Downsizing

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Description of Downsizing. Explanation.

Definition Downsizing. Description.

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 needs to reduce excess capacity during times of lower volumes.

2. Defensive. Because of difficult economic circumstances and macroeconomic forces. In this case, a company determines that its workers can no longer profitably produce products 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:
  • Reactive Downsizing. Implemented as a Response to a Crisis (economic or financial). This downsizing strategy is mainly related to external changes in the marketplace.
  • Proactive Downsizing. 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.
• 2 Approaches to Managing Employees:
  • 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
  • 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.

Downsizing Special Interest Group Special Interest Group (18 members)

Downsizing Forum   Recent topics   Downsizing versus Rightsizing What is the difference between downsizing and rightsizing?...           Downsizing and Restructuring Theories What are the theories of downsizing and other related topics like lay-offs, rightsizing and restructuring of an organization? Thanks...           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 D...

Best Practices - Downsizing   Disadvantages of Downsizing I have now understood about downsizing.. But what are the disadvantages of downsizing?...

Expert Tips - Downsizing   Why Recruiting Executives in Recessions and Downturns is Underestimated     Advance yourself in business administration and management

Resources - Downsizing   News about Downsizing         Videos about Downsizing         Presentations about Downsizing         Books about Downsizing         More about Downsizing       Accelerate your management career

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

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