How is downsizing beneficial?

Published: 20th August 2009
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Downsizing can be defined as, 'a set of organizational activities undertaken by the management, designed to improve organizational efficiency, productivity, and/or competitiveness'. Downsizing differs from lay-offs as it is permanent termination of services whereas lay-off could be a temporary step and the employees can be appointed back depending on the market situation. Downsizing is considered as a negative term as it means exclusion of employees. But there are some aspects of downsizing that can be beneficial for both the organization as well as its employees.

Downsizing is a method adopted to reduce additional or dispensable costs incurred by the company. When two employees perform the same task and bidding one of them would not make a difference, downsizing comes into the picture. Downsizing has also proved beneficial for the consumers because it sometimes means a reduction in prices of commodities. As the money invested in manufacturing decrease, the commodities can be available in cheaper rates.

It has also been seen that the stock prices of a company rises if it announces downsizing. For example, IBM's stock rose 7.7% as a result of announcing its downsizing plans. The productivity increases tremendously as the profit aggrandizes.

The decision making process can accelerate if the workforce is reduced. Even if the company consists of manifold staff that adds to the companies fertility, the time invested in taking decisions is immensely reduced due to downsizing.

The benefit of downsizing on the employee is that they can explore avenues that they are not well equipped with. Downsizing can lead to the creation of new jobs or positions. Hence the employee can delve into a contemporary field and enlighten themselves with additional skills.

Downsizing, re-structuring, re-engineering is what companies do in order to attain fluidity and flexibility. It is a pathway to improve, grow and flourish.

-Arti Bakshi

"Human Resource- A Magazine for the Discerning Professional

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