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Effects Of Downsizing. Essay

4718 words - 19 pages

IntroductionDownsizing, Layoffs, Cutting the Flab or more rudely put "removing of dead log" are the buzzwords being constantly used in today's business scenario. A national survey done by New York Times states: since 1980, a family member in one-third of all U.S. households has been laid off (New York Times, 1996). But what exactly we mean by "Downsizing". There has been very little research done on this subject (Cameron, 1994, p-183).Cameron, defines downsizing as a positive and purposive strategy: "a set of organizational activities undertaken on the part of management of an organization and designed to improve organizational efficiency, productivity, and/or competitiveness" (Cameron, 1994:194). Mostly companies used this strategy for cost reductions. Wayyat company survey done between 1985 to 1990, showed that 89% of the total companies which down sized put reduction in costs as their main objective.Efforts by researchers to bring more accuracy to the term has resulted in the emergence of two definitions, the difference being whether the term is narrowly or broadly defined (DeWitt, 1998). Companies that follow the narrow definition restrict the term to the planned reduction in company personnel (Allen et al., 1995; Cascio, 1993). From this angle, the term "downsizing" can be viewed as in parallel with layoffs (Hoskisson & Hitt, 1994). The broadly defined perspective views downsizing as a "selective reduction in a firm's use of resources" (DeWitt, 1998: 61). According to this viewpoint, downsizing is a method of restructuring company's resources by retrenchment, downscaling, and down scoping (DeWitt, 1993). Although reduction in personnel is seen as a main part of downsizing, downsizing can include any number of combinations of physical, human, and organizational system reductions (DeWitt, 1998). Due to advances in technology, deregulations of markets, emergence of global economy and availability of contingent workforce, companies around the world are facing stiff competition (Fierman, 1994). In order to remain competitive in this changing scenario, many executives have already restructured or are restructuring their operations. Most of the time restructuring includes reduction in workforce (Cameron, Freeman, & Mishra, 1991; Hitt, Hoskisson, & Harrison, 1991; Hoskisson & Hitt, 1994). There are many varied reasons for downsizing. Some companies call it rightsizing. Normally downsizing was related to bad financial health of the company. But even companies who are making profits choose to downsize. This phenomenon could not be explained by the standard microeconomics. Organizations are changing the reasons why they use downsizing. In the United States the results of a survey point to a decrease in reported importance of 'general economic conditions' as a rationale for why downsizing has occurred, while reasons such as better staff utilization, outsourcing, plant closure, mergers, automation and the use of new technology have become...

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