Retrenchment Strategy

At the corporate level, there are three strategic alternatives that may be employed; growth, stability, and retrenchment (Parnell, 2014). Growth and stability plans are usually implemented when the company is performing well and business is going along as planned. When a business begins to fail, or there is a decline or recession noted, a retrenchment strategy may be developed and put into place. Retrenchment characteristically takes on one of three different paths: turnaround, divestment, or liquidation (Parnell, 2014). If a company determines that a turnaround is their best course of action, they typically focus on increasing efficiencies through cost and asset reductions (Schmitt & Raisch, 2013). According to Parnell (2014), this may include

Retrenchment can be a very ethical process if implemented correctly. According to the utilitarian view of ethics, decisions are measured as morally right or wrong depending on their end result (Parnell, 2014). In most cases, if the utilitarian view of ethics is used, retrenchment decisions are based on their consequences to the employees, and the plan that creates the greatest good for the greatest number is the one that the company will attempt to implement first. In instances such as this, managers must do everything in their power to take care of all entities that will be affected. Managers need to be aware that the way they handle departing employees is an essential element of the retrenchment plan. To remain ethical, it is important that management is open, honest, and transparent about the process; as well as supportive and caring of all that will be affected (Morris, 2012). Retrenchment can have a lasting impact on those who are let go as well as those who remain, which may produce short-term morale, communication, and productivity issues and ultimately may threaten the business’s performance in the long-term (Morris, 2012). Parnell (2014) states that management should explain to all affected entities why the retrenchment is necessary and how the employees who are to lose their job will be selected and how they will be supported after the retrenchment is executed. Morris (2012) feels it is

In one instance, the retrenchment process was handled ethically and in my opinion; correctly. The employees who were slated to lose their jobs were not necessarily happy about the situation they were faced with, but they understood why it was happening and why it was necessary; primarily because management encouraged two-way communication, kept employees informed, and were transparent from the very beginning of the process. Because employees felt that the company had done all that they could do to save as many jobs as possible and had attempted to protect them at all costs, most left without feelings of ill-will. In the other instance, employees were not kept as closely informed and many found out about the retrenchment and associated plan, the day that they actually lost their jobs. Employees did not feel that the retrenchment plan was administered fairly and consistently; therefore those who lost their jobs were disgruntled and those who remained suffered from very low morale and eventually began looking for other jobs. The company continued to suffer from performance issues and low employee morale for a long time afterward. The perception of the retrenchment being ethical seemed to be based on how the retrenchment was handled rather than on the effect that it had on the