Downsizing | Meaning and Definition

What is downsizing?

Downsizing meaning is the permanent growth of the workforce of a company by eliminating ineffective departments and employees. It is a corporate activity that is the result of struggling firms and economic downturns. The downsizing of a complete division, branch, or store many times leads to the properties being left and free for sale during the process among the corporate organizations.

What can lead to a company’s downsizing?

The first and foremost thing a company looks for is profit. To maintain and retain its profitably, a company is often compelled to practice the process of downsizing.
Sometimes it is seen that downsizing results from a company buying another or two companies merging to become one. On the other hand, if that company is yet to merge or buy another one, it could follow downsizing to be seen as a more profitable candidate.
In bad times, it is seen that a company’s market suffers from a recession due to issues such as technology, for which it downsizes to cut the extra cost.
On a positive note, several companies reorganize and restructure themselves through downsizing to streamline themselves to increase performance and productivity.

Types of Downsizing

There are various ways in which it can happen in the organization. No matter how it happen but in downsizing employees should leave with dignity in the organization. Here are some types of downsizing:

1. Reducing the workforce

This is the most common way of downsizing in the company. Organization can reduce their employees to save their costs in crucial times.

The employer should be professional while doing so otherwise it will result in legal implications for the employer. Some examples include freezing of new hires, natural attritions and layoffs.

2. Redesigning work structure

The major reason for redesigning the work structure is to focus mainly on eliminating the unnecessary work.

The positions that are not so much necessary are eliminated and duties are transferred through redesigning.

Some major examples are redesigning of job, abolition of functions, reducing working hours etc.

3. Approaching the whole system

Certain changes can be made to bring down the overall costs in the organization. It ultimately increases the productivity of employees. The results are mostly long term rather than the short term.

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