<P>Corporate downsizing has been implemented by a large number of American firms in an<BR>effort to become more flexible and responsive to increased competition. The results<BR>associated with these downsizings have not been as stellar as researchers and practitioners<BR>had hoped. In fact, fewer than half of downsized firms reported achieving any<BR>reduction in costs (Hitt, Keats, Harback and Nixon, 1994). In addition to these dismal<BR>financial indicators, the effects of downsizing on the remaining employees have been<BR>substantial, including increased stress, reduced career opportunities and decreased<BR>company loyalty. This article looks at the possibility that person-based compensation<BR>systems such as skill/competency based pay or broad banding may alleviate some of<BR>the problems associated with both the poor financial performance and the negative<BR>impact on survivors of downsizing. By encouraging employees to acquire new skills and<BR>knowledge, person-based pay programs may foster the development of a highly flexible<BR>workforce. Employees with wider skills may prove valuable to downsized firms coping<BR>with large losses in organizational knowledge and memory. </P>

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