What is downsizing? Downsizing is a temporary elimination or, more often, the permanent cancellation or downsize of an employee, usually for business reasons, like increased personnel management or downsizing a company. In business, downsizing can also refer to “thinning out” a company or department to make room for new or upcoming ventures.
There are a number of reasons why a company might downsize. Sometimes, the need to reduce overhead costs forces a company to downsize. At other times, the need to maximize profitability requires that employees be cut down or made redundant. And in some cases, downsizing is mandated by law – organizations have to notify their employees in writing that they have been given an order to downsize. But these reasons are not always the only ones that prompt a company to downsize.
Many factors go into reducing costs and reducing expenses – this includes eliminating redundant functions and eliminating non-core activities. One of the most common ways to reduce overhead costs in a company is to downsize. This is especially true for large companies that have an expensive fixed overhead cost, like offices, furniture and supplies, etc., which cannot be easily outsourced to third party vendors. A layoff could be just the thing a company needs to address these costs and become more profitable. However, a layoff may also mean that your position as a valuable employee will be lost, which is a distinct possibility if you’re being laid off involuntarily.
Another way to look at it is this: when a company does layoffs, it doesn’t necessarily mean that the entire staff of that company will be laid off. If a company is going through a merger or acquisition, some of its positions (not all, but some) will be eliminated. These positions will be transferred to other companies where they can be used for training purposes, or for tasks that the company feels they need to perform to improve their bottom line. While these positions may be “idle,” they won’t be considered as such by most employees because they won’t be seeing the bottom line as a result of their job loss.
So how do companies choose the best tactic for dealing with employees who have been downsized? One option is to offer them a small amount of compensation for retraining, re-certification, or certification. Another option would be to pay for their airfare home and their hotel room until they find work somewhere else (a contingency plan, if you will). Another option is to simply make them available to the rest of the staff on a weekly basis, so they don’t feel like they’re left out. Sometimes, just meeting the necessities of an employee is enough to help them feel part of a company again.
While layoffs are unfortunate, not all employees view them as such. You’ll find some employees’ resumes look good right after being laid off, while others will look worse once they get a promotion or a pay increase. If you’re going to consider the employees’ layoff as a reason for your downsizing, consider whether this is a situation that could benefit your company and your employees.
To some extent, both sides of this debate will need to be addressed. If your company is in trouble financially, perhaps you need to cut costs and save money where you can. On the other hand, if you want to retain customers, you need to keep your prices competitive so employees feel motivated to come to work. A third consideration is that it’s usually in the businesses best interest to keep the costs as low as possible, especially when dealing with long-term contracts. Even though some businesses have tried to circumvent this rule by offering stock incentives to employees, the reality is that they just didn’t make any money off these contracts in the first place!
So what is downsizing – good or bad? This is one question that can only be answered by those who have experienced it themselves. However, one thing that is for certain is that it is definitely a process that is different for every business, even though both seem similar in concept. You’ll want to consult with your employees to see how they feel about the downsizing and its impact on their job satisfaction. It might be a good idea to allow them to have input during this important part of your business’s life.