In business, downsizing refers to reducing operating costs and making a company leaner. It is often is described as ‘trimming the fat’. This involves reducing the size of the workforce, closures and making the various units more productive and efficient. The aim of downsizing is to restructure a company in order to make it more competitive. It is a natural progression in terms of its development.
Some say the downsizing process differs from lay-offs, as the former is seen as a more permanent measure while the latter may include the possibility of rehiring workers who lost their jobs at a later date. Today, the term ‘lay-off’ can mean either the temporary suspension or permanent termination of a job.
Nonetheless, if not prepared and carried out properly, downsizing can have unpleasant repercussionsfor a business. Moreover, it is a very common measure that companies enforce during times of market volatility or poor financial performance. Many people, especially trade unions, view the term “downsizing” as simply a euphemism or double-speak for a layoff.
Businesses typically downsize to:
Improve efficiency (by replacing employees with machinery)
Reduce costs
Right-size resources relative to market demand
Take advantage of cost synergies after a merger
Increase profits by reducing overhead costs
Respond to a decline in demand for a company’s products or services
Generally, businesses downsize in different ways. Some may opt for a ‘gentler’ approach by offering early retirement and the possibility for workers to transfer to a subsidiary company.
Unfortunately, for some of the workforce, the most common way to downsize is to terminate the employment of multiple workers. The trimming process may occur gradually, bit-by-bit over a period of a couple of years, or suddenly in one giant slice.
Those in charge of downsizing will target staff and departments that are seen as ‘redundant’ (surplus to requirements) or loss-makers.
Notably, businesses that are downsizing attempt to take the necessary steps to ensure employees who are highly valued are retained. However, employees who are considered ‘key personnel’ can still find themselves out of a job, especially if the headcount reduction is aimed at management personnel.
Even when prepared meticulously and carried out properly, the entire process can be extremely nerve-wrecking for employees - even for those who are kept on. Everyone becomes curious or wonders how safe their jobs are, and whether they might be next.
How should companies approach downsizing? It is important to look at the consequences of downsizing to ensure the value created from trying to streamline the business outweighs the potential damage to the company’s reputation and decline in employee morale.
There are costs associated with the process. It is vital to carefully evaluate factors such as the potential lower productivity, talent loss, cost of severance packages and future hiring and training costs.
Ultimately, it is in the company’s best interest to ensure the downsizing process is done humanely and professionally, with all relevant players a part of the process. This process can be achieved by proper planning and determining the right amount of job cuts, one that suits both the company and its shareholders. Until we meet again, fill your life with memories rather than regrets. Enjoy life and stay on top of your game.
NB: Columnist welcomes feedback at deedee21bastian@gmail.com
• Deidre M. Bastian is a professionally-trained graphic designer/brand marketing analyst, author and certified life coach
Commenting has been disabled for this item.