FACULTY OF ECONOMICS AND BUSINESS

MID TERM PAPER

SEM II, 2017/2018

Course: EBM3103 Current Issues in Corporate Management

Submitted to: Dr. Irma Yazreen Binti Md Yusoff

Due Date: 4th April 2018

Date Submitted: 2 April 2018

TOPIC: Managing Human Resource and Diversity

Downsizing of General Electric Workforce: GE cut 12,000 Jobs in
TITLE:
Power Business Revamp

By submitting this form and signing below, I declare that:

 The attached Mid-Term paper is my own work and in my own words. Any material
copied verbatim is properly cited;
 I have complied with the rules of ethical conduct in completing this assessment;
 I have taken all reasonable precautions to ensure that my work has not been copied
by other students, including the protection of my files from access by other students.

Submitted by: Matric No: Signature:

Cennyson Sapon 51388 Cenny.
 EBM3103 Current Issues in Corporate Management

Introduction

The General Electric Company is an American Multinational Conglomerate company

that was founded in 1892. General Electric company (GE) was created by merger between
American Inventor Thomas Alva Edison’s Edison General Electric Company with Thomson-
Houston Electric Company (Carter & Juette, 1902). GE operate in five diverse business sector
such as oil and gas(Energy), aviation and healthcare (Technology Infrastructure), cable and
film (Media), commercial and consumer finance (Finance) and last but not least the
appliances and intelligent platforms (Business Solutions). GE currently has business in
about 180 countries around the world and has more than 323,000 employees. In 2017, GE
had been ranked as the 13𝑡ℎ largest firm in the U.S by the gross revenue. However, in 2017,
GE plans to cut 12,000 jobs in its power business. The reductions, accounting for about 18%
of the company Power’s workforce and will mostly affect professional workers and production
worker outside the United State. This paper will explain about GE downsizing decision by
cutting off huge amount of jobs in their Power and Energy Business, also the impact to the
company and to their employees. Thus, this paper portrayed my understanding, opinion and
my own perspectives on the current issues regarding GE cutting off 12,000 of their Power
and Energy business workforce.

GE Downsizing Decisions and its Impact

On December 2017, GE had announced that they would cut approximately around
12,000 jobs in its Power and Energy business (Oil and Gas) around the world that is around
18% of its current global workforce in that sector. Based on the news, GE’s Germany
workforce will suffer a considerable brunt of the job losses (Carter & Juette, 1902).
Approximately around 1,600 jobs expected will be cut off in GE’s German workforce, along
with 1,200 in Switzerland. GE announced that the job cut will reach 12,000. Labor Union
source had confirmed the announcement made by GE regarding their job cuts.

Downsizing a company is one of the hard decision and never a pleasant task to carry
out. This downsizing decision will eventually affect everyone in the company especially the
employees. Aside from creating unemployment, it also will cause change or restricting in the
company management. One of the primary reasons for employee to downsize is to reduce
their operation cost. Not only that, some company decided to downsizing the number of their
employees to show that there are having some restructuring and change in the management.
 EBM3103 Current Issues in Corporate Management

Thus, we can assume that the company trying to increase their value as the investor and
shareholder will assume that the change that the company make will increase their
profitability and attract more investor. Last but not least, company may assume that it is
better for them to outsource thus resulting decision in decreasing their number of employees.
Company officials decide that outsourcing certain activities will help to reduce cost and also
increase productivity. As for GE, the main reason for this huge amount of job cuts or extreme
downsizing is due to its global Power and Energy business are struggling due to it
overcapacity, fewer outages, lower utilization and growth in renewable energy sector.
Renewable energy such as solar power will eventually surpass the used of fossil fuels. Some
of the newest wind and also the solar farms are capable of competing head-on with
established fossil fuels such as coal, but without any negative environmental impact. For
example, the introduction of hybrid car that uses two or more engines that operate using an
electric motor and a conventional engine. This hybrid car will reduce the consumption of fuels
but also produce less CO2. Downsizing or job cuts decision is hard but also necessary for GE
due to their poor performance of their power market for the past few years. GE mentioned
that this decision is needed in order to reduce their structural cost and save approximately
around $1 billion in 2018. GE rival, Siemens also cutting approximately around 6,900 jobs,
or 2% of its global workforce, mainly at its power and also gas division, which has been hit
by the rapid growth of the renewables energy.

Impact of GE Job Cuts Off Decision Toward the Company and its
Employees

Hui & Lee (2000) stated that downsizing produces considerable consequences such as
the decline service quality and innovation, and employees’ “survivor syndrome”, as expressed
in increasing anxiety and risk aversion. As the company downsize or cut off their workforce,
they will rely more than ever on survivors to do what that are needed for the company to
survive and gain profitability (Meyer and Allen, 1997). According to Dunford, Bramble &
Littler (1998), downsizing will lead to increasing in the employees work pressure. The
decision of GE to save cost by axing approximately around 12,000 jobs in its global Power
and Energy business will hugely affect their employees worldwide. This stuff reductions
would affect people working in many areas especially in the human resources. Although this
decision might able to help GE company to reduce their operation cost, but there are some
cons of this decision. This decision will eventually create stress among GE employees.
 EBM3103 Current Issues in Corporate Management

Employees position will be eliminated during the downsizing, but the amount of work are
generally remains consistent. The remaining GE employee are saddled with additional
responsibilities and work load. Not only that, GE decision to downsize will also lead to
decrease on their employee’s morale. As soon as the GE downsizing announcement been
made, most of their employees worry about the probability of them to lose their jobs and if
they manage to secure their jobs, their will face greater work responsibilities without extra
pay. Due to intense competition and afraid of being fired, some employees may reserve their
ideas in case they are downsized thus the workplace will be less creative. Lower creativity
and motivation will lead to lower productivity and fewer innovation ideas to keep GE
company Competitive. GE downsizing is one of the highest number of job cuts in the world
approximately around 12,000 jobs globally. This downsize will increase the unemployment
rate. For a company, downsizing may be seen as a positive way to reduce their overall
operation cost but downsize generally will cause a negative business image for potential
employees and customer. Outsider may assume that the decision that made by GE indicated
their poor performance and doing bad in the Power and Energy business.

Conclusion

GE downsizing announcement of its Power and Energy business on 2017 is one of the
largest job cuts off in the history approximately around 12,000 jobs globally. This decision
does have affect the company either in a benefit way or otherwise. Due to its struggling Power
and Business energy, GE had decided to reduce their workforce in this sector. This decision
is the best way to reduce their structural and operation cost in order to maintain their
sustainability in Power and Energy business. Thus, from the aspect of the GE company, this
downsizing decision provide advantages to GE. However, reducing their workforce will bring
bad impression of the company image. Some investor or shareholder might think that GE is
doing bad thus their decided to reduce their workforce in order to cover all their losses. Maybe
few will think that downsizing indicate GE restructure their management and this new
change might bring profit to the company. Company downsizing decision will greatly affect
their employees because downsize mean the company decided to reduce their size thus few
employees will be layoff from their jobs. The remaining employees will saddle with additional
responsibilities and work load thus creating work stress.
 EBM3103 Current Issues in Corporate Management

Reference

Carter, G. K., & Juette, G. W. (1902). General Electric Company. Journal of the Franklin
Institute, 154(2), 115–116. https://doi.org/10.1016/S0016-0032(02)90099-2

Dunford, R., Bramble, T. & Littler, C.R. (1998). “Gain and pain: the effect of Australian
public-sector restructuring”, Public Productivity and Management Review, Vol. 21
No. 4, pp. 386-402.

Folger, R. & Konovsky, M. A. (1989). “Effect of procedural and distributive justice on

reactions to pay raise decisions”, Academy of Management Journal, Vol. 32 No. 1, pp.
115-30.

Greenberg, J. (1990), “Organizational justice: yesterday, today and tomorrow”, Journal of

Management, Vol. 16 No. 2, pp. 399-432.

Hui, C. & Lee, C. (2000). “Moderating effects of organization-based self-esteem on

organizational uncertainty: employee response relationships”, Journal of
Management, Vol. 26 No. 2, pp. 215-32.

Lee, J., & Corbett, J. M. (2006). The impact of downsizing on employees’ affective
commitment. Journal of Managerial Psychology, 21(3), 176–199.
https://doi.org/10.1108/02683940610659542

Meyer, J. P. 7 Allen, N. J. (1997). “Commitment in the Workplace: Theory, Research and

Application, Sage Publication, London.