Downsizing

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What is Downsizing? Meaning.

Downsizing is an euphemism referring to an organization's need to streamline its operations, often combined with layoffs, in order to cut labor costs by reducing the size of the company. Downsizing can occur at any time, but becomes epidemic in difficult economic times.

A downsizing strategy can be considered for 2 main reasons:

1. Offensive: Increase a company's profits. This usually occurs when there are other firms in the same industry who are performing better, or when a company wants to reduce excess capacity.

2. Defensive. Because of difficult economic circumstances and macroeconomic forces. In this case, a company determines that its workers can no longer profitably produce its output (products and services) at current market prices.

In an article in MIT Sloan Management Review (Autumn 2009), Christopher D. Zatzick, Mitchell L. Marks and Roderick D. Iverson argue there is no one size fits all’ approach to downsizing. The authors describe a framework that integrates the paradoxical practices of Talent Management and downsizing. The framework considers two important variables:

• 2 Types of Downsizing:
  • Proactive Downsizing (~offensive). Implemented to increase long-term Competitive Advantage. This downsizing strategy is aimed at improving efficiencies, taking advantage of new technologies, changing the skills of the work force or restructuring the organization.
  • Reactive Downsizing (~defensive). Implemented as a Response to a Crisis (economic or financial). This downsizing strategy is mainly related to external changes in the marketplace.
• 2 Approaches to Managing Employees:
  • Commitment Oriented Downsizing. This downsizing strategy focuses on Empowering Employees to perform their jobs relatively independently using their discretion, according to the company’s goals.
  • Control Oriented Downsizing. This downsizing strategy is typically used by organizations that compete with a strategy of Operational Excellence, focusing on offering low-cost products and services. The aim is to increase the organization's efficiency, notably by reducing direct labor costs

Forum Forum about Downsizing. Below you can ask a question about this topic, share your experiences, report a new development, or explain something. Start a new topic about Downsizing Share your knowledge here (or ask a question)   Downsizing versus Rightsizing What is the difference between downsizing and rightsizing?... 11   1 comments Downsizing and Restructuring Theories What are the theories of downsizing and other related topics like lay-offs, rightsizing and restructuring of an organization? Thanks... 6   🔥 NEW How to Handle Layoffs Appropriately? Layoffs, sometimes called downsizings, have been increasingly common since the 1970s. In 1979 fewer than 5% of Fortune 100 companies announced layoffs, but in 1994 almost 45% did. A McKinsey survey on... 4   1 comments Downsizing During Economic Downturns: Effective? As we have seen in recent global economic crises, many organizations use downsizing (DS) as an approach to survive economic downturns. They consider DS as a useful instrument to survive difficult time... 4   17 comments Disadvantages of Downsizing I have now understood about downsizing.. But what are the disadvantages of downsizing?... 4   2 comments

Expert Tips Advanced insights about Downsizing. Here you will find professional advices by experts. Why Recruiting Executives in Recessions and Downturns is Underestimated Recruiting, Hiring, Recession, Downturn, Restructuring Companies often try to take advantage of recessionary times by eliminating the most redundant jobs in their businesses, ...

Information Sources Various sources of information regarding Downsizing. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Managing Employee Separation (Layoffs) and Employee Retention Employee Turnover, Employee Retention, Employee Separation, Discipline, Layoffs, Dismissing, Employee Termination Presentation about the retention and separation of employees, including the following sections: 1. Learning Objectives ...

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Compare also: Outsourcing  |  Restructuring  |  Business Process Reengineering  |  SG&A  |  Turnaround Management  |  Exit Strategy  |  Outplacement  |  Theory E and Theory O

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