temporary employees the DoD can save on fixed costs, between 1985 and 1995 the DoD reduced the permanent staff by 30%. As of today the DoD has taken the lead in federal downsizing and starting initiatives to reduce permanent staff positions and rely more on temporary employees and outsourcing. During the mid 1980’s Honda decided to make some major cuts and reduce the permanent engineering staff due to a slump in sales. By removing their ability to develop new technologies in a competitive market Honda began to see a loss on market share. The decision to cut engineer jobs made a huge negative impact on Honda and took years to rebound from this decision. The computer industry is a rapidly changing market that involves definite highs and lows. These current highs and lows are making these technology firms reevaluate their fixed costs and make
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dramatic cuts. IBM reported that in 1992 they saved $8.3 billion dollars and another $2.9 billion in 1991 by eliminating jobs. Downsizing is typically the byproduct of a company trying to quickly improve its profits and unfortunately the biggest loss for a company is employee benefits and payroll. Downsizing of staff consists of these elements: it is intentional; it leads to reductions in personnel; it attempts to increase the efficiency of the organization; and it affects work processes (Huber & Glick, 1993). Downsizing is often justified as a necessary measure to protect the company from bankruptcy. According to a 1997 survey by the American Management Association (AMA), the most often
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