I. An introduction to corporate downsizing.
II. The reasons behind a company downsizing.
A. Cash flow, profits, and profit margins.
B. Organizational structure and procedures.
III. Planning the downsizing.
A. Pro and con factors.
B. Identifying the options.
IV. Implementing the downsizing.
A. Announcing the action.
C. Staff Stability.
Corporate Downsizing: A Profitable Benefit Or An Unprofitable Disaster
The unemployment level is at an all-time low. The economy is strong. The stock market is breaking new records. Investors are buying stocks by the handful. Corporations are making extremely high profits. So, why is it that corporations are laying-off and firing people by the hundreds? The reason is corporate downsizing. The main objective of a corporation is to be profitable and survive in the ever changing times and economy. Corporate downsizing plays a big role in the profitability and survival techniques of a company.
There are many reasons why a company would downsize. Management makes a decision to reduce the entire workforce in order to cause a buying frenzy with investors, which results in more capital for the company. It also creates more compensation for management when the company gains more equity. When companies merge together, many times they do not need the vast majority of workers from the merging companies to perform the jobs. Therefore, they would implement a downsizing. Un-collectable accounts will cause a lack of cash flow. A company always needs some form of cash flow in order to pay bills and make payroll. The lack of it could cause downsizing because of payroll issues. Technology is always changing, and some companies do not have the time or money to update their equipment. This will result in losing some customers, and without customers there is no inflow of money. Also with the changing technology comes more competition. Many new companies are trying to break into the business barriers. A lot of these factors affect the company’s profits and profit margins.
One of the biggest reasons to downsize is a change in organizational structure or procedures. This can come internally from the company or it can come from mergers and buyouts. While many factors greatly influence downsizing at a greater level, recession still plays a part in the decision. When the economy goes through a recession, it will always affect companies in some way. To the extent it affects them varies on the company. The products manufactured by companies can become non-useful or not as in-demand as they were before. The lack of productivity is another reason for downsizing. A last few deciding factors are the government deregulating certain industries and excessive overhead costs. Based on a 1997 survey by the American Management Association, the most often claimed reasons for downsizing are “organizational...