Opportunity Cost Is Looking For Another Alternative Management Essay

Opportunity cost is looking for another option giving up another. In concern chance is a changeless matter ; houses by and large opt to downsize their staff during this period of alteration. Though retrenchment is legal for organisations to choose for and is all but just, but since downsizing employees is covering with worlds so the issue becomes ethical and downsizing without moralss can take a company to ruination. Most direction ignores the ethical side of retrenchment and goes on with the procedure with caring for the emotional of their workers, which in return affects the employees emotionally, doing them lose their assurance and their productiveness degree. Downsizing does non merely consequence the laid off employees but the surviving employees are effected as good, they tend to lose assurance in the direction and a feeling of insecurity sets in, set uping the whole working clime. If direction is to take serious note of downsizing as an ethical issue every bit good so the direction can minimise these effects and can take the organisation towards success.

Opportunity cost is giving up a certain thought in order to take up another thought. In concern a house by and large faces such state of affairss on several occasions. When resources in the universe began to go scarce, so doing picks is indispensable, so a peculiar pick can go an chance cost so that another pick can be taken in, that is considered to be more valuable ( Buchanan, 1987 ) . For illustration a company is covering with a certain merchandise and so another merchandise is available that would be better and more profitable and so they drop the old merchandise and opt for the new merchandise, the net income that the company was deriving through the old merchandise is the chance cost. In this survey we are traveling to look at the employment side of chance cost that the company would lose if it is to lose out some of its best acting employees. A company running successfully with extremely gifted workers that produce high productiveness degrees is all of a sudden fired, because the company has opted to outsource their procedure to another squad of workers. Who has agreed to work for them at a much lower monetary value? First the company downsized its mean workers in order to direct their work to this new squad ; in the procedure many cardinal employees experiencing insecure began to discontinue the organisation. The 1s that remained had lost religion in the company and their engagement in the company dropped, they public presentation dropped every bit good, they began to miss occupation satisfaction, they were under emphasis at work and at place, the working ambiance was severely affected and this continued to do the direction to downsize its employees farther, losing sight of the hazard that was involved in downsizing its employees. The company suffered the hazard of covering with people who they ne’er knew, people whose work was non proven before their eyes ; their committedness degree was non known. There were many such hazard factors involved, in the determination that the direction had taken.

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Definition of Opportunity Costs

Buchanan ( 1987 ) points out that chance cost is a cardinal construct it brings frontward the relationship between pick and scarceness. As we live in a universe where resources are acquiring scarce twenty-four hours by twenty-four hours and hence to maintain up with the scarce resources picks has to be taken. The construct of chance cost speaks of the following chance or option that is better or seems to be better than another pick.

Why Downsizing is an Ethical Issue

Downsizing issues are all economical, legal and psychological affair. But when the pick is made it does hold an impact on the well being and rights of others, when it is ethical in the existent sense. Even though the rationalisations are strong for downsizing employees it ever seem to be a nerve-racking experience to all, and particularly for those that are being fired non merely face fiscal challenges but psychological challenges every bit good ( Aleccia, 2008 ) . The topographic point of work, does n’t merely stay a on the job topographic point for the employees, it becomes a topographic point of constructing relationships, where employees spend more clip with their colleagues than they would pass with the household members. It becomes a significance to their life, and all of a sudden being removed does bear an impact on the psychological side of the individual in concern. Hence it is necessary that directors treat downsizing to be a painful experience and non merely an option to construct luck ( Hunter, 2007 ) . Though it is legal and apprehensible because companies are looking to do net incomes and they downsize in order to diminish their liabilities. But at the nucleus, it does hold its ethical side, and a director that is efficient and concerned does non merely look at the legal and fiscal side of the company but to look at the unity and self-respect of every person working in the organisation, who have a function to play in the organisation and is the company ‘s lifeblood.

Duties of Ethical Directors

Top direction plays a critical function in moving on this class. Downsizing determinations has ethical concerns connected to it, the first option of a director is to take attention of the organisations good being, second he has to take into consideration the fact that he should non transgress the rights of his employees, though retrenchment is an alternate that is extremely preferred by organisations, in order to cut costs and to run into their concern footings. Retrenchment is non a little issue and it needs plenty counsel from the HR direction ( Hopkins and Hopkins, 1999 ) . The psychological side is non taken into consideration by the direction. The rupture sum that should be paid, to what distance will the organisation go with them for them to happen some other occupation is wholly non bothered about by direction. Particularly when you take this point into consideration that the laid off employee is non being downsized because of unethical behaviour or due to bad public presentation, and that it is merely because the company is looking to upgrade its net incomes, that is why downsizing determination are really serious and can impact the company ‘s hereafter, this is the chief ground moralss experts province that employees are to be given due regard.

Interrupting the psychological contract

Rousseau ( 1995 ) defines psychological contract to be the trust between the employee and the employer. It is an informal bond, subjected and revolves around the person ‘s relationship between the house and the employee ( Rouillard & A ; Lenine, 2005 ) . Martin, McGoldrick & A ; Pate ( 2003 ) points out that by and large the breach is due to unmet duties, which can be for a short clip or may turn out to be lasting. Feldman and Turnley ( 1998 ) argue that go againsting an employee may do the other employees to be angry or experience a sense of insecurity as good and they may go forth or may lose trueness towards the organisation, they willingness to co-operate with the company will drop.

Del Campo ( 2007 ) points out that therefore the psychological contract is a critical tool, which is to be understood by the directors and the relationship between the employee and the company ; this should be taken into consideration. A concerned and more efficient Management covering with psychological contract can minimise the hazard of employees acquiring emotionally affected, which consequences in better public presentation, addition in occupation satisfaction and lower staff turnover. Satisfaction degree additions for both the employer and the employee every bit good.

Survivors syndrome

Mishra & A ; Spreitzer ( 1997 ) points out that the stage of retrenchment has a peculiar consequence on the working clime and on the employees every bit good. They farther indicate out that the respond of subsisters to the retrenchment can be several ways. Appelbaum et Al ( 1999b ) argues that by and large people who are laid off are supposed to be affected, but on the contrary it is the subsisters that are more negatively affected. These effects are to be taken into consideration, because it affects the employee ‘s morale, the working clime and so affects the entire public presentation in the organisation. In fact it is after the retrenchment stage that anxiousness and misgiving among the staying employees begin to develop. Cascio ( 1993 ) argues that downsizing bears its effects on the employee ‘s motive and morale. He farther points out that many surveies have shown that the subsisters tend to go self-involved, narrow minded, and averse to put on the line. Further he points out that there is a dip in public presentation, morale sinks and deficiency of trust towards the direction. These symptoms he links to a common term: the subsister ‘s sickness syndrome. The symptoms are many: lessening in motive, insecurity and anxiousness, misgiving, turning away of hazard, dissatisfaction, deficiency of communicating and planning, bead in commitment degree, depression, denial, feeling of unfairness, bead in direction recognition, weariness, emphasis, struggles, work overload and burnout.


Erturk ( 2008 ) points out that if communicating is missing between the employees and direction in respects to downsizing it creates a feeling of uncertainness, anxiousness, menace, disaffection, which gives rise to emphasize, and increases the degrees of turnover and absenteeism. It besides creates uncertainty in the employees mind, because of rational thought among the employees and some intercession from outside, likely from the direction ( Procter & A ; Randall, 2008 ) . Sometimes there is uncertainness and uncertainty in the employees mind fearing the result and at times the intercession of the directors are non meaningless and non decently timed. Hence during downsizing communicating should be effectual, where communicating is uneffective negative emotions can be created in the heads of the workers, which decreases the employee ‘s occupation engagement. Wherever occupation insecurity, uncertainness is present that company will hold occupation stressor nowadays, under such fortunes the employee gets de-motivated. Kilic and Uygur ( 2009 ) states that occupation engagement is a motive to work, and because the presence. So, during organisational alteration, uneffective communicating can bring forth negative emotions in the heads of employees, which can cut down their occupation engagement. Because when fright and uncertainness is in the head of an employee, he begins to experience insecure and emphasis additions, this de-motivates the employee and his public presentation degree is severely affected. The employee ‘s engagement in the organisation accordingly decreases.


The construct of chance cost is of small relevancy to the direction in most fortunes is true, but it all depends on the direction. Generally chance cost is an ethical issue, but somehow the direction does non acquire that message and does non look into the ethical side of the issue, they ignore the emotional side of their employees. This kind of intervention to employees does non merely consequence the laid off employees but the employees that remain every bit good, because an uncertainness is created and the Begin to experience insecure about their occupation in the hereafter, this in return effects their public presentation and farther pushes them into depression. A good director will understand the emotional side to the issue and though no 1 can make anything as organisation has to see to their well being and downsizing has to be done, but a good director will cognize the how an employee would experience and would cover with it in a more professional mode. He will discourse the affair much before clip, so he will pass on with the employees and will impart a morale support to them in happening another occupation. He will do things clear and be honest about the state of affairs the company is in, he will give clip and go on to pass on till the employee soaks and absorbs the state of affairs, since it takes clip for a individual to accept a thing that is aching. This kind of direction would give the company better opportunities of lasting. But most directors seem to disregard this procedure and trade with the employees with no concern and support.

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