THE EFFECT OF RETRENCHMENT ON THE PRODUCTIVITY AND MORALE OF WORKERS A CASE STUDY OF ZENITH BANK PLC

ABSTRACT

Retrenchment raises a number of other issues besides cost savings. Retrenchment in reality is hitting all levels of employees. This study investigated the effect of retrenchment on the productivity and morale of workers a case study of Zenith Bank Plc. The study used survey research design was used in carrying out this research work. The specific objectives of the study were: to inquire the prevalence of the effect of retrenchment on the productivity and morale of workers of Zenith Bank Plc,to determine the effects of retrenchment on the workers of Zenith Bank Plc and to establish the effects of retrenchment on the organizational productivity.

 

 

CHAPTER ONE

INTRODUCTION

1.1     Background to the Study

Due to continued economic decline, many organizations have found it difficult to maintain a large workforce. The services of some employees have been declared redundant leading to poor morale of the remaining workforce as a result of job insecurity. Due to economic constraints, most organizations are compelled to make hard decisions of dispensing human capital investment as they strive to control costs and remain competitive. Some of the common cost reduction programs employed by firms include reducing the number of staff, reducing salary increase budgets, reducing hiring and cutting down on bonuses (Huka, 2003). Human resource deals with rewarding employees, training and development, recruitment, and separation. Separation concerns the way employees’ part relationship with the companies they work for. This research is concerned with retrenchment, a process of separation. Separation can be due to death, lay-off, retiring, and retrenchment. Separation, like selection, affects the composition of a company’s workforce. Both the incumbent employees and those being dismissed may be affected by the process in various ways. There is therefore need to carry out the process with all due care to ensure it is a success considering its strategic role in the organization. Retrenchment is usually linked to downsizing programs that play a significant role in the overall process of restructuring. This has greatly affected organizations. Lewis (1992) defined retrenchment from a legal perspective as a dismissal that is ‘attributable wholly or mainly to’: an actual or intended cessation of business or an actual or expected diminution in the requirements of the business for employees to carry out ‘work of a particular kind’, either generally or in the place in which the employee is employed. Retrenchment per se, is the involuntary termination of employment, occupation, or job by the employer through no fault of the employee. Therefore, retrenchment is a form of dismissal and its essence is that the employer requires fewer workers. Employers normally deal with redundancies in one of the following three ways: an ad hoc approach whereby there are no formally established arrangements, a formal policy setting out their approach to be adopted by management when faced with making redundancies and a formal agreement setting out the procedure to be followed when redundancies have been considered. Whether or not an employee is dismissed or struggles on, the result is costly in both economic and human terms. Most business enterprises are at present cutting down their workforce due to a number of reasons including overstaffing. Most firms attempt whenever possible to avoid retrenchment situations and prefer to let natural attrition reduce the labour force gradually. Retrenchment situations result in anguish and hardship for the employees, disrupted production and soured industrial relations for the company. Employees find the threat of retrenchment unnerving and extremely worrying. With their livelihoods threatened, employees may impose sanctions on the company- working to rule, strikes, and factory occupations- in an attempt to save their jobs (Bottomley, 1990).There are a number of reasons attributable to retrenchment: the overall level of business activity may be low necessitating reductions in the number of employees, the number of employees available for a particular job may be much more when compared to the workload, the job itself may no longer be necessary, there may be a significant change in the contents of a job or there is a change in work methods (Bell, 1981). Retrenchment decisions are costly to the company. Compensation has to be incurred; trade unions are greatly concerned about the social and personal impact of retrenchment situations. In terms of human accounting, redundancies represent the scrapping by one user of a valuable resource and its transfer into a community pool from which it can be withdrawn and put to work by another (Armstrong and Murlis, 1998). In the Telecoms Systems reseller and Integration Industry in Kenya which Telkom Limited operates in a lot of changes has taken place. First there was the entrance of Mobile telephony in the year 1999 - 2000, also the Telecommunication service provider business was a monopoly of one state owned organization; this later changed with the liberalization of the telecoms sector to allow other players to enter the Industry. With increased competition, the human resource department was affected as it was deemed that there was too many staff that was not efficient enough. Thus, the restructuring process involved retrenchment of many staff. Six thousand workers were retrenched in 2006. In 2007, 9,767 workers were laid-off, earning the firm the distinction of having retrenched the most workers in Kenya’s corporate history. The staffs numbers currently stand at about 7, 521 and half of the staff are to be laid-off this year (Business Daily, 2008). So far, the study by Shivo (2005) on the work trauma on retrenchment survivors in organizations remains one of the studies done in Kenya on retrenchment. The study does not however indicate the effect of retrenchment on other employee aspects such as job security, motivation and job loyalty. There is therefore an urge to study the implications of retrenchment on the employees left in the organization with a focus on other employee-work aspects. Up to this time, no study has been done to ascertain the effect the retrenchment process has had on the employees of Telkom Kenya.

So far, in Nigeria, there has not been any major work that worked on the effect of retrenchment on the productivity and morale of workers a case study of Zenith Bank Plc. There is therefore an urge to study the effect of retrenchment on the productivity and morale of workers a case study of Zenith Bank Plc. Up to this time, no study has been done to ascertain the effect the retrenchment process has had on the employees in the banking sector in Nigeria and certainly this is what this study is going fully discuss with a focus on the Zenith Bank Plc.

 

 

1.2     Statement of the Problem

The retrenchment exercise currently taken place in Nigeria poses economic and social problems.  Retrenchment started of economic reasons in the early 80s.  Nigeria’s economic downturn has been a very peculiar situation because it has resulted in many workers using their jobs. The most recent workers retrenchment done at the Zenith Bank Plc members of staff were retrenched. The issue of retrenchment in all sectors in Nigeria has been trending since the country started experiencing economic meltdown. Most homes have been severely affected. May organizations including public and private organizations have retrenching their workers and those who are not retrenching seriously owe their workers some months’ salaries and workers do not derive satisfaction in their work again as a result of this. In summary, this work set out to investigate the effect of retrenchment on the productivity and morale of workers a case study of Zenith Bank Plc.

1.3  Research Questions

The following are some of the questions which this study intends to answer:

i)            What is the prevalence of the effect of retrenchment on the productivity and morale of workers of Zenith Bank Plc?

ii)          What are the effects of retrenchment on the workers of Zenith Bank Plc?

iii)        What are the effects of retrenchment on the organizational productivity?

1.4  Objectives of the Study

The objective of this study was to investigate the effect of retrenchment on the productivity and morale of workers a case study of Zenith Bank Plc. The specific objectives are:

i)            To inquire the prevalence of the effect of retrenchment on the productivity and morale of workers of Zenith Bank Plc.

ii)          To determine the effects of retrenchment on the workers of Zenith Bank Plc.

iii)        To establish the effects of retrenchment on the organizational productivity.

1.5  Research Hypotheses

The research hypotheses to be tested include:

i)            There is no significant difference between retrenchment and feelings of job insecurity to employees.

ii)           There is no significant relationship between retrenchment and organizational productivity

1.6  Significance of the Study

The findings and recommendations of this research work will help the government, banks, other agencies and authorities of the nation especially developing countries to see the effects on morale of workers. The study will b significant to the Bankers, the general public, human resource managers and business practitioners as it relates to management of work force, workers and their dependants. Academicians and students especially those in the field of Public and Human Resource Management will benefit from this study since it will serve as an additional source of information.

1.7  Scope of the Study

This study was limited to the Zenith Bank Plc staff and therefore the questionnaires will be distributed to the employees of the organisation.

1.8  Limitation of the study

The only constraint encountered by the researcher was finance. This limited the researcher to print just one hundred and twenty questionnaires as against the proposed two hundred and fifty questionnaires. The researcher, however, came up with findings that would be worth making reference to in future and also contribute to the existing literature.

1.9  Definitions of Terms

The following terms were used in the course of this study:

Morale: This is the mental and emotional condition of an individual or group with regards to their functions or tasks at hand. Morale is a feeling, somewhat related to spirit de corps, enthusiasm

Productivity:the effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input.

Retrenchment: Retrenchment is a government initiated ministry-wide exercise of cutting down the numbers of employees aimed at cost reduction. This cutback of the employees is determined by various reasons and is aimed, in the long run at improving the quality of services delivered. (Hansen and Twaddle, 2002:78).

Workers:one that works especially at manual or industrial labor or with a particular material.

 

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